Monthly Archives: February 2016

S&P 500 Elliott Wave Technical Analysis – 29th February, 2016

Downwards movement was expected as most likely. This is what happened.

However, downwards movement has not yet passed the confirmation point below which confidence may be had in the Elliott wave count.

Summary: More downwards movement is still most likely from here, but the end of the Dead Cat Bounce is still unconfirmed. A new low below 1,891 and below the channel on the hourly chart would provide confidence the bounce is over. The invalidation point for the preferred wave count remains at 2,104.27. A big third wave should still be approaching, so look out for surprises to the downside.

To see how each of the bull and bear wave counts fit within a larger time frame see the Grand Supercycle Analysis.

To see detail of the bull market from 2009 to the all time high on weekly charts, click here.

Last published monthly charts can be seen here.

If I was asked to pick a winner (which I am reluctant to do) I would say the bear wave count has a higher probability. It is better supported by regular technical analysis at the monthly chart level, it fits the Grand Supercycle analysis better, and it has overall the “right look”.

New updates to this analysis are in bold.

BULL ELLIOTT WAVE COUNT

DAILY CHART – FLAT

S&P 500 daily 2015
Click chart to enlarge.

This wave count is bullish at Super Cycle degree.

Cycle wave IV may not move into cycle wave I price territory below 1,370.58. If this bull wave count is invalidated by downwards movement, then the bear wave count shall be fully confirmed.

Cycle wave II was a shallow 0.41 zigzag lasting three months. Cycle wave IV should exhibit alternation in structure and maybe also alternation in depth. Cycle wave IV may be a flat, or combination. This first daily chart looks at a flat correction.

Cycle wave IV may end within the price range of the fourth wave of one lesser degree. Because of the good Fibonacci ratio for primary wave 3 and the perfect subdivisions within it, I am confident that primary wave 4 has its range from 1,730 to 1,647.

Primary wave C should subdivide as a five.

Within the new downwards wave of primary wave C, intermediate waves (1), (2) and now (3) may be complete. Intermediate wave (4) may now be over, finding resistance at the upper edge of the black channel. It is just within the fourth wave of one lesser degree still, which is a common place for a fourth wave to end.

Intermediate wave (2) was a deep double zigzag. Intermediate wave (4) may be a complete shallow 0.46 zigzag. There is alternation in depth and a little in structure.

At 1,806 intermediate wave (5) would reach 1.618 the length of intermediate wave (1). This would see intermediate wave (5) move below the end of intermediate wave (3) at 1,847 avoiding a truncation. Primary wave C would end below the end of primary wave A but not too far. Cycle wave IV would have a reasonable regular flat look.

The idea of a flat correction for cycle wave IV has the best look for the bull wave count. The structure would be nearly complete and at the monthly level cycle wave IV would be relatively in proportion to cycle wave II.

HOURLY CHART

S&P 500 hourly 2015
Click chart to enlarge.

I will use the two hourly charts today, for bull and bear, to see this Dead Cat Bounce in two different ways.

Both ways of labelling this upwards movement work in the same way for both wave counts.

If the upwards movement is a double zigzag, then it may be incomplete. This first way of labelling the upwards wave of intermediate wave (4) (which is the same as minute ii for the bear) looks best if the structure is incomplete.

At 2,004 minute wave c within minor wave Y would reach equality in length with minute wave a.

If the channel is breached by downwards movement, at least one full hourly candlestick below the lower blue trend line and not touching it, then this idea may be discarded. If intermediate wave (4) is incomplete as a double zigzag, then price should remain in the channel while the structure completes.

Within the second zigzag in the double, minor wave Y, minute wave b may not move below the start of minute wave a at 1,891.

DAILY CHART – COMBINATION

S&P 500 daily 2015
Click chart to enlarge.

This idea is technically possible, but it does not have the right look. It is presented only to consider all possibilities.

If cycle wave IV is a combination, then the first structure may have been a flat correction. But within primary wave W, the type of flat is a regular flat because intermediate wave (B) is less than 105% of intermediate wave (A). Regular flats are sideways movements. Their C waves normally are about even in length with their A waves and normally end only a little beyond the end of the A wave. This possible regular flat has a C wave which ends well beyond the end of the A wave, which gives this possible flat correction a very atypical look.

If cycle wave IV is a combination, then the first structure must be seen as a flat, despite its problems. The second structure of primary wave Y can only be seen as a zigzag because it does not meet the rules for a flat correction.

If cycle wave IV is a combination, then it would be complete. The combination would be a flat – X – zigzag.

Within the new bull market of cycle wave V, no second wave correction may move beyond the start of its first wave below 1,810.10.

I do not have any confidence in this wave count. It should only be used if price confirms it by invalidating all other options above 2,104.27.

BEAR ELLIOTT WAVE COUNT

DAILY CHART

S&P 500 daily bear 2015
Click chart to enlarge.

This bear wave count fits better than the bull with the even larger picture, super cycle analysis found here. It is also well supported by regular technical analysis at the monthly chart level.

Importantly, there is no lower invalidation point for this wave count. That means there is no lower limit to this bear market.

Downwards movement so far within January still looks like a third wave. This third wave for intermediate wave (3) still has a long way to go. It has to move far enough below the price territory of intermediate wave (1), which has its extreme at 1,867.01, to allow room for a following fourth wave correction to unfold which must remain below intermediate wave (1) price territory.

Intermediate wave (2) was a very deep 0.93 zigzag. Because intermediate wave (2) was so deep the best Fibonacci ratio to apply for the target of intermediate wave (3) is 2.618 which gives a target at 1,428. If intermediate wave (3) ends below this target, then the degree of labelling within this downwards movement may be moved up one degree; this may be primary wave 3 now unfolding and in its early stages.

Intermediate wave (2) lasted 25 sessions (not a Fibonacci number) and minor wave 2 lasted 11 sessions (not a Fibonacci number). Minute wave ii may now be complete in ten sessions (not a Fibonacci number). Although minute wave ii is seen as a double zigzag, which fits best on the hourly chart, it has a single zigzag look at the daily chart level. This mirrors the structure for minor wave 2 earlier on in November 2015. That correction looks like a single zigzag on the daily chart, but on the hourly chart it subdivides as a double zigzag with the second zigzag in the double very brief and short.

Minute wave ii may not move beyond the start of minute wave i above 2,104.27.

HOURLY CHART

S&P 500 daily bear 2015
Click chart to enlarge.

This is the other possible structure for the correction, a single zigzag.

This structure has a better look at both daily and hourly chart levels. Minuette wave (c) would be just 2.56 points short of 0.618 the length of minuette wave (a).

The channel is drawn in the same way for both hourly charts. If it is breached tomorrow by a full hourly candlestick below and not touching the lower edge, that would provide trend channel confirmation of a trend change.

Thereafter, a new low below 1,891 would provide price confirmation. At that stage, the idea presented in the first hourly chart with the bull wave count would be invalidated.

Further confidence that the bounce is over would come with a new low below 1,810.10.

At 1,486 minute wave iii would reach 1.618 the length of minute wave i.

The cyan trend lines are copied over from the daily chart. They may still provide support and then resistance along the way down.

ALTERNATE DAILY CHART

S&P 500 daily bear 2015
Click chart to enlarge.

I have previously noted this idea in the text and now it is time to chart it, so that the implications are clear.

Within the downwards impulse unfolding, it may be that intermediate waves (1) and (2) are complete and now minor waves 1, 2 and 3 may also be complete within intermediate wave (3).

This wave count expects minor wave 5 to be extended within intermediate wave (3). Minor wave 5 should also show a strong increase in momentum, so that at its end intermediate wave (3) has clearly stronger momentum than intermediate wave (1).

There is no difference to the target for intermediate wave (3). This wave count makes a difference to the invalidation point. Minor wave 4 may not move into minor wave 1 price territory above 2,019.39.

This wave count also has a lower probability than the main bear wave count. This wave count would be more typical of commodities than the S&P.

Minor wave 2 lasted 11 days. Minor wave 4 may be over in 10 days, which is not a Fibonacci number.

TECHNICAL ANALYSIS

DAILY CHART

S&P 500 daily 2015
Click chart to enlarge. Chart courtesy of StockCharts.com.

Two downwards days in a row, both on increasing volume, is bearish. The fall in price is supported by volume, so is not suspicious. The prior rise in price ended on declining volume and was suspicious. Overall, the volume profile continues to be more bearish than bullish.

ADX still indicates the market is not trending. It has not indicated a trend change either: the -DX line remains above +DX line.

ATR agrees. It too indicates the market is not trending; it is consolidating.

With the market consolidating, it should be expected that price may swing from resistance to support and back again until a breakout occurs. Stochastics may be used to assist in identifying when price will turn. At this stage, price has found resistance about 1,950 and Stochastics is overbought. This approach would expect a downwards swing about here.

RSI is still just above neutral. There is plenty of room for this market to rise or fall. RSI shows weak slight bearish divergence for Friday’s session; while price made a new high RSI moved slightly lower.

On Balance Volume has found resistance and turned down at the green trend line, which was a weak bearish signal. OBV has now broken below the pink line which was more tested, and which is a slightly stronger bearish signal. A break below the dark blue line would be another bearish signal.

DOW THEORY

For the bear wave count I am waiting for Dow Theory to confirm a market crash. I am choosing to use the S&P500, Dow Industrials, Dow Transportation, Nasdaq and I’ll add the Russell 2000 index. Major swing lows are noted below. So far the Industrials, Transportation and Russell 2000 have made new major swing lows. None of these indices have made new highs.

I am aware that this approach is extremely conservative. Original Dow Theory has already confirmed a major trend change as both the industrials and transportation indexes have made new major lows.

At this stage, if the S&P500 and Nasdaq also make new major swing lows, then my modified Dow Theory would confirm a major new bear market. At that stage, my only wave count would be the bear wave count.

The lows below are from October 2014. These lows were the last secondary correction within the primary trend which was the bull market from 2009.

These lows must be breached by a daily close below each point. So far the S&P has made a new low below 1,821.61, but it has not closed below 1,821.61.

S&P500: 1,821.61
Nasdaq: 4,117.84
DJT: 7,700.49 – this price point was breached.
DJIA: 15,855.12 – this price point was breached.
Russell 2000: 1,343.51 – this price point was breached.

THIRD WAVE EXAMPLE

S&P 500 daily 2015
Click chart to enlarge.

This is the detail of the middle of the third wave in the last bull market. It spans February 2014 to October 2014, eight months.

The middle of intermediate wave (3) is extended.

Right down to micro degree, within each third wave it is the middle, the third wave, which is extended.

The whole structure has a stretched out middle. This makes each correction within it more time consuming than corrections at these low degrees normally are. It begins with a lot of overlapping.

For the S&P this is a very normal looking third wave. Although this is a third wave within a bull market, a third wave within a bear market most often looks the same or very similar. The only difference is bear market third waves may end more sharply with strong fifth waves.

This analysis is published @ 08:53 p.m. EST.

[Note: Analysis is public today for promotional purposes. Member comments and discussion will remain private.]

Continue reading S&P 500 Elliott Wave Technical Analysis – 29th February, 2016

S&P 500 Elliott Wave Technical Analysis – 26th February, 2016

Downwards movement was expected as most likely, but an end to the bounce was unconfirmed.

Price moved slightly higher before turning down to complete a small red candlestick.

Continue reading S&P 500 Elliott Wave Technical Analysis – 26th February, 2016

S&P 500 Elliott Wave Technical Analysis – 25th February, 2016

Downwards movement was expected.

An alternate Elliott wave count allowed for some more upwards movement.

Continue reading S&P 500 Elliott Wave Technical Analysis – 25th February, 2016

S&P 500 Elliott Wave Technical Analysis – 24th February, 2016

Again, downwards movement was expected.

Price moved lower to make a lower low and a lower high. This fits the wave count.

Continue reading S&P 500 Elliott Wave Technical Analysis – 24th February, 2016

S&P 500 Elliott Wave Technical Analysis – 23rd February, 2016

Downwards movement was expected, but a new high to 1,948 – 1,950 was also considered a possibility first. This did not happen.

Continue reading S&P 500 Elliott Wave Technical Analysis – 23rd February, 2016

S&P 500 Elliott Wave Technical Analysis – 22nd February, 2016

Upwards movement continued as expected from the last analysis.

Continue reading S&P 500 Elliott Wave Technical Analysis – 22nd February, 2016

S&P 500 Elliott Wave Technical Analysis – 19th February, 2016

It was expected that price may move a little lower for Friday.

This is what happened.

Continue reading S&P 500 Elliott Wave Technical Analysis – 19th February, 2016

S&P 500 Elliott Wave Technical Analysis – 18th February, 2016

Yesterday expected to see short term sideways / downwards movement for the hourly charts.

This is what happened.

Continue reading S&P 500 Elliott Wave Technical Analysis – 18th February, 2016

FTSE Elliott Wave Technical Analysis – 17th February, 2016

Downwards movement was again expected for FTSE.

Although upwards movement remains below the invalidation point and is just at the trend line, this market is not behaving as expected. I have a new alternate wave count which should be seriously considered.

Summary: With upwards movement of 17th February on an increase in volume, this market is not behaving as expected. A new wave count is required. A new high above 6,115.10 would invalidate the main wave count and confirm the new alternate. At that stage, expect FTSE is most likely in a larger and deeper bear market rally which may end about 6,453.

To see a monthly chart and the bigger picture, with an explanation of why there are only bear wave counts for FTSE, click here.

New updates to this analysis are in bold.

MAIN WEEKLY WAVE COUNT

FTSE weekly 2014
Click chart to enlarge.

From the all time high in April 2015, FTSE has a five down and a three up. This current fall should move well below the end of intermediate wave (1) at 5,768.22 and then remain below that point. Intermediate wave (3) must move beyond the end of intermediate wave (1), far enough below to allow room for a subsequent fourth wave which may not move back into intermediate wave (1) price territory.

Price has now made a new low below the August low at 5,768.22. Downwards movement should continue, if this wave count is correct.

The main difference between this main wave count and the new alternate is the correction labelled here minor wave 2 within intermediate wave (1). This main wave count sees that movement as a combination: flat – X – zigzag lasting 19 days. There is alternation between minor waves 2 and 4: minor 2 was a combination and minor 4 was a triangle. Minor wave 4 lasted 35 days.

MAIN DAILY WAVE COUNT

FTSE daily 2014
Click chart to enlarge.

So far the middle of the third wave may not have passed for FTSE. Upwards movement labelled minuette wave (ii) is back in minute wave i price territory. This cannot be minute wave iv, so it may only be yet another second wave correction if this wave count is correct.

Intermediate wave (2) lasted 42 days. Minor wave 2 lasted 11 days. Minute wave ii lasted 9 days. Each subsequent second wave is shorter in duration than its predecessor giving the wave count the right look. None of these waves are exhibiting Fibonacci durations.

Minuette wave (ii) may have completed in a Fibonacci 8 days total, reaching a little above the 0.618 Fibonacci ratio. A lower degree second wave correction should not breach a base channel drawn about a first and second wave one or more degrees higher.

Within minuette wave (iii), yet another first and second wave may be completing for subminuette waves i and ii. Again, subminuette wave ii is in the price territory of the first wave one degree higher, so this upwards movement may not be minuette wave (iv). If this wave count is correct, then this may only be yet another second wave correction.

Subminuette wave ii has passed the 0.618 Fibonacci ratio. The last daily candlestick has closed just above the base channel. If this wave count is correct, then upwards movement should stop here. Price should find resistance at the base channel.

So far the lower edge of the base channel is providing support. If price manages to break below this support line, then it would be confirming a big third wave should be underway.

The target for intermediate wave (3) remains the same at 4,296 where it would reach 1.618 the length of intermediate wave (1).

A shorter term target is calculated for minuette wave (iii). At 5,023 it would reach 1.618 the length of minuette wave (i).

If targets are wrong, they may not be low enough.

Of all the indices I follow with Elliott wave counts, FTSE remains the clearest bear.

ALTERNATE WEEKLY WAVE COUNT

FTSE weekly 2014
Click chart to enlarge.

The first movement after the all time high is seen differently for this alternate wave count. At the daily chart level, it does not have as good a fit which is why it will remain an alternate until confirmed by price.

If there are two corrections within there rather than just the one, now minute wave i does not subdivide perfectly as a five and looks like a three on the daily chart.

Now minor waves 2 and 4 are more grossly disproportionate.

This wave count sees the possibility of a five wave impulse over at the recent low, with minor wave 5 an ending expanding diagonal.

Intermediate wave (2) may continue for weeks and may end about the 0.618 Fibonacci ratio at 6,453.

Intermediate wave (2) may not move beyond the start of intermediate wave (1) above 7,122.70.

ALTERNATE DAILY WAVE COUNT

FTSE daily 2014
Click chart to enlarge.

If price moves above 6,115.10 and invalidates the main wave count, then this wave count would be confirmed.

The most likely target for intermediate wave (2) is the 0.618 Fibonacci ratio at 6,453.

TECHNICAL ANALYSIS

DAILY CHART

FTSE daily 2015
Click chart to enlarge. Chart courtesy of StockCharts.com.

There is no volume data on either the FXCM feed or StockCharts. Volume analysis is done from Yahoo Finance data.

Upwards movement for the 17th of February comes with an increase in volume. This is concerning for the main wave count and supports the alternate.

The stalled pattern, a bearish version of three white soldiers, is invalidated by the following long green candlestick.

ADX indicates the market is not trending, but it may be about to indicate a trend change: the -DX line is crossing below the +DX line.

ATR is increasing. This indicates the market is trending.

RSI is just above neutral. There is room for this market to rise or fall.

Stochastics is also just above neutral. There is room for the market to rise or fall.

This analysis is published @ 03:43 a.m. EST on 18th February, 2016.