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Yesterday’s main Elliott wave count expected more upwards movement.

Summary: A new all time high adds confidence to the main wave count. The next target is at 2,858, and at about that point a correction to last about two weeks is expected. The trend remains upwards.

Last monthly and weekly charts are here. Last historic analysis video is here.

The biggest picture, Grand Super Cycle analysis, is here.

MAIN ELLIOTT WAVE COUNT

WEEKLY CHART

S&P 500 Weekly 2018
Click chart to enlarge.

Cycle wave V must complete as a five structure, which should look clear at the weekly chart level. It may only be an impulse or ending diagonal. At this stage, it is clear it is an impulse.

Within cycle wave V, the third waves at all degrees may only subdivide as impulses.

Within cycle wave V, the corrections for primary wave 2 and intermediate wave (2) both show up clearly, both lasting several weeks. The respective corrections for intermediate wave (4) and primary wave 4 should also last several weeks, so that they show up at weekly and monthly time frames. The right proportions between second and fourth wave corrections give a wave count the right look. This wave count expects to see two large multi week corrections coming up.

Cycle wave V has passed equality in length with cycle wave I, which would be the most common Fibonacci ratio for it to have exhibited. The next most common Fibonacci ratio would be 1.618 the length of cycle wave I.

Intermediate wave (3) has passed equality in length with intermediate wave (1). It has also now passed both 1.618 and 2.618 the length of intermediate wave (1), so it may not exhibit a Fibonacci ratio to intermediate wave (1). The target calculation for intermediate wave (3) to end may have to be done at minor degree; when minor waves 3 and 4 are complete, then a target may be calculated for intermediate wave (3) to end. That cannot be done yet.

When minor wave 3 is complete, then the following multi week correction for minor wave 4 may not move into minor wave 1 price territory below 2,400.98. Minor wave 4 should last about four weeks to be in proportion to minor wave 2. It may last about a Fibonacci three, five or even eight weeks if it is a time consuming sideways correction like a triangle or combination. It may now find support about the mid line of the yellow best fit channel. If it does find support there, it may be very shallow. Next support would be about the lower edge of the channel.

A third wave up at four degrees may be completing. This should be expected to show some internal strength and extreme indicators, which is exactly what is happening.

DAILY CHART

S&P 500 Daily 2018
Click chart to enlarge.

Keep redrawing the acceleration channel as price continues higher: draw the first line from the end of minute wave i to the last high, then place a parallel copy on the end of minute wave ii. When minute wave iii is complete, this would be an Elliott channel and the lower edge may provide support for minute wave iv.

Minute wave iii has passed 1.618 the length of minute wave i. The next Fibonacci ratio in the sequence is used to calculate a target for it to end.

With momentum increasing in the last two days of upwards movement, the wave count is adjusted today for most recent movement. Minute wave iii may only subdivide as an impulse, and within it minuette wave (i) only may have recently ended as a long extension.

Within the impulse of minute wave iii, the upcoming correction for minuette wave (iv) may not move back into minuette wave (i) price territory below 2,694.97.

Because minuette wave (i) with this wave count is a long extension, it is reasonable to expect minuette wave (iii) may only reach equality in length with minuette wave (i). This target fits with the higher target for minute wave iii one degree higher.

HOURLY CHART

S&P 500 Hourly 2018
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Always assume that the trend remains the same until proven otherwise. At this stage, there is no technical evidence for a trend change; we should assume the trend remains upwards.

The adjusted base channel is drawn in the same way. Look for the lower edge to provide support for corrections along the way up.

Momentum is increasing. This wave count expects that a third wave at six degrees is coming to an end (four degrees at the weekly chart level, and six at the hourly chart level now). Momentum may increase further.

Micro wave 2 may not move beyond the start of micro wave 1 below 2,736.06. However, it should find support at the lower edge of the adjusted base channel. If that channel is breached by downwards movement, then this analysis must consider the possibility that subminuette wave iii may be over.

TECHNICAL ANALYSIS

WEEKLY CHART

S&P 500 weekly 2018
Click chart to enlarge. Chart courtesy of StockCharts.com.

Indicators should be expected to be extreme as a third wave at four degrees comes to an end.

When third waves are ending they fairly often will show weakness at the weekly chart level. There is no evidence of weakness at this time. When intermediate wave (3) is close to or at its end, then we may expect to see some weakness.

DAILY CHART

S&P 500 daily 2018
Click chart to enlarge. Chart courtesy of StockCharts.com.

The target calculated from the measuring gap at 2,760 was met and followed by a downwards day.

There is still no evidence of enough weakness to expect a multi week correction here. Wait for RSI to exhibit some divergence while overbought, and for divergence with price and Stochastics to be stronger.

ADX and On Balance Volume remain very bullish.

VOLATILITY – INVERTED VIX CHART

VIX daily 2018
Click chart to enlarge. Chart courtesy of StockCharts.com.

So that colour blind members are included, bearish signals will be noted with blue and bullish signals with yellow.

Normally, volatility should decline as price moves higher and increase as price moves lower. This means that normally inverted VIX should move in the same direction as price.

Bullish divergence noted yesterday has been followed by a strong upwards day. It may be resolved here.

Price moved higher today, but inverted VIX moved lower. The rise in price today did not come with a normal corresponding decline in market volatility; volatility has increased. This divergence is bearish.

However, because there is no equivalent divergence between price and the AD line today, this divergence with VIX will not be given weight in this analysis.

BREADTH – AD LINE

AD Line daily 2018
Click chart to enlarge. Chart courtesy of StockCharts.com.

There is normally 4-6 months divergence between price and market breadth prior to a full fledged bear market. This has been so for all major bear markets within the last 90 odd years. With no longer term divergence yet at this point, any decline in price should be expected to be a pullback within an ongoing bull market and not necessarily the start of a bear market.

Only mid and large caps made new all time highs last week. There is some weakness with small caps unable to make new all time highs; this is slightly bearish.

Breadth should be read as a leading indicator.

Both price and the AD line have made new all time highs today. The rise in price has support from rising market breadth. This is bullish.

DOW THEORY

The S&P500, DJIA, DJT and Nasdaq last week all made new all time highs. The ongoing bull market is confirmed.

The following lows need to be exceeded for Dow Theory to confirm the end of the bull market and a change to a bear market:

DJIA: 17,883.56.

DJT: 7,029.41.

S&P500: 2,083.79.

Nasdaq: 5,034.41.

Charts showing each prior major swing low used for Dow Theory are here.

Published @ 07:27 p.m. EST.