Price has moved higher for Monday, which is exactly what was expected from last analysis.
Summary: The next target is at 3,020.
In the short term, look for a pullback tomorrow for a second wave correction. The pullback may find support now about the upper edge of the best fit channel on the hourly chart.
Always practice good risk management. Always trade with stops and invest only 1-5% of equity on any one trade.
The biggest picture, Grand Super Cycle analysis, is here.
Last historic analysis with monthly charts is here. Video is here.
An historic example of a cycle degree fifth wave is given at the end of the analysis here.
MAIN ELLIOTT WAVE COUNT
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.
Due to its size intermediate wave (4) looks proportional to intermediate wave (2), even though their durations so far are quite different.
Intermediate wave (4) has breached the Elliott channel drawn using Elliott’s first technique. The channel may be redrawn when it is confirmed as complete using Elliott’s second technique. A best fit channel is used while it may still be incomplete to show where it may find support. Price points are given for this channel, so that members may replicate it on a semi-log scale.
Intermediate wave (4) may not move into intermediate wave (1) price territory below 2,193.81.
The S&P has behaved like a commodity to end intermediate wave (3): a relatively strong fifth wave with a steep slope. The high looks a little like a blow off top. This is followed by a sharp decline, which is typical behaviour for a commodity and not common for the S&P.
Friday’s low is only a little above the lower edge of the best fit channel. The very long lower wick on Friday’s candlestick is bullish. It looks like intermediate wave (4) may now have found its low.
Despite the duration of intermediate wave (4) being much quicker than intermediate wave (2), the size is proportional. On weekly and monthly time frames intermediate wave (4) now has the right look. However, it is of course still possible that intermediate wave (4) may be only just beginning as a flat, combination or triangle to move sideways. All these ideas would now expect an upwards swing which should exhibit weakness. If the next wave up is particularly weak, then a B wave within an ongoing correction will then be considered.
A zigzag downwards may now be complete.
A breach of the yellow best fit channel on this hourly chart adds reasonable confidence to this wave count.
2,727.67 is the start of minor wave C. A new high above this point could not be a second wave correction within minor wave C, and so at that stage minor wave C would have to be over. This would add further confidence to this wave count.
A new all time high would add substantial confidence to this wave count.
So far there may be a small five up off the low. This is labelled minute wave i. Minute wave ii may correct tomorrow and may find support now at the upper edge of the yellow best fit channel. If it finds support there, it may be relatively shallow.
Minute wave ii may not move beyond the start of minute wave i below 2,571.12.
ALTERNATE MONTHLY WAVE COUNT
This monthly chart should be considered alongside last published historic analysis, which is linked to every day at the start of each article.
In the Grand Super Cycle analysis, Super Cycle wave (I) lasted over 60 years (my data does not go all the way to the start of Grand Super Cycle wave I); Super Cycle wave (II) lasted just 8 years (the market crash which began in 1929); Super Cycle wave III lasted 66 years, up to the high of 2000; and, Super Cycle wave (IV) ending in March 2009 lasted just 8.5 years.
Both of Super Cycle waves (I) and (III) are long extensions. This means Super Cycle wave (V) may not be a long extension because only two of the three actionary waves within Grand Super Cycle wave I may be extended.
If the degree of labelling within Super Cycle wave (V) is moved down one, it may be that only cycle wave I is nearing its end. The following correction for cycle wave II may not move beyond the start of cycle wave I below 666.79.
If only cycle wave I is nearing an end, then so far it has lasted 9 years. This does not look right for the Grand Super Cycle analysis because it would have to see a longer third wave for cycle wave III, and then Super Cycle wave (V) would look extended and the Elliott wave rule would be violated.
However, it is possible that cycle wave III could be relatively short, as could cycle wave V to end Super Cycle wave (V). And so this alternate may be considered, although it looks like it may have a low probability if the Grand Super Cycle wave count is correct.
Click chart to enlarge. Chart courtesy of StockCharts.com.
This pullback has now brought RSI well back down into neutral territory. ADX is declining from very extreme. A possible trend change to down is indicated, but as yet no new downwards trend at this time frame.
In the first instance, support should be expected for On Balance Volume at the yellow trend line. A breach below this line by On Balance Volume would be a very strong bearish signal. A bounce up off the line would be a strong bullish signal.
Click chart to enlarge. Chart courtesy of StockCharts.com.
Resistance on On Balance Volume may force a downwards reaction tomorrow. This supports the hourly Elliott wave count, which expects a second wave correction.
The lack of volume for this upwards day is not too concerning for the bullish case. Light and declining volume has been a feature of this market for several years, yet price has continued to rise with it.
Overall, it still looks like a low may be in place and the next wave up may have begun.
VOLATILITY – INVERTED VIX CHART
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.
Both price and inverted VIX have moved higher today. The rise in price comes with a normal corresponding decline in market volatility.
BREADTH – AD LINE
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.
All of small, mid and large caps last week moved lower. The decline has support from wide breadth.
Breadth should be read as a leading indicator.
Upwards movement today has support from rising market breadth. This is bullish.
All indices have made new all time highs as recently as three weeks ago, confirming the ongoing bull market.
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:
Charts showing each prior major swing low used for Dow Theory are here.
Published @ 9:05 p.m. EST.
Has anyone else noticed that we seem to be following the wave price action in DAX by 24 hours, or is it my imagination? 🙂
Hi Verne when you look at the japans markets and euros stock markets they are all about 8 -12% off from and all time highs.
The Us stock market makes up about 40% of the worlds stock markets caps.
which is crazy considering we are only 325 million people in the world.
Look at the Whillshire 5000 index to GDP that hit a record high on January 26.
Warren Buffets model is when Market cap exceeds GDP by 100% stocks are overvalued. It hit 152% higher then in 2000 where is hit 148.5% of GDP.
Hourly chart updated:
I think it’s time to also chart and publish the idea that intermediate (4) may continue sideways for another few weeks.
It could be any one of a flat, combination, triangle or double zigzag.
The only problem I have with this is if it’s a very common expanded flat it’s B wave should make a new ATH. But the B wave should show weakness, identifying it as a B wave.
But the problem there is rising price on light and declining volume has been a persistent feature of this market for years now. So rising price here on light and declining volume may not necessarily be a B wave.
At a new ATH there may be divergence between price and Stochastics, another identifying mark of a B wave, but divergence just isn’t that reliable. Sometimes it develops… then simply disappears.
How on earth am I to distinguish a B wave from a new wave up in this weak market?!?!
I don’t want you all to miss a beautiful entry point to another good bull run, but I also don’t want accounts to see unnecessary losses from a sucker B wave.
So I think the answer is to treat it as a possible new start to another bull run, but beware it could be a B wave too. So keep stops relatively close so if this does make a new ATH profits can be taken if it then quickly reverses and proves it was a B wave.
Risk management is going to be the key here.
Indeed. The possible combination of B and fourth waves presents one of the most challenging trading environments ever. Tight stops and modest position sizes are key… 🙂
Lest we confuse ourselves, there is the potential LARGE B wave (where the entire ATH to recent lows end up being an A wave), and then there’s the “small B wave” that the hourly indicates price is in now, with an expectation of a C down right in front of us (tomorrow). The action today screams “B wave” due to it’s overlapped, churning nature as I see it. Whether the higher time frame bounce from last week’s lows is going to play out as a massive B wave or not, I have zero clue, and I view it as “TBD” because it pretty much is unknowable as I see it. Risk management is the best and only solution to that problem.
Lara, I think you can publish this count at an end of the week analysis, make that analysis a historical analysis link, and publish the last paragraph in that analysis.
It’s a very thoughtful and also thought provoking statement:
“I don’t want you all to miss a beautiful entry point to another good bull run, but I also don’t want accounts to see unnecessary losses from a sucker B wave.”
Also will make all traders more careful on their trading, due to all the possibilities.
Thanks Ari and Kevin.
I think I’ll publish it today as an alternate. That way I can figure and and we can all see price points which differentiate the idea. If indeed there are any.
My comment about this possibility without a chart may cause confusion… and I wouldn’t want any confusion waiting for clarification for a few days.
Its interesting that the elliott wave international site is so bearish meaning they believe this is Wave 2 of 5 Down.
They also say that its possible that wave 2 can go as high as wave 1 meaning equal to and all time high.
That really doesn’t help and investor out too much.
Just curious why is your view so much different then theres?
Perhaps NDX’s double top now is what’s going to turn it back down for all the major indices today.
I would not recommend it for everyone but I am shorting this pop. VIX says it is probably bogus….
I’m with ya. I took it as priced dropped back through the 76% and NDX indicated double top.
What are you shorting (long VIX, short SPY…)?
Mainly DJI via the diamonds ETF. Very short term trades with tight targets and stops.
I am on S&P with shorts and will wait to scale in based on tomorrow’s economic numbers
FWIW, when you see VIX futures and VIX not responding with any conviction to these out-of-the-blue market ramps they should generally be viewed, imho, with deep suspicion.
I know several forum members maintain, as I do, separate accounts for short, mid, and long term positions. This is a great heads-up from Chris Kimble on a bird’s eye view of what may be developing vis a vis long term accounts.
I’m liking the GLD action, bought yesterday on what appeared to be a bullish turn. So far so good.
Me too. Trading via JNUG bull 10/12 put credit spread.
Price has bounced once off the 23.6%. It “should” go deeper, and price “should” get to the 38% minimally, the 50% or 62% likely. “I’ll bet it will” and I have. Fortunately, invalidation is merely filling that opening gap, so no substantial damage if wrong. Best of luck all today.
Based on the market action, we are likely to see this into tomorrow morning CPI release. I think the way market moved higher yesterday, it was momentum crowd that are trying to front run the CPI news. A more reasonable ramp higher would be better but no one seem to have patience for that. Markets however is showing lower highs and lower lows so a revisit to trendline might not be a bad idea and CPI might be the trigger for that…on sidelines through this churn..
Sounds reasonable. I’m looking at the price action at the moment as a possible ABC down, and the action right now is in the B up phase. We’ll see….
Yep! I think it will complete D of a possible triangle, followed by a final E up, and then…..!!!!
This could explain the indecisive VIX price action.
Triangles looking good…
Hmmm, well…I don’t see (nor expect) a real triangle here. A triangle is “always” a 4 and we aren’t expecting any 4 here, in theory a 5 just completed. What we are expecting is a 2. And I see one leg down of that 2, and now lots of sideways action staying below the gap down open. So far. My best guess continues to be that a C leg down of a 2 should be coming. Maybe it needs a CPI report tomorrow to happen. Or maybe (?????) this pullback to the 23.6% is IT for a 2?? Not impossible by any means. If that gap gets filled and price starts pushing up, there will be buy triggers, and more serious consideration of a completed 2 will be necessary. It’s kind of headed that way at the moment…
We could get a B wave of 2 that exceeds the high from yesterday. Followed by a sharp reversal for a C of 2 down below today’s low. That would fool a lot of bulls maybe whipsawing a few people.
Darn, that could even fool me!! (But I’m easily fooled.) Thanks for pointing out that risk Rodney. Ye old expanding flat tomfoolry!!
Thats funny you say that on the old mans sight for the daily update yesterday he mentioned the same thing that market goes slightly higher then yesterdays high before C Down.
Hi Kevin do you think now the wave 2 is complete because it filled the opening gap?
Not because it filled the opening gap, and essentially I won’t be a “confirmed” believer the 2 is over until it’s pretty clear there is new impulsive action upward. This could be the start of it…but the higher probability at this point as I see it is that a C wave down is still due.
I’ll start really suspecting the 2 down is over when prices pushes above yesterday’s high, though Rodney’s caution is valid.
Note that the high today is at the 76% retrace of the high yesterday and low today. If it breaks that to the upside…it’s probably going to keep on going to the 1.27% extension. I.e., breaking that would greatly increase the chance the 2 is over. IMO. Which is often wrong.
triangles can form independently in 4, B, or X. I just dont know if E is allowed to spike so high…
Thinking the same thing but we have seen this move before. It bolts from the formation in the direction NOT expected and does a nasty reversal. I cannot explain why or how that happens but it does.
A new interesting article (with scholarly references no less) on zero hedge about market manipulation, notwithstanding folk who would like to to stick their head in the sand. I have never met a real trader who has any doubts whatsoever that market shenanigans can and do take place!
The bottom line that I have found is that you NEVER allow positions, especially on VIX, to go into the day of expiration…EVER!!!! The exception is of course if you are deliberately using OpEx strategies… 🙂
Ah yes, now I understand and see what you guys are talking about. Got it. Yea, that “E” wave doesn’t look like one, looks more like a break to the upside. It’s all a corrective mess is what it is.
3 bounces off 23.6%. That’s a sign of more strength than I expected, so I’ve gone flat to wait and see what develops here. Discretion is the better part of valor. I’ll get short if and when price starts dropping through that 23.6% at 2639.5.
Something in the market has definitely changed. A quick glance at prior VIX moves above the B bands at the completion of an impulse would see a rapid and relentless retreat back toward the lower band. Not so this time. Of course it is safe to assume the frenzied shorting going on for the past few years has abated somewhat, as one can well imagine! What is also new is a return back below the upper B band has never previously ocurred this far above the 200 day moving average. We are uncharted waters. Francesco Filia thinks anyone convinced things are going back to “normal” may be premature in that assumption. Here is his latest missive.
Why certainly we missed you wabbit.
The current VIX situation does not look that much different than the situation in late 2015. It looks like it took a couple of months for VIX to get back to pre-breakout levels. Of course the final price bottom did not occur until Jan-Feb 2016 while VIX had another but lower price jump. Perhaps we are setting up for the same pattern, A wave completed and B-C waves yet to come to complete Intermediate 4.
I agree that everything so far is reminiscent of 2015.