Price moved lower as expected but ended the session higher to complete a green candlestick.
Price remained below the invalidation point on the hourly chart for the session.
Summary: The wave count now expects to see a third wave down. The short term target is now at 1,916. The long term target remains at 1,423. Risk should still be calculated at 2,111.05, but for the less adventurous it may now be set at 2,103.48. Persistent weakness in upwards movement is noticed and volume favours more downwards movement. This looks like a very good low risk high reward opportunity. Nothing is ever 100% certain though, so always manage risk: never invest more than 5% of equity on any one trade and always use a stop loss to protect your account.
To see detail of the bull market from 2009 to the all time high on weekly charts, click here.
New updates to this analysis are in bold.
BEAR ELLIOTT WAVE COUNT
MONTHLY CHART
Click chart to enlarge.
What if the big flat correction labelled super cycle wave (w) or (a) was only the first three in a larger correction?
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.
There are two ideas presented in this chart: a huge flat correction or a double flat / double combination. The huge flat is more likely. They more commonly have deep B waves than combinations have deep X waves (in my experience).
A huge flat correction would be labelled super cycle (a)-(b)-(c). It now expects a huge super cycle wave (c) to move substantially below the end of (a) at 666.79. C waves can behave like third waves. This idea expects a devastating bear market, and a huge crash to be much bigger than the last two bear markets on this chart.
The second idea is a combination which would be labelled super cycle (w)-(x)-(y). The second structure for super cycle wave (y) would be a huge sideways repeat of super cycle wave (a) for a double flat, or a quicker zigzag for a double combination. It is also possible (least likely) that price could drift sideways in big movements for over 10 years for a huge triangle for super cycle wave (y).
Importantly, there is no lower invalidation point for this wave count. That means there is no lower limit to this bear market.
A box is added in cyan to the monthly chart level. Price is boxed in, perhaps as far back as April 2014. This is a long time for price to be essentially range bound, albeit within a very large range. Price will eventually break out of this range and move again in a clear trending direction. Classic technical analysis may be used to determine the most likely breakout direction. So far that direction looks likely to be downwards.
WEEKLY CHART
Click chart to enlarge.
The box is added today to the weekly chart. Price has been range bound for months. A breakout will eventually happen. The S&P often forms slow rounding tops, and this looks like what is happening here at a monthly / weekly time frame.
Primary wave 1 is complete and lasted 19 weeks. Primary wave 2 is over lasting 28 weeks.
An expectation for duration of primary wave 3 would be for it to be longer in duration than primary wave 1. If it lasts about 31 weeks, it would be 1.618 the duration of primary wave 1. It may last about a Fibonacci 34 weeks in total, depending on how time consuming the corrections within it are.
Primary wave 2 may be a rare running flat. Just prior to a strong primary degree third wave is the kind of situation in which a running flat may appear. Intermediate wave (B) fits perfectly as a zigzag and is a 1.21 length of intermediate wave (A). This is within the normal range for a B wave of a flat of 1 to 1.38.
Within primary wave 3, no second wave correction may move beyond its start above 2,111.05.
DAILY CHART
Click chart to enlarge.
If intermediate wave (C) is over, then the truncation is small at only 5.43 points. This may occur right before a very strong third wave pulls the end of intermediate wave (C) downwards.
The next wave down for this wave count would be a strong third wave at primary wave degree. At 1,423 primary wave 3 would reach 2.618 the length of primary wave 1. This is the appropriate ratio for this target because primary wave 2 is very deep at 0.91 of primary wave 1. If this target is wrong, it may be too high. The next Fibonacci ratio in the sequence would be 4.236 which calculates to a target at 998. That looks too low, unless the degree of labelling is moved up one and this may be a third wave down at cycle degree just beginning. I know that possibility right now may seem absurd, but it is possible.
Alternatively, primary wave 3 may not exhibit a Fibonacci ratio to primary wave 1. When intermediate waves (1) through to (4) within the impulse of primary wave 3 are complete, then the target may be calculated at a second wave degree. At that stage, it may change or widen to a small zone.
Minor wave 2 fits perfectly as a very common expanded flat correction. Minute wave b is a 1.3 length of minute wave a, nicely within normal range of 1 to 1.38. Minute wave c is 4.08 points longer than 1.618 the length of minute wave a. Minute wave c has a clear five wave look to it on the daily chart.
At 1,916 minor wave 3 would reach 2.618 the length of minor wave 1. This is the appropriate ratio to use for this target because minor wave 2 is very deep at 0.9 the length of minor wave 1.
Notice that the bear market trend line has been overshot before at the high labelled primary wave 2, so it may be overshot again. A parallel copy of the bear market trend line is drawn in gold and placed on the high labelled primary wave 2. This line was almost touched with today’s high. At this time, this line may be the final line of resistance.
Minor wave 2 may not move beyond the start of minor wave 1 above 2,111.05. This is the risk to short positions at this stage.
If any members are choosing to enter short positions here, then manage risk carefully: Do not invest more than 3-5% of equity on any one trade and always use a stop loss to contain losses.
HOURLY CHART
Click chart to enlarge.
Minute wave c is 4.08 points longer than 1.618 the length of minute wave a within the expanded flat of minor wave 2.
Ratios within minute wave c are: there is no Fibonacci ratio between minuette waves (i) and (iii), and minuette wave (v) is 1.47 points short of 0.382 the length of minuette wave (iii).
There is alternation between the zigzag of minuette wave (ii) and the combination of minuette wave (iv).
Draw a channel about minute wave c using Elliott’s technique: draw the first trend line from the highs labelled minuette waves (i) to (iii), then place a parallel copy on the low labelled minuette wave (ii).
Within minor wave 2, no second wave correction may move beyond its start above 2,103.48.
When there is a clear five down on the hourly chart, then the invalidation point (and final risk) may be moved down also at the daily chart level. That still cannot be done today.
Price has moved higher today. The correction labelled minuette wave (ii) subdivides as an expanded flat on the five minute chart. Within the flat, subminuette wave b is a 1.36 length of subminuette wave a, nicely within the normal range of 1 to 1.38. Subminuette wave c is 1.04 points short of 1.618 the length of subminuette wave a.
Second wave corrections can be and often are very deep. Their purpose psychologically is to convince us there has been no trend change; they achieve this purpose especially well when they are deep.
At 2,062 minuette wave (iii) would reach 1.618 the length of minuette wave (i).
A new low below 2,058.35 would provide price confirmation of a trend change. This is the high of minuette wave (i) within minute wave c. A new low below 2,058.35 could not be a fourth wave correction within an impulse unfolding upwards because it may not move into first wave price territory.
At 1,916 now minor wave 3 would reach 2.618 the length of minor wave 4.
ALTERNATE HOURLY CHART
Click chart to enlarge.
What if I’m wrong? What if minute wave c is not over yet?
At this stage, I would judge this alternate to have an exceptionally low probability, possibly as low as 5%. I base this judgement on classic technical analysis: volume, On Balance Volume, candlestick patterns and ATR.
Within minute wave c so far, minuette wave (iii) is 3.05 points longer than 1.618 the length of minuette wave (i). At 2,105 minuette wave (v) would reach 0.618 the length of minuette wave (i).
There is no alternation between the zigzag of minuette waves (ii) and (iv).
On balance, there is no advantage yet in terms of Fibonacci ratios for this alternate, and there is a disadvantage in terms of alternation. This reduces the probability of this to an alternate.
The channel is drawn here using Elliott’s second technique: the first trend line is drawn from the lows of minuette waves (ii) to (iv) then a parallel copy is placed on the high labelled minuette wave (iii). The middle of the third wave overshoots the channel, which is normal.
Minor wave 2 may not move beyond the start of minor wave 1 above 2,111.05.
If price breaks below the lower edge of this channel tomorrow, then this alternate will be discarded.
BULL ELLIOTT WAVE COUNT
MONTHLY CHART
Click chart to enlarge.
This wave count is bullish at Super Cycle degree.
The two big bear markets of 2000 – 2002 and 2007 – 2009 may have been waves A and C within a large flat correction for a Super Cycle wave IV. The bull market since 2009 may be Super Cycle wave V.
Cycle waves I, II and III are complete within Super Cycle wave V. Cycle wave II was a relatively shallow 0.41 zigzag lasting 12 weeks. Cycle wave III is 55.97 points short of 1.618 the length of cycle wave I. This is a reasonable difference, but as it is less than 10% the length of cycle wave III (it is 5.2%) I consider this an acceptable Fibonacci ratio.
Draw a best fit channel about this bull market as shown. Cycle wave IV may have ended just short of support at the lower edge. Because cycle wave IV fits so nicely within the channel, and because if it were to continue further sideways it would breach the channel, I am labelling it as complete. For the bull wave count, it would most likely be complete finding support at the channel.
If it continues any further, 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 III shows an increase in upwards momentum beyond cycle wave I.
Cycle wave II was a shallow 0.41 zigzag lasting three months. Cycle wave IV may be a complete shallow 0.19 regular flat correction, exhibiting some alternation with cycle wave II.
At 2,500 cycle wave V would reach equality in length with cycle wave I.
WEEKLY CHART
Click chart to enlarge.
Cycle wave IV is seen as a complete flat correction. Within cycle wave IV, primary wave C is still seen as a five wave impulse.
Intermediate wave (3) has a strong three wave look to it on the weekly and daily charts. For the S&P, a large wave like this one at intermediate degree should look like an impulse at higher time frames. The three wave look substantially reduces the probability of this wave count. Subdivisions have been checked on the hourly chart, which will fit.
Cycle wave II was a shallow 0.41 zigzag lasting three months. Cycle wave IV may be a complete shallow 0.19 regular flat correction, exhibiting some alternation with cycle wave II.
At 2,500 cycle wave V would reach equality in length with cycle wave I.
Price remains below the final bear market trend line. This line is drawn from the all time high at 2,134.72 to the swing high labelled primary wave B at 2,116.48 on November 2015. This line is drawn using the approach outlined by Magee in the classic “Technical Analysis of Stock Trends”. To use it correctly we should assume that a bear market remains intact until this line is breached by a close of 3% or more of market value. In practice, that price point would be a new all time high which would invalidate any bear wave count.
This wave count requires price confirmation with a new all time high above 2,134.72.
While price has not made a new high, while it remains below the final bear market trend line and while technical indicators point to weakness in upwards movement, this very bullish wave count comes with a strong caveat. I still do not have confidence in it.
The invalidation point will remain on the weekly chart at 1,370.58. Cycle wave IV may not move into cycle wave I price territory.
This invalidation point allows for the possibility that cycle wave IV may not be complete and may continue sideways for another one to two years as a double flat or double combination. Because both double flats and double combinations are both sideways movements, a new low substantially below the end of primary wave C at 1,810.10 should see this wave count discarded on the basis of a very low probability long before price makes a new low below 1,370.58.
DAILY CHART
Click chart to enlarge.
If the bull market has resumed, it must begin with a five wave structure upwards at the daily and weekly chart level. That may today be complete. The possible trend change at intermediate degree still requires confirmation in the same way as the alternate hourly bear wave count outlines before any confidence may be had in it.
Intermediate wave (2) may be an incomplete zigzag. Within the zigzag, minor wave B may now be a complete expanded flat. At 1,988 minor wave C would reach 1.618 the length of minor wave A. This ratio is used for this target because intermediate wave (2) should be expected to be relatively deep. If this target is wrong, it may not be low enough. The next likely target would be the 0.618 Fibonacci ratio at 1,920.
In the long term, this wave count absolutely requires a new high above 2,134.72 for confirmation. This would be the only wave count in the unlikely event of a new all time high. All bear wave counts would be fully and finally invalidated.
TECHNICAL ANALYSIS
MONTHLY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
The long trend line on price is drawn from the low of March 2009, at 666.79 to the low in October 2011. This trend line was repeatedly tested, breached, and then provided resistance in August 2015. Price has closed well over 3% of market value below it. Trend lines like this one which are long held and repeatedly tested are highly technically significant. The breach tells us the market has switched from bull to bear. This supports the bear wave count over the bull.
Volume has overall declined during the bull market spanning over 6 years. The rise in price was not supported by volume at the monthly chart level. This also supports the bear wave count over the bull.
RSI shows double negative divergence with price as the final highs were made. Finally, a failure swing on RSI completes a pattern which was last seen in September 2000. This pattern indicates a bear market may begin from here and supports the bear wave count over the bull.
On Balance Volume also shows divergence with price (pink line) as the final highs were made. On Balance Volume has breached a very long held trend line (brown). OBV came up to test the brown line for resistance in November 2015 and the line held. Now OBV is coming up to test the pink line for resistance, and it is reasonable to expect this line to also hold. This is further support for the bear wave count over the bull.
Since the all time high in May 2015, downwards movement is coming with an increase in volume at the monthly chart level. This further supports the bear wave count over the bull.
Now, for the last three months, green monthly candlesticks come with a decline in volume. Again, at the monthly chart level this does not support the rise in price, so the rise in price for this time is suspicious and is not sustainable. This again supports the bear wave count over the bull.
A box is added to this chart in cyan. Price has been range bound since about April 2014. During this sideways chop, it is the downwards months of January and February 2016 which have strongest volume. This indicates a downwards breakout is more likely than upwards and supports the bear wave count over the bull.
Not only is there nothing bullish about this picture at the monthly chart level, it is very bearish indeed. It indicates that recent downwards movement is more likely to be the start of a large bear market than it is to be another correction within a continuing bull market.
WEEKLY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
There is a bearish engulfing candlestick pattern at the last high. This has occurred at the round number of 2,100 which increases the significance. Volume on the second candlestick is higher than volume on the first candlestick, which further increases the significance. That it is at the weekly chart level is further significance.
Engulfing patterns are the strongest reversal patterns.
Now this pattern is followed by another red weekly candlestick. The reversal implications of the pattern are confirmed.
This is a very strong bearish signal. It adds significant weight to the expectation of a trend change. It does not tell us how low the following movement must go, only that it is likely to be at least of a few weeks duration.
There is also a Three Black Crows pattern here on the weekly chart. The first three red weekly candlestick patterns are all downwards weeks. The pattern is not supported by increasing volume and only the third candlestick closes at or near its lows; these two points decrease the strength of this pattern in this instance. That the pattern occurs at the weekly chart level increases its strength.
Last week completes a strong bullish candlestick, but it comes on declining volume. Price was not supported by volume although price managed to move substantially higher.
This pattern was seen back in July 2015 on this weekly chart. The week ending 13th of July, 2015, completed a strong bullish candlestick after a week immediately prior which completed a candlestick with a small real body and a long lower wick. The second candlestick there too came on declining volume. The following week managed to make a slight new high, but the advance of the bullish candlestick was fully retraced within two weeks.
The conclusion must be that this candlestick is bullish and would support more upwards movement. But the decline in volume is very concerning and indicates that if price does continue higher, it may not be by much.
On Balance Volume trend lines have been redrawn. OBV is constrained within two larger lines (green and orange). A break above the green line would be a strong bullish signal. A break below the orange line would be a strong bearish signal. OBV is constrained more short term between the two pink lines. The upper line may provide resistance; a break above it would be a weak bullish signal. The lower line has been tested and breached; this line is weak. A break below the lower pink line would be a weak bearish signal.
There is some long held divergence here between On Balance Volume and price. Between the last two major swing lows in price at the end of August 2015 and early February 2016, price made new lows but OBV made a higher low. This regular bullish divergence indicated the February low in price was weak. It was followed by a major upwards swing from price.
Now, from the major swing high for price in early November 2015 to the last major swing high in April 2016, price has made a lower high but OBV has made a higher high. Price cannot make a corresponding new high despite OBV making a new high. Price is weak. This hidden bearish divergence now supports the Elliott wave count.
DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
Volume data on StockCharts is different to that given from NYSE, the home of this index. Comments on volume will be based on NYSE volume data when it differs from StockCharts.
Yesterday’s candlestick is a hanging man. This is a reversal pattern, but the bullish implications of the long lower shadow mean that it requires bearish confirmation with either an open below the real body of the hanging man or preferably a close below the real body. Today opened below the real body providing some confirmation but not as much as could be had. The candlestick for Tuesday is not another hanging man, because the lower wick is only 1.6 times the length of the real body and a hanging man candlestick requires a lower wick to be minimum 2 times the real body.
Volume for yesterday was the highest for the last several days on a downwards day. Now an upwards day has lighter volume than the prior downwards day. Volume here is bearish; the fall in price is supported by volume and the rise in price is not.
Price continues to find resistance about the round number pivot of 2,100 and the purple horizontal trend line.
ADX still indicates an upwards trend is in place. This indicator is lagging as it is based on a 14 day average.
ATR today is still declining, disagreeing with ADX. During the last rally of seven days, ATR overall declined which indicates the rally is more likely a bear market rally than part of a bull market. Declining ATR is normal for counter trend movements and not normal for a sustainable trend.
RSI is not extreme and exhibits no divergence with price.
Stochastics is overbought. If this rally is a countertrend movement, then it may end here or very soon.
On Balance Volume today has come again up to almost touch the yellow trend line. This is providing some resistance and may serve here to stop price from rising further.
A break below the pink line would be a reasonable bearish signal from OBV. A break below the purple line would be a strong bearish signal.
A break above the yellow line would be a weak bullish signal from OBV. Weak because this line has been breached before yet OBV returned below it.
VOLATILITY – INVERTED VIX DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
Volatility declines as inverted VIX climbs. This is normal for an upwards trend.
What is not normal here is the divergence over a reasonable time period between price and inverted VIX (green lines). The decline in volatility did not translate to a corresponding increase in price. Price is weak. This divergence is bearish.
There is now double negative hidden bearish divergence between price and VIX (pink lines). At the end of last week, VIX has made a new high above the prior swing high of 20th of April yet price has failed to make a corresponding new high. This indicates weakness in price. Volatility has declined below the point it was at on 20th of April, but this has failed to be translated into a corresponding rise in price.
BREADTH – ADVANCE DECLINE LINE
Click chart to enlarge. Chart courtesy of StockCharts.com.
With the AD line increasing, this indicates the number of advancing stocks exceeds the number of declining stocks. This indicates that there is breadth to prior upwards movement.
From November 2015 to 20th April, the AD line made new highs while price far failed to make a corresponding new high. This indicates weakness in price; the increase in market breadth is unable to be translated to increase in price (orange lines).
The 200 day moving average for the AD line is now increasing. This alone is not enough to indicate a new bull market. During November 2015 the 200 day MA for the AD line turned upwards and yet price still made subsequent new lows.
The AD line is now declining and has breached a support line (cyan). There is breadth to downwards movement; more stocks are declining than advancing which supports the fall in price.
There is now double hidden bearish divergence between price and the AD line at the end of this week (dark blue lines). The AD line has made a new swing high above the prior high of 20th of April. This increase in breadth to upwards movement has failed to translate into a corresponding rise in price. Price has failed to make a new high above 20th of April. This indicates weakness in price.
Price has essentially over the last two days moved sideways and slightly lower, but the AD line has moved higher for both days. There was increasing breadth to upwards movement, but it could not translate into higher prices. Price was weak.
ANALYSIS OF LAST MAJOR BEAR MARKET OCTOBER 2007 – MARCH 2009
Click to enlarge.
In looking back to see how a primary degree third wave should behave in a bear market, the last example may be useful.
Currently, the start of primary wave 3 now may be underway for this current bear market. Currently, ATR sits about 19. With the last primary degree third wave (blue highlighted) having an ATR range of about 18 to 76, so far this one looks about right.
The current wave count sees price in an intermediate degree first wave within a primary degree third wave. The equivalent in the last bear market (yellow highlighted) lasted 39 days and had a range of ATR from 16 – 27.
To see some discussion of this primary degree third wave in video format click here.
Click chart to enlarge.
This chart is shown on an arithmetic scale, so that the differences in daily range travelled from the start of primary wave 3 to the end of primary wave 3 is clear.
Primary wave 3 within the last bear market from October 2007 to March 2009 is shown here. It started out somewhat slowly with relatively small range days. I am confident of the labelling at primary degree, reasonably confident of labelling at intermediate degree, and uncertain of labelling at minor degree. It is the larger degrees with which we are concerned at this stage.
During intermediate wave (1), there were a fair few small daily doji and ATR only increased slowly. The strongest movements within primary wave 3 came at its end.
It appears that the S&P behaves somewhat like a commodity during its bear markets. That tendency should be considered again here.
Looking more closely at early corrections within primary wave 3 to see where we are, please note the two identified with orange arrows. Minor wave 1 lasted a Fibonacci 5 days and minor wave 2 was quick at only 2 days and shallow at only 0.495 the depth of minor wave 1.
Minute wave ii, the next second wave correction, was deeper. Minute wave i lasted 3 days and minute wave ii was quick at 2 days but deep at 0.94 the depth of minute wave i.
What this illustrates clearly is there is no certainty about second wave corrections. They do not have to be brief and shallow at this early stage; they can be deep.
This chart will be republished daily for reference. The current primary degree third wave which this analysis expects does not have to unfold in the same way, but it is likely that there may be similarities.
Put / Call ratios are added from data published at CBOE. This ratio is the index ratio published, not the ratio specifically for the S&P500. It should be a reasonable indicator of sentiment. Only values above 2 and below 1, extremes, are noted. A low P/C ratio indicates more long positions than short, so it is interpreted as bearish, a contrarian indicator. A high P/C ratio indicates more short than long positions, so it is interpreted as bullish, a contrarian indicator.
There were two instances where the P/C ratio gave a bullish extreme above 2 during primary wave 3. One instance happened right at the end of the middle of the third wave. My conclusion is that the P/C ratio may be a reasonable sentiment indicator, but it is not to be taken definitively. It should be one piece of information weighed up alongside other information. Currently, the index P/C ratio is not extreme. Only extremes will be noted.
DOW THEORY
DJIA
Click chart to enlarge.
The last major swing low within the bull market for DJIA was 15,855.12 on 15th October, 2014.
The Dow Industrials have closed below this point on 25th August, 2015, when the daily close was 15,666.44.
Now, within the new bear market, the first major swing high is 17,977.85 on 4th November, 2015. DJIA has closed above this point several times in the last month.
DJT
Click chart to enlarge.
The last major swing low within the bull market for DJT was 7,700.49 on 12th October, 2014. DJT closed below this point on 24th August, 2015.
Therefore, on the 25th of August both DJIA and DJT had closed below their respective major lows within the prior bull market. On that date Dow Theory confirmed a bear market was underway.
Now, within the new bear market, the first major swing high for DJT is calculated at 8,358.20 on 20th November, 2016. At this stage, DJT has not closed above this point.
Classic Dow Theory has confirmed a bear market. And so far has not confirmed the end of that bear market and a new bull market.
S&P 500
Click chart to enlarge.
The last major swing low within the bull market up to the all time high was 1,821.61 on 15th October, 2014. The S&P has not closed below this point yet.
NASDAQ
Click chart to enlarge.
Adding Nasdaq as the modern day equivalent of the transportation index seems reasonable. So far Nasdaq has not confirmed a bear market, nor has it confirmed the continuation of a bull market.
The last major swing low within the bull market for Nasdaq is taken as 4,117.84 on 15th October, 2014.
The first major swing high within the current potential bear market is taken as 5,176.77 on 2nd December, 2015.
This analysis is published @ 10:48 p.m. EST.
Elliott Wave
I think there is a general belief among many analysts and investors that the Central Banks have unlimited power to elevate market levels by inserting free money into the financial systems through their member surrogates. Further, their intervention is believed to preclude normal market forces from exerting any substantial downward trajectory on prices. Those beliefs combine to reinforce a higher level of risk taking by market participants and discourage the use and reliance on technical systems designed to gage the intensity of human sentiment, like Elliott Wave Theory. Why bother to deploy nuanced technical analysis systems when everyone knows the Fed is not going to let the markets fall?
But isn’t that just what Elliott Wave is all about? Does it really matter what common belief is causing the extreme optimism or pessimism among the participants? The overly optimistic belief in the omnipotent Fed will continue until it doesn’t. That intensity of optimism will follow a path described in the structure of Elliott Wave Theory and will abruptly turn when that structure is complete. No intervention can stop it. If it could, why did 2000-2003 happen? Why did 2007 to 2009 happen? Surely if the Fed and its members were more powerful than the market forces they would have stopped the devastating declines in days not years.
Sorry for thinking out loud, but I just had to completely rebuild my MotiveWave workspace and had to make some sense out of all this work.
Gary
Exactly Gary.
I hear the belief that central banks / governments can force markets to move in their desired direction repeatedly.
When the Shanghai Composite crashed nothing the CCP could do to stop it worked. The CCP is the closest to a God of Markets there ever will be, they can and do exert more influence on their markets and economy than any other government / central bank does.
When that crash happened despite all the meddling and influence of the CCP I really thought that the concept that central banks / governments could influence markets should have been finally laid to rest.
That it persists I think is due to over optimism because the US markets are so close to all time highs.
I do think that large players, central banks and governments can influence short and maybe possibly mid term price movements; they can make a correction deeper or longer lasting, they can push a trend further than it otherwise would go. But I do not think that they can change a major direction, nor stop a crash.
That’s my two cents worth anyway.
I have found that the process I go through in writing up the analysis (which Cesar is proofing right now) is a very useful one. By the time I get to the end I have (usually) a pretty firm conclusion.
Verne and Olga, have you noticed divergence today with price and VIX?
I can see some pretty big divergence between the 27th of May and today. Inverted VIX has made a reasonably lower high, the difference is clear. Yet price has made a higher high.
In my experience with VIX so far I would give this a fair amount of weight. But I’m asking you for your opinion because you both are much more experienced than I in regards to VIX.
This may also be true (the matter of experience with VIX) for other members here who may like to make a comment on this today.
This week’s results: From AAII’s sentiment survey
Bullish: 30.2%, up 12.4 points
Neutral: 40.8%, down 12.1 points
Bearish: 29.1%, down 0.3 points
Historical averages:
Bullish: 38.5%
Neutral: 31%
Bearish: 30.5%
John, I’m looking at Barron’s Market Lab Tables daily for sentiment indicators.
I’m interested in maybe getting historic data from Consensus Inc. to see how useful it was in the past and so to judge how useful it may be in the future.
Is there a specific reason for you choosing to note the AAII index?
Lara it’s just one of the sites I read to pull hopefully some useful data from hence why I noted the source of the data so anyone reading can be subjective to to the validity of the information and do their own due diligence. looking at the Barron’s there seems to be some discrepancies to what I have from AAII.
http://www.aaii.com/sentimentsurvey?a=updatenm06216
Thank you John.
FWIW, the intensity of ramp tomorrow could very well take S&P toward 2,136 (assuming the upward break from 2,111 is strong) representing the next Fibonacci level.
I never paid much attention to the long term historic counts until today’s video was posted…
Lara’s count from the low in 2009, from 666 funny enough…I’m no Elliottician, but that 3-4-5 of “a” looks like it doesn’t have… as RWE might say” The right look”
Am i alone here?
Have a look at the count below – Consider it a counter to the long term analysis which is supposed to lead us into the gates of economic Hell.
EW aside, don’t underestimate the effects of Kool Aid 🙂
Lara’s weekly bull chart is pretty much saying the same thing (of course not speaking for her). But the wave up from the Feb. low is so hollow, my point is why not take a low risk entry point to go short where we are up coming up against a major trendline? If stopped out just over 2111 the loss is small. If correct then 100 basis points is possible as profit – I’ll take that all day. Weekly SPX chart shown.
Well Stuart, if you are right, it should be abundantly clear to all of us here by the end of this month. I will be the first to post here that you nailed it.
There are any number of considerations entirely apart from the EW count that in my mind cast very serious doubt on your unbridled optimism about the market’s future.
You are not alone however. Others agree with your count. 🙂
The number of EW people who have switched from bear to bull in the past week is amazing. What to think of it, I’m not sure.
I agree, it is amazing! Lara said a few weeks ago that this wave 2 would do that.
There’s still the problem of the third wave being light in volume.
This is a monthly, but because we can’t see the axes with price and dates it makes it more difficult to understand what’s happening.
Another thing about Lara’s count Stuart is that she paid very careful attention to how momentum played out during the move up from the 2009 lows. I was going to make a few comments in that regard but you did not put any other indicators on your chart so I did not. She had excellent techincal reasons for the labels you see, your comment about the “right look” notwithstanding.
I do think the comment on your chart is unnecessary.
Some technical support of this bullish wave count would be appreciated.
Seriously, am I missing something here? I genuinely would like to know if there is bullish support for this proposed wave count. If you can offer some I will consider it. If it is strong support it may change my analysis.
All points of view will be taken into consideration.
It now seems almost axiomatic that the first descent out of a well-established bull channel by SPX cannot be taken as confirmation of a trend change. We have seen this now so often that it should be something we expect methinks!
I will be holding all future short trades until I see that ole’ reliable gap ‘n go on volatility. Third wave gaps generally do not get filled the same trading session as we have been seeing repeatedly the last few sessions. Every time I have tried to go short without seeing a true break-away gap I get stopped out, unless I quickly took profits intra-day. I still do believe the kind of cascading new 52 week lows in volatility suggest we are closer to a major top than a major bottom. Price will tell all. ‘Nite all!
IKR
Most frustrating. This is one of the more annoying tendencies of S&P.
I’m still expecting pretty strong resistance at the bear market trend line and its parallel copy, and about 2,100.
But the fact that price closed above 2,100 today is concerning.
I’m looking for alternates.
I think you’ll not like this Verne but it has to be done.
I’m resurrecting the leading expanding diagonal.
I think it has a low probability, but TBH the main wave count now suffers from the problem of the running flat for primary wave 2. So on basis of probability of structures they’re either about even or the diagonal could be considered more likely.
Another technical indicator I like to use is daily MACD. If you look at SPX daily MACD and draw a trend line from the MACD high around 3/22 (connect to 4/26ish top), we are now approaching the top of the trend line. If we break it, we are heading considerably higher. If we bump it and drop, bears will drive this market significantly lower.
I will be interesting to see if MACD remains below wave three high on 5/31 tomorrow. We should see a turn down before according to the new wave count showing a final five up to complete minor two….
Hi Lara, first time poster. Please comment as to whether there is enough room for iii, iv, and v to complete without invalidating the bear count. I don’t see how iii can get high enough to allow iv enough space to not enter the territory of i. Thank you.
While i don’t expect new ATH’s just yet, i do expect a tad higher (2112+ & daily bear count invalidated)
Then, and only then will we see a meaningful pullback, into what is a wave 2, which *could* be a sharp and or deep aggressive affair, as wave 2’s can be…
Thinking is thus:
The volatility deck is an empty one, and all those who have tried the long vol trade have been carried out on their backs. It has been about 6 months since a meaningful move in vol (And we usually get 2 to 3 vol events per year.) And so, the odds now favor some type of move….
Hopefully that is down, after this pig does what it is threatening to do and gaps up at some point soon…
This will be the hourly wave count for todays analysis
Within minuette (v) subminuette waves iii, iv and v now need to complete.
I’ve tried to see if minuette (iv) could be a triangle and ending at 2,088.59 but it won’t fit and meet all EW rules for a contracting triangle.
So this is my conclusion.
considering we closed at 2105.26 are you expecting then a slightly higher target than you labeled at 2105?
One thing that I found unusual about the price action in this wave count is some the corrective waves, especially minuette four and sub-min two, seemed to exhibit more impulsive momentum than the motive waves. Did any one else get that impression?
Maybe I am missing something…?
If 2111.05 holds and sell the rumor play out tomorrow, this may the blueprint…. Chart of minuette w5 to follow.
Minuette w5
there’s a truncation for subminuette c of minuette (iv)
a wave count which avoids the truncation would have a higher probability
Thanks Lara,
I observed that and tend to agree with you, but I had a problem with sun-minuette w1 because it appeared to be a three wave structure. However, also thought it could be w1 of ending diagonal. I like your count more and keeps w5 target lower than mine from 2111.05.
Another interesting thing about the jobs reports is that one will often see a “buy the rumor”, “sell the news” scenario. It also makes particular sense in this case, as a good report will lend cover to the FED to “talk up”, and I do mean “talk”, a rate hike.
Interesting inter-market divergence today with SPX printing a new near term high but DJI not confirming. That could be a cautionary note that upwards movement could be limited, unless of course DJI plays catch-up tomorrow….
Except when it is “buying the leak” information…
UVXY is at 10.14 and if the market zooms up with a good jobs report will likely go under 10 – and be ripe for the reverse split…
Yep. If the market does not turn down tomorrow that is a virtual certainty. Folk should definitely unload shares if it closes under ten imo…
Its failure to really gap up and hold at the open was a good clue we were not in a third down yet…
SPX close above 2100 very bullish. Gone to all cash short term. Third waves down rarely, if ever surrender round number pivots on corrections in my experience…
VIX also closing at lows of the day…
Agreed 100% Verne…
You were right…despite all the bearish signals, it looks like we are going higher.
On balance volume does not confirm this price rise at all from the May 19th low.
Volume after the close going crazy, bet 4:00.02-4:06PM …. now 621.377 Million & still going.
It was 100K+ shares lower than yesterday at exactly 4:00PM and now the above!!!
Edit… Volume now 973.166 Million
Edit… Volume now 973.585 Million — looks like this is about it!
Volume Final 624.565 Million Close 2105.26
Sorry I entered the wrong volume symbol for SPX Total Volume
Ignore my previous post… but this is accurate
It was 100K+ shares lower than yesterday at exactly 4:00PM and now the above!!!
I have 628M, higher than yesterday’s…
Mine is always about 4 to 8 Million lower for some reason as a final.
I’m sticking with on balance volume not supporting/confirming the price rise. Although it looks like 2109-2111 is going to be tested.
The volume didn’t mean all that much yesterday… not sure if it means anything today. At least that has been the result the last few weeks. It has been meaningless.
Interpreting the non-confirming volume since May 19th low as it is a “b” (false) type of wave.
It would indeed appear that all the bearish signs we hoped would confirm our expectation of a major decline were not conclusive, certainly not in the short term….
We could also be seeing wholesale short side capitulation in the ramped up volume. It would be really worrisome to see the market continue much higher in the face of all the bearish signals we saw the last few days. Price discovery is tough enough as it is. Having normally reliable technical indicators go kaput would really throw another monkey wrench in the trading decision apparatus….
Vern,
That is what I have been saying for few weeks. I still think we make a new ATH before any meaningful down move.
There is that data freeze again. Frozen in time.
Lasted about 2 min.
ALT Target hit!
I’m watching the gold parallel copy of the cyan bear market trend line…
Price is getting pretty close to it now. Maybe a kiss and then sudden death? That would be nice.
the volume is only 366.70m. staying short
That is certainly not bullish is it.
This rise in price isn’t sustainable if its coming on much lighter volume. The longer it rises on declining volume, the closer it is to an end. And end it will.
The question is exactly where and when? For now the target will remain at 2,105 but I’m concerned it’s a bit too low.
SPX last candle was an impressive 2.1M shares!
SPY gapping higher after hours.
Maybe leaked jobs report?
SPX shows a close of 2105.26
I’m still holding onto a short that I entered… a few days ago now. Underwater, but I’ll be patient and give this market time and space to move. Leaving my stop at just above 2,111.05 until the position is comfortably positive.
When its positive I’ll move my stop lower to at least breakeven and look to add more shorts.
For now I’ll just hold tight.
I am looking at SPY – I see 5 up – and now looks like going to break down thru channel . ? testing channel bottom ?
You gotta hand it to the banksters. This is one of the most awesome “shake the trees” operation I have seen in quite some time. Once again, my line in the sand is that 2100 round number. Even then, I am holding dry powder until I see futures down double digits. I could care less about the jobs reports because third wave don’t either! 🙂
These lows in volatility are telling us that minor two was not done…
Good morning. The main hourly wave count isn’t looking good… on my data I don’t have an invalidation yet though. I see others do.
High 2103.75
Does the Alt work with a High of 2103.75? Meaning can it turn there?
the alt now needs more upwards movement to complete the structure
minuette (v) needs to be a five wave structure, so far it looks like a three
Yep! It’s toast I’m afraid! 🙂
Yep. Toast on my data now too 🙁
Dammit. I hate that tendency of S&P to breach channels and then turn back and continue in the old direction. It makes this market very frustrating.
Oh well. The bigger picture remains intact. Still finding resistance at the trend line and about 2,100. For now anyway.
C truncation resolved. The hourly alternate is looking quite nicely!
Well maybe now we get a kick in the face extended wave 1 down tomorrow that knocks off 40 handles.
Howzabout fifty?! 🙂
main count invalidated by 3 cents
MF
SPX Volume will be lower than yesterday.
Sehr Gut! 🙂
well ,,looks like the hourly alternate is our best hope
Barry,
Watch for 2,116.50 as the next target and failure of the same before making new short positions. Now that is assuming that there is no other positive spin to take the markets higher.
Not from an ES stand point. I don’t know if that matters?
Check the high made last October and it will fit the throw over 2,111 before turning down.
If minuette w2 holds…this could be possible.
yes…AGREE!
guess not…
this board is starting to capitulate…..it MUST mean the end of 2 is here…LOL!
trying to add some humor, to be clear, I’m one of those close to capitulating too.
Just got SHORT again!
fully short here.. holding.. (paaain)
Yes! Feeling the capitulation too! Still short though. 🙂
Iron men!! 🙂 🙂 🙂
well…..I also believe my current count is correct. expanded flat completed at tyesterday’s high, x-wave at today’s low, ZZ up to here. For a nice combination 2 wave!
add to that we are over bought on the 30 min, the hourly charts. Only thing that gives me a little pause is the MA’s are saying uptrend, so these moves can stay over bought.
We’ll know tomorrow I guess… 🙂
yes, the iron-man suit here includes a diaper!
Can’t be to careful! 🙂
I’m eyeing VIX. If it goes green prior to the close, I’m in!
But seriously, this really does feel like a wave two top of significance where everybody folds! 🙂
Everyone has a guess as to what is going on in the market so I will give mine also. If you go to the SPX daily chart and draw a trend line from the 5/19 low (connect with the 5/24 low), it officially only CLOSED below it yesterday. That would signal the first break of this trend up. I have found it more useful to look for closes below trend lines instead of just intra- day breaches. Right now it could be retracing to kiss the top of the trend line(which lines up perfectly with the top BB). I think everyone is just a little early in calling for the start of wave 3 down. Remember, SPX just officially closed below the trend line yesterday.
Yep. Would be supportive of the alternate hourly count. Once again the lower probability count prevails!
I kinda see a pattern here. 🙂
The main count was NOT eliminated yet.
Slowly I turned…step by step…inch by inch…
Slowly I turned…step by step…inch by inch…
Slowly I turned…step by step…inch by inch…
Don’t know what will happen tomorrow with the jobs report. If it is better than expected then there is a case for fed to raise…negative for stocks….if lower than expectations then the economy is stalling out….negative for stocks…..imho………feels like someone is buying up the indexes to push through some stops…….they can see where all the stops are…before reversing
30min SPX chart. Just the little count for this move which I’m trading, up around 4 pts overall so willing to take a loss if it goes above this. I can always take solice as Target stock is down again, that makes me happy.
I count five up. Now what??!!
VIX still underwater so no bearish indicators flashing….
If the alternate hourly count is playing out, if did not go past 2103.48 so if it ends here we would have a C wave truncation of about 0.73 points…
The banksters kicked a lot of bear booty today; an amazing display of finesse! I kinda smelled a rat…!
That’s what I’m playing, it should not go over 2103.45
Shoot man… stopped out today. Will wait now for more clarity. Hopefully sooner rather than later.
We need a steady march higher in VIX right into the close to signal a top. I am not convinced unless and until that happens….
Exiting remaining short positions. You cannot argue with price action….
I have a hunch the jobs report will help solve the wave count?
looks like a 4th wave.. 1 more high above 2111 ish
Unlikely to bolster the bearish case. That kind of news generally hits the market early (surprise) so if anything, you can expect a positive report. A close above 2100 in my view puts the bearish count on hold for the immediate term.
IFF the bear count is still good, then this could have been a combination. Expanded flat that Lara pointed out yesterday and a zz today?
Not trying to justify, but with the jobs report tomorrow too?!
Exactlly. The expanded flat would be wave W.
This would be a zigzag labelled wave Y.
Not ZZ though.
OK. If we get an immediate reversal down that means we just finished minor two. New 52 week low in UVXY suggests this is the case. If not, we are going higher and the bearish case is at the very least suspended…. 🙂
I think this is an expanded flat minuette 2 to end at c.2104
Can’t be a second wave…
Th-th-th-that’s all… folks!
Went short again futures just now. Fill corresp. to SPX 2099.60
E-minis only went 0.75 above my short price. Looking for top now.
It seems to me the case for a second wave up from this morning’s lows is not being confirmed by action in VIX. It will usually begin to move up ahead of an impending impulse, and right now it’s heading South…
If market continues to meander into the close I will be exiting remaining short term bearish trades until we get some clarity…
My target in coming trading days is 2,116 as stated few days back. I suspect a lot of Bears will bail at that point.
If minor two not done, we need a new 52 week low in UVXY for confirmation…
Hey all. Long-time subscriber here, first-time comment (actually second time… my first comment a few weeks ago was held all day for moderation, as all first comments are, but this is probably the first one most of you will see).
The price move from yesterday’s high of 2100.97 to this morning’s low of 2088.59 looks to me like a perfect impulse (on 2-minute chart). I’m thinking we now have a complete A (nominal seven waves, which is corrective) >B (three waves) > and we may be seeing a final upward C. If price exceeds 2100.97, then this is wrong and I’ll get stopped out of SPXU for a tolerable small loss.
Thoughts?
sounds reasonable. also watching 2101..
It is certainly still possibly a second wave so long as it stays below 2100.97. Lack of momentum for the start of a third down a bit problematic for me personally. I would expect to see shallower corrections, with volatility continuing to rise…that is not happening….
The steady grind higher after immediate recovery down open is a worry.
No push back from the bears during intraday trade makes a breakdown very unlikely. This has the look of a consolidating higher grind then upside breakout. Hope I’m wrong.
That’s what I see as well…
I agree with you and David. It sure has been an aggravating slow grind. Lara’s main wave count looks right, and she backs it up beautifully. But without some nice acceleration downward it still feels pretty iffy to trade.
I’ve been mostly on the sidelines, but took a chance today… with a tight stop. Maybe too tight. Will probably know in a few minutes…
Edit: Yup… there it goes. Ouch!
Yeah, I feel your pain too. Death by 1000 cuts.
We’ve been just days from a breakdown for forever, or it seems.
After today’s impressive run up – what comes now – breakout or breakdown?
It could be that the fourth wave of the alternate hourly count was not complete at yesterday’s lows, and that we need a final impulse up for minute C of minor two. Hard to envision what else could be unfolding from the bearish perspective…
2 expanded flats in a row? (micro and nano)
actually, the main count has SPX completing 3 larger expanded flats: at daily, weekly (truncated), and monthly. Another expanded flat now at pico (1 min) and we have 6! exp-flats .. for the Guinness book? 🙂
a possible expanded flat at pico! :):)
starting to count ticks.. confirmation 2097.50, invalidation 2098.50.
just kidding.. so bored..
Got out of my E-minis with 1 basis point profit. Looking to short again here….
I think we are looking at a Triple Three correction, Flat-Zig-Zag and now possibly a final triangle forming as outlined in EWP pages 52,53. I have seen these type of corrections before in the Dow especially when indecision surrounds the market.
Sub min 2 of minuette 3?
I do not at all like the price action around the 2100 pivot. It is acting too much like a magnet for what should be a strong third wave down. Keeping powder dry until we take out 2085.10 It looks to me like consolidation so far, and if we are going to see an impulse, it really has to get going today imo…
Vern,
Couple of things that are puzzling me (but I get confused quickly)
1. After Hours Bears are unable to take futures down to show they are in control (assuming FED and central banks are not participating)
2. When markets do open down, there is a bid that consistently brings the market up to unchanged. Reflecting inability of Bears to forced a sell off.
3. NASDAQ (as I had mentioned yesterday and few days back) is showing life especially for the leaders. I suspect the moment buyers show up for AAPL, we will be at new highs. No one is paying any attention to lower revisions to earnings so far.
4. IWM showing strength despite negative Russell earnings.
5. CBOE put call not showing overly bullish sentiment (but this could be misleading given the ETF situation).
6. Oil close to $50 and peak season for US in terms of gas consumption approaching so is the hurricane season that disrupts the oil refining capacity and pushes oil higher on any given year.
7. FED leaning to keep markets from free fall as we head into the elections later in the year.
I suspect that longer we linger around at these levels, any kind of positive news earnings, oil or economy is going to lit the fire and 2100 will go down in a eye blink.
our thoughts please.
There will be NO POSITIVE news… So nothing to be concerned about with that!
As to the Fed… Liars! Actual Action is a Must… everything else from them is a LIE… ignore everything they say!
It is a bit of a puzzle considering what one would expect for a third wave decline at minor degree. The one thing that is apparent to me is that there is no aggressive selling by the bears and I can’t figure out why. Sure they have defended the 2100 area but that’s about it. On the other hand, the market is failing to make any upward headway in the face of what is clearly persistent buying, so it too is trading quite heavy in the absence of selling pressure. This makes for a boring market, but is still I think bearish…
Same pattern the last two days… They are still trying to suck people into the market.
They push it down over night & pre-market with not much $$$ which in the morning forces the Buy the dip people into the market the rest of the day. These BTD people will get BURNED!
This kind of price action, especially around round numbers, more often than not results in another sharp run higher before the downward trend resumes. What is going on looks to me more like consolidation than correction. I know it does not fit the wave count but that is what it looks like from my perspective…
Nah… It’s an old trading desk strategy.
When you have a ton of shares to unload… you force market down in the futures market (which doesn’t take much capital) and then unload your shares to the buy the dip people & others.
The key is you want them to feel that they are making the right decision which is why market creeps higher during the full normal trading day. It’s done this way so that the desk can unload all shares that they have to sell without their competitors figuring it out.
Where is everyone today?
IFF, this is the start of a w3 of some sort, the move off todat’s lows looks like a double ZZ.
All we need now is for it to start break down after the 76% retrace.
we break 2092.50 on the ES and I’m hammering this puppy on the short side.
nibbling on the short side here with my eye on the exit. adding to if we see 2092.25 on the ES.
all aboard!!!
sheez…no follow through! ughhh, yet another pin prick!
LOB
this looks like a very very strange third wave!
What third wave? 🙂
ES looks like its about to pop… upwards… And VIX seem to have given it permission to do so…
My current take 🙂
quiet in here this AM?
Keeping a low profile… as the market unfolds today. I posted way too much yesterday.
Bounce so far on declining volume in both ES & SPX. 1st 10 min down candle has the highest volume with a steady decline for each subsequent 10 min candle.
gotcha…. 🙂
Lara, I know you’re sleeping, but I wanted to write this before my trading day begins because I may forget to say something later.
Thank you for yesterday’s video. Looking at the bigger picture, in this case the monthly chart, always helps keep things in perspective.
Hmmm….tops never easy. Usually macd flattens out and starts heading down. Getting close……
Well, can’t resist. First.