Category Archives: Indices

Below are analyses that have been published for S&P 500, Nasdaq, FTSE, DJIA, Russell 2000:

Russell 2000 Elliott Wave and Technical Analysis – 6th December, 2017

This Elliott wave count begins at the end of the global financial crisis in March 2009. This Elliott wave count will focus only on the current upwards bull market, which is subdividing as an impulse.

Continue reading Russell 2000 Elliott Wave and Technical Analysis – 6th December, 2017

FTSE Elliott Wave Technical Analysis – 24th April, 2017

FTSE is either ending a minor degree pullback or has had a major trend change. Classic analysis will be used to evaluate which scenario is more likely and at which price point one would be confirmed and the other discarded.

Summary: A pullback may be over here or very soon for FTSE. Assume the trend remains the same, up, until proven otherwise. This would be in some doubt only if price moves below 6,997.25.

Changes to prior analysis for FTSE are in bold.

MONTHLY ELLIOTT WAVE COUNT

FTSE monthly 2017
Click chart to enlarge.

For clarity only one monthly chart will be presented in this analysis. The alternate I have updated does not diverge in expected direction, so at this time it adds no depth to the analysis.

FTSE may be still within a large Super Cycle wave (II) unfolding as an expanded flat correction. These are very common structures.

Cycle wave a subdivides as a simple zigzag.

Cycle wave b may be unfolding as a double zigzag. These are also common structures for B waves.

Within the double zigzag, the second zigzag labelled primary wave Y is either complete or requires another upwards wave to complete it. These two possibilities are separated in the daily charts below.

The normal range of B waves within flats is from 1 to 1.38 the length of their respective A waves, giving a normal range for cycle wave b to end from 6,951 to 8,318. Price has reached up to within this range now.

When cycle wave b reaches 2 times the length of cycle wave a at 10,624, then the idea of an expanded flat should be discarded based upon a very low probability.

A new major swing low below 5,499.51 should be seen for Dow Theory to indicate a trend change.

WEEKLY ELLIOTT WAVE COUNT

FTSE weekly 2017
Click chart to enlarge.

This weekly chart shows the structure of intermediate waves (B) and (C) within primary wave Y.

Within minor wave 5, no second wave correction may move beyond the start of its first wave below 6,676.56. Downwards movement should now find strong support though at the lower edge of the blue Elliott channel if this wave count is correct.

DAILY ELLIOTT WAVE COUNT

FTSE daily 2017
Click chart to enlarge.

Always assume the trend remains the same until proven otherwise. Assume FTSE is still within a bull market until price proves it is not.

There is a problem with this first daily wave count: the possible ending contracting diagonal of minuette wave (v) to end minute wave iii meets all Elliott wave rules regarding wave lengths, but it does not look right. First, at their end, contracting diagonals normally have a small overshoot of the (i)-(iii) trend line but there is no overshoot. Second, the trend lines should converge but these do not; they actually diverge very slightly, which is technically a violation of the Elliott wave rule.

This wave count is published with this acknowledgement. This should reduce its probability. It is published only because at this stage I have not been able to see a resolution to this bullish wave count, and the alternate is so bearish. That does not mean a resolution is not possible.

Minute wave iv may not move into minute wave i price territory below 6,997.25.

ALTERNATE DAILY ELLIOTT WAVE COUNT

FTSE daily 2017
Click chart to enlarge.

It is possible at this stage to see the entire structure of cycle wave b complete. The problem with the ending diagonal seen in the main wave count is here neatly resolved.

A new trend at cycle degree should begin with a clear five down on the daily chart. This has not completed yet. This wave count should not be given serious weight until it has proven itself.

To prove itself these conditions should be met:

– A five down on the daily chart

– A new low below 6,997.25

– A breach of the bull market support line on the monthly technical analysis chart below

– A new low below 5,499.51

Cycle wave c should last one to several years. It would be extremely likely to make a reasonable new low below 3,277.5. An initial target about 1,537 would see cycle wave c reach 1.618 the length of cycle wave a, the most common Fibonacci ratio for C waves within expanded flats.

TECHNICAL ANALYSIS

MONTHLY CHART

FTSE monthly 2016
Click chart to enlarge. Chart courtesy of StockCharts.com.

Expect the blue bull market line to offer final support while price remains above it. If this line is breached, expect a trend change from bull to bear.

Moving averages are bullish. This pullback is resolving ADX reaching extreme. There is again room for a trend to develop.

Long term RSI bearish divergence is concerning for bulls.

WEEKLY CHART

FTSE weekly 2016
Click chart to enlarge. Chart courtesy of StockCharts.com.

A mid term pullback within the larger bull market is indicated by a breach of the mid term bull trend line.

The prior upwards trend showed weakness in declining ATR, but did not reach extreme as ADX remained below 35 and below both directional lines.

DAILY CHART

FTSE daily 2016
Click chart to enlarge. Chart courtesy of StockCharts.com.

With RSI now just reaching oversold and price very close to support, it would be reasonable to expect either a bounce, at least, or fairly likely an end to this pullback here. This supports the main daily Elliott wave count.

RSI and Stochastics do not always exhibit divergence with price at lows, but they very often exhibit divergence with price at highs.

This analysis is published @ 03:26 a.m. EST.

Long Term Technical Analysis of Indices: DJIA, DJT and S&P500 – Video – 18th January, 2017

Long Term Technical Analysis of Indices: DJIA, DJT and S&P500 – 18th January, 2017

An analysis of monthly charts of the Dow, Transportations and the S&P500 may be helpful in identifying whether or not the current bull market is healthy and likely to continue or shows signs of weakness.

Bull markets end and eventually turn into bear markets for a time. Often this change comes with technical weakness some months prior to a trend change. Technical weakness cannot be used as a signal nor as a timing device to exit a bull market, but it can be used to provide advance warning of an impending bear market which investors should use to watch markets carefully and increase levels of caution.

DOW JONES INDUSTRIAL AVERAGE

MONTHLY CHART

DJIA Monthly 2017
Click chart to enlarge. Chart courtesy of StockCharts.com.

I will not use the purple Magee trend lines on this monthly chart for the DJIA. I have concluded that after analysis of that method it does not work sufficiently well to be of any reasonable use for this market at this time frame.

A bull market should be accompanied by a corresponding rise in volume for it to be healthy and sustainable. Price requires the active participation of buyers for it to continue to move higher. The bull market of October 2002 to October 2007 was accompanied by a rise in volume to support price.

For a bear market, a rise in volume is not necessary for price to fall. Price may fall of its own weight; an absence of buyers can force price lower just as increased activity of sellers can achieve the same thing.

The bear market of October 2007 to March 2009 did see some reasonable increase in volume to assist the fall in price.

The first three months of the current bull market (for March, April, and May 2009) saw very heavy volume, the balance of all which was upwards. However, through each month volume declined and has continued to be lower since. Overall, this current bull market is accompanied by a decline in volume. This is somewhat unsteady, but it does continue. This indicates weakness in the bull market but cannot assist in identifying when it may end. The decline is clear enough and has persisted now for years, so investors should be cautious in this market.

On Balance Volume often works well with trend lines to indicate a following direction from price. OBV gives a bullish signal in May 2016 with a break above the purple resistance line, and again in November 2016 with a bounce up from a back test of that same line.

RSI often provides a warning of an impending trend change. Again, this cannot be used to pinpoint a turn for price; it is a warning of weakness only. This works for both bull and bear markets. For bull markets the warning can span years and for bear markets it more often is short lived spanning only months.

RSI exhibited divergence with price at the end of the bull market ending in January 2000 going back to July 1997 (not shown on this chart). The warning given spanned 30 months and developed onto triple bearish divergence before price turned.

At the end of the DotCom crash in October 2002, there was no warning of an end to the bear market from RSI. There was no divergence and RSI did not reach oversold. This indicator does not always work to warn of the end to a bear market.

At the end of the bull market in October 2007, RSI exhibited single bearish divergence with price spanning only three months. The message here is that this warning cannot be used for market timing.

At the end of the Global Financial Crisis in March 2009, there was only single month divergence with price and RSI, with RSI oversold.

Currently, there is single bearish divergence with price and RSI spanning 26 months. This could certainly continue for longer before price turns, but it cannot be useful in timing. However, it should warn investors to be cautious in this current bull market.

ADX can be useful to tell if a trend is extreme or young. An ADX reading above 35 (yellow line) is considered extreme. When the black ADX line is above both directional lines the trend is extreme. If this occurs with ADX also above 35, then extreme caution is warranted because the trend is likely to end very soon. This was the case in October 2002 and March 2009. In both instances that was the month a bear market ended.

In October 2007, at the end of the last bull market, ADX was below 35 but did manage to rise above both of its directional lines in August 2007, two months before the bull market ended.

Currently, ADX is not extreme. It is quite the opposite. It is rising and only just above 15. The ADX line is below both directional lines. This indicates a young bull market after the large correction that ended in January 2016.

If ADX reaches extreme, either above both the directional lines or above 35, then investors would be warned to cull underperforming stocks and be alert for a potential bear market. That is not the case today.

DOW JONES TRANSPORTATION AVERAGE

MONTHLY CHART

DJT Monthly 2017
Click chart to enlarge. Chart courtesy of StockCharts.com.

The purple lines are trend lines drawn using the technique outlined by Magee in the classic “Technical Analysis of Stock Trends”.

This simple method would have worked well for DJT to confirm an end to a bull or bear market. For a bull market, the trend line is drawn across the first two major lows within the market. For a bear market, the trend line is drawn from the start of the bear to the first major high within it.

The current bull market has price comfortably well above the trend line. If this line is breached, it would serve to provide strong confidence that a bear market would be underway and likely in the early stages for DJT.

Volume shows the same weakness here as it does for the industrials. The decline is less steady for DJT, but volume is still overall declining as price continues higher.

A long term support line can be drawn for DJT on On Balance Volume. If OBV comes down to this line, it should initially be expected to offer support and assist to halt a fall in price there. If the line is breached, then it would provide a bearish signal (but not a strong one as the line has been tested only twice).

Prior to the end of the bull market in April 1998 for DJT, there was only single month divergence with price and RSI for the month of April 1998: RSI declined as price made the final high. This would not have been very useful at all in timing, but it did offer a small warning of weakness.

At the end of the DotCom crash in March 2003, there was substantial single bullish divergence between price and RSI at the last two major lows. This would have been a strong warning that the bear market was coming to an end.

At the end of the bull market in May 2008, there was double bearish divergence between price and RSI. The message here is that this divergence can be longer held at the end of bull markets than it normally is in bear markets, a tendency that I have long noticed.

At the end of the Global Financial Crisis in March 2009, there was only single month divergence between price and RSI for DJIA and RSI was oversold.

Currently, there is very strong divergence between price and RSI back to November 2014. This is a warning again of some weakness in this bull market, so investors would be wise to be alert and cautious.

ADX indicates no clear trend yet for DJT as the black ADX line is declining. It remains above both the directional lines.

The situation at this time for DJT is more bearish than DJIA or the S&P500.

S&P500

MONTHLY CHART

S&P500 Monthly 2017
Click chart to enlarge. Chart courtesy of StockCharts.com.

Magee trend lines do not work well for this market, so only one is drawn for the current bull market. This line will not be given much weight in future analysis, but it will be watched.

The last bull market exhibited support from rising volume, but this current bull market does not. Price is rising overall on declining volume, a situation which indicates a lack of participation of bulls. This has been sustained now though for some years, so it may continue for some time. What it does possibly signal is that when this market turns from bear to bull the decline may be strong and very fast.

Price exited a box which spanned 27 months (cyan box). The duration of this box suggests the following trend should also be of long duration. So far it has only lasted for a total of six months.

At the beginning of the two bear markets, shown on this chart, price and RSI exhibited multi month divergence. A failure swing was also seen prior to the DotCom crash. This may happen again, or RSI may move back into overbought. Current divergence goes back to November 2014, and it may continue for longer. This only indicates weakness in this market and cannot be useful for timing.

On Balance Volume has given two bullish signals recently with a breach of the purple trend line and a retest.

ADX was extreme at the beginning of the last two bear markets. That is not the case at this time. ADX is rising and below 15. If it rises above 15, it would indicate a long term bull trend. It remains below both directional lines, so the trend would be young.

Summary: The current bull market may continue for several months. There are signs of weakness, particularly declining volume and long term divergence between price and RSI. Investors would be wise to be cautious in this bull market.

If price breaks below long term monthly support lines and / or if ADX moves to extreme, then investors would be wise to cull underperforming stocks and tighten stops on long positions.

This analysis is published @ 04:50 p.m. EST.

USD Index Elliott Wave and Technical Analysis – 11th January, 2017

Summary: The USD index is in a bull market. A short term correction looks like it may have just ended. The target for the next wave up to end is about 105.98. If the correction deepens, it should not move below 97.56.

ELLIOTT WAVE ANALYSIS

MONTHLY CHART

USD Index Monthly 2017
Click chart to enlarge.

This Elliott wave count sees the USD index in a new bull market to last generations.

The bull market began with two overlapping first and second waves labelled cycle waves I and II, and primary waves 1 and 2.

Within cycle wave III, the final fifth wave up is underway for primary wave 5. When cycle wave III is complete, the following correction for cycle wave IV may not move back into cycle wave I price territory below 89.62.

WEEKLY CHART

USD Index Weekly 2017
Click chart to enlarge.

The Elliott channel is drawn using Elliott’s second technique. Primary wave 5 may end either about the mid line or about the upper edge.

Primary wave 5 is very close to equality in length with primary wave 1. The structure is not close to completion though, so the Fibonacci ratio applied to the target is equality with primary wave 3 for this reason.

DAILY CHART

USD Index Daily 2017
Click chart to enlarge.

The daily chart shows the detail of the final fifth wave of primary wave 5. When this is complete, then the larger impulse for cycle wave III would be complete.

Upwards movement is expected from here to complete minor wave 3 at the target calculated.

When minor wave 3 is complete, then another correction for minor wave 4 would be expected. It may not move into minor wave 1 price territory below 97.56.

The black channel is an acceleration channel drawn as a best fit. Deeper corrections along the way up may find support about the lower edge.

TECHNICAL ANALYSIS

MONTHLY CHART

USD Index Daily 2017
Click chart to enlarge. Chart courtesy of StockCharts.com.

The longer term picture sees USD index still within an upwards trend.

ADX is still rising and the +DX line is above the -DX line. An upwards trend is indicated. ADX is not yet at 35, so there is room for the trend to continue. The black ADX line is above both +DX and -DX lines though, so this trend is entering extreme territory.

ATR is overall slowly rising, indicating some health still within this trend.

RSI exhibits long term divergence with price at the last high. This trend is extreme.

Stochastics is overbought and also exhibits divergence with price.

MACD is bullish at the monthly chart level. It also exhibits strong divergence with price.

The trend is entering extreme territory, so look out for signals for it to end. But there is still room for price to continue higher.

DAILY CHART

USD Index Daily 2017
Click chart to enlarge. Chart courtesy of StockCharts.com.

Price has been finding support for deeper corrections close to the mid term Fibonacci 55 day moving average since the trend resumed in August 2016.

The mid term Fibonacci 55 day moving average is pointing up, as is the long term 200 day moving average. The trend is still indicated as upwards.

The short term average is above both mid and long term averages. The short term average has turned downwards indicating a short term consolidation within the trend.

ADX is declining and is below 20. The black ADX line is below both the +DX and -DX lines. A consolidation is indicated. If the black ADX line turns upwards from here, then a new upwards wave would be indicated.

ATR has been showing some increase in recent days. A new wave up may be beginning.

RSI is neutral. There is plenty of room for price to rise or fall.

Stochastics is close to oversold but not extreme. This may offer support for price; the last time this happened price turned upwards. Look out for that to possibly happen again here.

For the short term MACD is bearish. It also exhibits divergence with price at the last highs indicating some weakness to the last wave up.

Overall, this analysis fits the Elliott wave count. As price moves past the middle of a third wave and into a series of fourth wave corrections and final fifth waves up, some weakness and divergence would be expected. In the short term, it looks like Stochastics may be a useful guide to signal when price may turn within a few days. It looks like price may be expected to turn up about here.

This analysis is published @ 01:35 a.m. EST.

Nasdaq Composite Elliott Wave Analysis – 29th September, 2016

Updated Elliott wave and Technical analysis of Nasdaq.

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FTSE Elliott Wave Technical Analysis – 7th August, 2016

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Nasdaq Composite Elliott Wave Analysis – 28th June, 2016

Elliott wave charts of bear wave count.

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Nasdaq Composite Elliott Wave Analysis – 7th June, 2016

Charts only today for members only.

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