Category Archives: Indicies

S&P 500 Elliott Wave Technical Analysis – 3rd November, 2017

Upwards movement continues exactly as the main Elliott wave count and classic technical analysis expected.

On Balance Volume continues to be very bullish. The targets remain the same.

Summary: The Elliott wave target is at 2,616 and a target from a small pennant pattern is 2,617. The upwards trend has support from very bullish On Balance Volume.

However, assume the trend remains the same until proven otherwise. The trend is up.

Weakness at the end of this week in market breadth points to the alternate hourly Elliott wave count possibly being correct. If price breaks below the green Elliott channel on the hourly charts, then expect a multi day pullback or consolidation is underway.

Pullbacks and consolidations at their conclusions offer opportunities to join the upwards trend.

Always trade with stops and invest only 1-5% of equity on any one trade.

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

MAIN ELLIOTT WAVE COUNT

WEEKLY CHART

S&P 500 Weekly 2017
Click chart to enlarge.

This wave count has strong support from another bullish signal from On Balance Volume at the weekly chart level. While classic analysis is still very bullish for the short term, there will be corrections along the way up. Indicators are extreme and there is considerable risk to the downside still.

As a Grand Super Cycle wave comes to an end, weakness may develop and persist for very long periods of time (up to three years is warned as possible by Lowry’s for the end of a bull market), so weakness in volume may be viewed in that larger context.

When minor wave 3 is complete, then minor wave 4 should find support about the lower edge of the best fit channel. Minor wave 4 may not move into minor wave 1 price territory below 2,299.55.

The next reasonable correction should be for intermediate wave (4). When it arrives, it should last over two months in duration. The correction may be relatively shallow, a choppy overlapping consolidation, at the weekly chart level.

DAILY CHART

S&P 500 Daily 2017
Click chart to enlarge.

Minute wave v is completing as an impulse. The final fifth wave of minuette wave (v) is underway.

The target for minor wave 3 expects to see the most common Fibonacci ratio to minor wave 1.

Within minuette wave (v), no second wave correction may move beyond the start of the first wave below 2,544.00.

HOURLY CHART

S&P 500 Hourly 2017
Click chart to enlarge.

Assume the trend remains the same until proven otherwise. Assume the trend remains up while price remains within the green channel and above 2,544.

Minuette wave (v) must subdivide as a five wave structure. It may be an impulse with subminuette waves i and ii complete. Subminuette wave ii now looks like a completed three wave zigzag.

This wave count expects to see a further increase in upwards momentum as a small third wave up unfolds.

Within subminuette wave iii, no second wave correction may move beyond its start below 2,566.17.

A breach of the green channel by downwards movement would be the earliest indication that this first wave count may not be correct. If that happens, then seriously consider the alternate hourly wave count below.

ALTERNATE HOURLY CHART

S&P 500 Hourly 2017
Click chart to enlarge.

This alternate simply moves the degree of labelling within the last five up all up one degree. It is possible again that minor wave 3 could be over.

Minor wave 2 was a quick shallow 0.16 zigzag lasting just three days. Minor wave 4 should also show up at the daily chart level. It may be a sideways consolidation, subdividing as a flat, combination or triangle, to exhibit alternation with the zigzag of minor wave 2. These structures are often more time consuming than zigzags. So far minor wave 4 may have lasted five days and the structure would be incomplete. It may end in a total Fibonacci eight or possibly even thirteen days.

A new correction at minor degree should begin with a five down at the hourly chart level. This has not happened, a three down only is complete. The probability of this wave count is reduced.

It is possible that minor wave 4 is beginning with a flat correction for minute wave a. Within the flat, minuette wave (b) has passed the minimum 0.9 length of minuette wave (a). Minuette wave (b) may continue higher above the start of minuette wave (a) at 2,588.40 as in an expanded flat.

Upwards movement during Thursday’s session has some reasonable support from volume. This reduces the probability of this alternate wave count; B waves should exhibit weakness, not strength.

TECHNICAL ANALYSIS

WEEKLY CHART

S&P 500 weekly 2017
Click chart to enlarge. Chart courtesy of StockCharts.com.

The Hanging Man candlestick requires bearish confirmation because the long lower wick has a strong bullish implication. This week has not given bearish confirmation, so the Hanging Man candlestick should not be read as a reversal signal.

Indicators are now extreme, but at this stage there is not enough weakness in price to indicate an end to the upward trend here. Extreme conditions for ADX and RSI may persist for several weeks while price continues higher.

DAILY CHART

S&P 500 daily 2017
Click chart to enlarge. Chart courtesy of StockCharts.com.

Pennants are one of the most reliable continuation patterns. The measured rule calculates a target about 2,617. Because this is only one point off the Elliott wave target, this area may offer strong resistance.

On Balance Volume remains very bullish. Volume today shows some decline, but this can persist for reasonable periods of time in current market conditions while price may continue to rise. On its own, this decline in volume signals a warning of weakness, but it will not be useful in timing an end to this upwards movement.

There is less weakness evident today as double divergence between price and RSI now becomes only single divergence. This divergence indicates some weakness here in price, but again it will not be useful as a timing tool to show when price has found a high.

On Balance Volume will be given the most weight in this analysis because it remains one of the most reliable indicators in current market conditions.

VOLATILITY – INVERTED VIX CHART

VIX daily 2017
Click chart to enlarge. Chart courtesy of StockCharts.com.

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

Bullish divergence noted in last analysis has now been followed by an upwards day to a new all time high for price. This divergence may now be resolved or it may need one more upwards day to resolve it.

There is no new divergence today. Both price and inverted VIX have made new all time highs. The rise in price today has come with a normal corresponding decline in volatility. This is bullish.

BREADTH – AD LINE

AD Line daily 2017
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.

There is new bearish divergence today between price and the AD line: price has moved higher to make a new all time high, but the AD line has moved lower for the session. The rise in price did not have support from rising market breadth, so this divergence is bearish and points to a red daily candlestick for Monday and / or Tuesday.

Small caps have moved lower during this week failing to make new all time highs. Mid caps made their last all time high on Wednesday and have failed to make a new all time high for Friday. There is some very short term weakness within this market developing.

DOW THEORY

At the end of this week, only DJT has failed to make a new all time high. The S&P500, DJIA and Nasdaq have made new all time highs. DJT has failed so far to confirm an ongoing bull market.

Failure to confirm an ongoing bull market should absolutely not be read as the end of a bull market. For that, Dow Theory would have to confirm new lows.

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

DJIA: 17,883.56.

DJT: 7,029.41.

S&P500: 2,083.79.

Nasdaq: 5,034.41.

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

Published @ 06:12 p.m. EST.

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

Continue reading S&P 500 Elliott Wave Technical Analysis – 3rd November, 2017

What Signals A Crash? A Look at 3 Historic Examples | 26th October, 2017

Could the indicators and classic technical analysis used here at Elliott Wave Stock Market have warned of the last three major crashes of 1987, 2000 and 2007?

1987

WEEKLY CHART

S&P 500 Weekly 1987
Click chart to enlarge.

A candlestick pattern at the high offered the first warning of a trend change.

Moving averages are lagging indicators. They offered no warning at the high. They only caught up with the crash after the low; in November 1987 they were full bore bearish.

ADX gave no warning.

RSI offered a strong warning with double bearish divergence while overbought.

Stochastics offered a weak warning.

MACD was fully bullish at the high.

Volume data is unavailable for this time period from StockCharts.

DAILY CHART

S&P 500 Daily 1987
Click chart to enlarge.

Moving averages were fully bullish at the high. This changed on the 13th of October to a mid term pullback, and finally on the 28th of October they were fully bearish.

ADX at the daily chart level did offer an early warning of an extreme upwards trend susceptible to a pullback.

RSI offered a reasonable warning of a high in place, as did Stochastics.

MACD gave a bearish crossover on the 27th of August, and was fully bearish by 15th of September.

AD LINE

S&P 500 Daily 1987
Click chart to enlarge.

The AD line did offer a strong warning, with over 4 months of clear bearish divergence. Double divergence developed just before the high.

2000

WEEKLY CHART

S&P 500 Weekly 2000
Click chart to enlarge.

For later data, volume data is also available.

A strong bearish candlestick reversal pattern was seen at the high.

Volume offered no warning. The first bearish signal from On Balance Volume came in mid March.

At the high, in March 2000, moving averages were fully bullish.

ADX offered no warning. ATR offered no warning.

Not only did RSI not offer any warning, it indicated there was room for price to rise.

Stochastics did offer a warning with bearish divergence.

MACD was fully bullish at the high.

DAILY CHART

S&P 500 Daily 2000
Click chart to enlarge.

A candlestick reversal pattern was given at the daily chart level as well as the weekly.

The first bearish signal from On Balance Volume came on the 12th of April.

ADX and ATR offered no warning. RSI showed very weak bearish divergence and was not overbought at the high.

Stochastics offered no warning. MACD was fully bullish.

By the 13th of April, bearish signals came from: On Balance Volume, MACD, ADX and rising volume with falling price.

AD LINE

S&P 500 Daily 2000
Click chart to enlarge.

Of all three examples looked at in this article, the strong and persistent divergence between price and the AD line in March 2000 is the most striking. This would have been a very strong warning that something big to the downside may be brewing.

2007

WEEKLY CHART

S&P 500 Weekly 2007
Click chart to enlarge.

A very strong Bearish Engulfing pattern at the high offered some warning.

Volume offered a small warning as it declined up to the high in October 2007. On Balance Volume offered no warning; its first bearish signal came at the end of December 2007.

ADX offered some reasonable warning as it had been extreme for a long time prior to the high, and then had declined as price moved higher.

RSI offered a warning with long term bearish divergence.

Stochastics also offered a warning with single bearish divergence.

MACD was fully bullish at the high and only became fully bearish at the end of December 2007.

DAILY CHART

S&P 500 Daily 2007
Click chart to enlarge.

Moving averages offered no warning. Volume did offer some warning as it declined towards the final high.

On Balance Volume did not offer a warning prior to the high, but it did give a bearish signal very soon after on the 15th of October, 2007. This was followed by two more bearish signals shortly after, noted on the chart.

ADX offered no warning.

ATR offered some warning as it declined towards the final high.

RSI offered no warning. Stochastics offered only a weak bearish warning.

MACD was fully bullish.

AD LINE

S&P 500 Daily 2007
Click chart to enlarge.

The AD line again offered a very strong warning, with clear and strong divergence over 4 months.

CONCLUSION

Markets do not repeat, but they do rhyme.

In each of these examples of price approaching a final high prior to a large bear market, only the AD line was consistent in offering a warning each time. That does not mean it must do so prior to a future bear market, only that the probability of it doing so again for at least 4 months is high.

The other indicator which appears to more consistently offer a warning shortly after a high is On Balance Volume.

The current bull market today has no divergence with the AD line, and no bearish signals at all from any of the indicators studied here. That points to a very low probability of a bear market developing in the next few months.

Published @ 3:26 a.m. EST on 27th October, 2017.