Category Archives: Public Analysis

Examples of past analysis from the members area

Expanded Flat Corrections – A Real Life Example | 1st September, 2017

I mentioned in comments on Thursday that I wanted to illustrate a real life example of an expanded flat. The concept is important when trading corrections.

S&P 500 daily 2017
Click chart to enlarge.

I did not have to go far back at all to find a good example of this very common corrective structure.

This expanded flat is in a second wave position within the final wave up of intermediate wave (5), which may have ended primary wave 3 at the last all time high.

Within expanded flats, both waves A and B must be three wave structures. Wave B is a minimum 1.05 length of wave A, so it makes a new price extreme beyond the start of wave A.

There is unfortunately no rule stating a maximum length for B waves within flats. There is a convention within Elliott wave that states when the possible B wave is longer than twice the length of the possible A wave the idea of an expanded flat should be discarded based upon a very low probability. I have seen a few expanded flats though which in hindsight were correct that had B waves that were longer than twice the length of their A waves.

The longer wave B is in relation to wave A the longer wave C should be expected to be. Here, wave C has a good Fibonacci ratio to wave A. Wave C of an expanded flat should move substantially beyond the end of wave A. The whole structure has an expanding sideways look to it.

Expanded flats are very common (only zigzags would be more common). It is my judgement given nine years of professional daily Elliott wave analysis that expanded flats are the second equal most common corrective structures alongside combinations.

What technical signals may give an expanded flat away? The answer lies in the strength, or lack of it, in wave B.

S&P 500 daily 2017
Click chart to enlarge.

Within wave B, some weakness can be noticed from:

– Very slight divergence at the end of wave B between price and RSI.

– Strongly declining ATR.

– Strong divergence at the end of wave B between price and Stochastics, after Stochastics has reached extreme.

– Declining volume.

Published @ 03:13 a.m. EST on 2nd September, 2017.

S&P 500 Elliott Wave Technical Analysis – 28th August, 2017

Bearish divergence noted in last analysis between price and breadth and price and volatility has been followed by a downwards day. This was expected.

Summary: The bigger picture sees the S&P now in a primary degree pullback to last a minimum of 8 weeks and find support at the maroon channel on the weekly chart.

Watch the upper blue trend line on the main hourly chart carefully. If price breaks above it, then look for upwards movement to end somewhere in the zone of 2,466 to 2,477. A new high above 2,453.71 would provide price confidence in this view.

However, the short term trend remains the same (down) until proven otherwise. Assume new lows are ahead while price remains below the blue trend line.

The short term target for a third wave down is still at 2,389.

If price moves above 2,474.93, then use the alternate hourly chart.

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

ELLIOTT WAVE COUNT

WEEKLY CHART

S&P 500 Weekly 2017
Click chart to enlarge.

Primary wave 3 now looks complete. Further and substantial confidence may be had if price makes a new low below 2,405.70, which is the start of minor wave 5 within intermediate wave (5). A new low below 2,405.70 may not be a second wave correction within an extending fifth wave, so at that stage the final fifth wave must be over. Fibonacci ratios are calculated at primary and intermediate degree. If primary wave 3 is complete, then it still exhibits the most common Fibonacci ratio to primary wave 1.

Primary wave 4 may not move into primary wave 1 price territory below 2,111.05.

Primary wave 4 should last about 8 weeks minimum for it to have reasonable proportion with primary wave 2. It is the proportion between corrective waves which give a wave count the right look. Primary wave 4 may last 13 or even 21 weeks if it is a triangle or combination. So far it has lasted only two weeks.

If primary wave 4 reaches down to the lower edge of the Elliott channel, it may end about 2,325. This is within the range of intermediate wave (4); fourth waves often end within the price territory of the fourth wave of one lesser degree, or very close to it.

The final target for Grand Super Cycle wave I to end is at 2,500 where cycle wave V would reach equality in length with cycle wave I. If price reaches the target at 2,500 and either the structure is incomplete or price keeps rising, then the next target would be the next Fibonacci ratio in the sequence between cycle waves I and V. At 2,926 cycle wave V would reach 1.618 the length of cycle wave I.

DAILY CHART

S&P 500 Daily 2017
Click chart to enlarge.

The daily chart will now focus in on the unfolding structure of primary wave 4.

Primary wave 2 was a regular flat correction lasting 10 weeks. Given the guideline of alternation, primary wave 4 may most likely be a single or double zigzag. Within both of those structures, a five down at the daily chart level should unfold. At this stage, that looks incomplete.

While primary wave 4 would most likely be a single or double zigzag, it does not have to be. It may be a combination or triangle and still exhibit structural alternation with primary wave 2. There are multiple structural options available for primary wave 4, so it is impossible for me to tell you with any confidence which one it will be. It will be essential that flexibility is applied to the wave count while it unfolds. Multiple alternates will be required at times, and members must be ready to switch from bear to bull and back again for short term swings within this correction.

While intermediate wave (A) is labelled as an unfolding impulse, it may also be a diagonal. Both structures are considered at the hourly chart level.

Intermediate wave (A) may also be a zigzag if primary wave 4 is to be a triangle. So far it is possible a zigzag downwards could be complete, but it is not deep enough for wave A of a triangle when it is viewed on the weekly chart. And so that possibility will not be considered at this time.

MAIN HOURLY CHART

S&P 500 hourly 2017
Click chart to enlarge.

Minor wave 1 downwards looks very clear as a five wave structure.

Minor wave 2 upwards ended just above the 0.618 Fibonacci ratio. Minor wave 3 downwards has now made a new low below the end of minor wave 1, meeting the Elliott wave rule.

Minor wave 3 now exhibits slightly stronger momentum than minor wave 1. A further increase in downwards momentum would be expected.

Minuette wave (i) will fit as a leading contracting diagonal. Minuette wave (ii) may now be a completed deep zigzag.

Another leading contracting diagonal may have completed today for subminuette wave i. Subminuette wave ii may not move beyond the start of subminuette wave i above 2,453.71.

If price moves higher above the upper edge of the base channel, then the alternate below should be preferred as soon as that trend line is breached and before the invalidation point is passed.

The target expects minor wave 3 to be an extension. When third waves extend, they do so both in price and time. They often show their subdivisions at higher time frames, which is why minute waves ii and iv may show up on the daily chart.

Minute wave iii may also be extending; it is common for the middle of third waves to extend and be stretched out. With minute wave iii extending, it too may show its subdivisions at the daily chart level.

ALTERNATE HOURLY CHART

S&P 500 hourly 2017
Click chart to enlarge.

If the base channel on the main hourly chart is breached by upwards movement, use this alternate.

The other possible structure for intermediate wave (A), if it is to be a five, would be a leading diagonal. These are not as common as impulses, so this must be an alternate wave count judged to have a lower probability than the main wave count. However, low probability does not mean no probability. All possibilities should be considered.

Within leading diagonals, the first, third and fifth waves are most commonly zigzags. They may also appear to be impulses. Here, minor wave 1 will fit as a zigzag.

Second and fourth waves must be zigzags. Minor wave 2 may not move beyond the start of minor wave 1 above 2,490.87.

Sideways movement of the last four sessions fits well as a triangle. This is supported by MACD hovering about zero. So far the triangle adheres well to its trend lines; this looks correct. If a triangle is unfolding as it is labelled here, then the breakout should be upwards.

Second and fourth waves within diagonals are usually very deep; a range is given for the common depth.

Minor wave 3 would have to move below the end of minor wave 1 at 2,417.35. Minor wave 3 downwards of a leading diagonal should still exhibit an increase in downwards momentum and should still have support from volume.

TECHNICAL ANALYSIS

WEEKLY CHART

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

Last week has made a lower low and lower high, but the candlestick closed green and the balance of volume was upwards. Lighter volume does not support the rise in price during the week.

ADX had been extreme for a long time and is now declining. The black ADX line is now declining but has not yet been pulled down below both directional lines, so the consolidation or pullback may be expected to continue.

DAILY CHART

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

For the last four sessions, price has been moving sideways and volume overall has been declining. A small pennant pattern may be forming. But volume is strongest on a downwards day within this small consolidation suggesting a downwards breakout is more likely. However, the pennant pattern suggests an upwards breakout.

A target using the measured rule for the possible pennant would be about 2,487.

On Balance Volume suggests that any upwards movement may be limited. Watch On Balance Volume carefully over the next few days. A breakout there may indicate the next direction for price.

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.

Bearish divergence noted in last analysis between price and inverted VIX has now been followed by one downwards day. It may now be resolved, or it may need one more downwards day to resolve it. There is no new divergence today.

BREADTH – AD LINE

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

With the last all time high for price, the AD line also made a new all time high. Up to the last high for price there was support from rising market breadth.

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 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.

Short term bearish divergence noted in last analysis has now been followed by one downwards day. It may be resolved here or it may need one more downwards day to resolve it. There is no new divergence today between price and the AD line.

DOW THEORY

The S&P500, DJIA, DJT and Nasdaq have all made new all time highs recently.

Modified Dow Theory (adding in technology as a barometer of our modern economy) sees all indices confirming the ongoing bull market.

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

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 @ 09:50 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 – 28th August, 2017

Volume and Breakouts – Is it Necessary? | 11th August, 2017

This chart was published two days ago. At that time, it was warned that the possible upwards breakout of the 8th of August lacked support from volume and may turn out to be false:

S&P500 Daily 2017
Click chart to enlarge.

That was proven correct. The strong downwards movement from the S&P comes on a day with an increase in volume. This is a classic downwards breakout.

When a downwards breakout has support from volume, that adds confidence in it. Downwards breakouts do not require support from volume; the market may fall of its own weight. Price can fall due to an absence of buyers as easily as it can from an increase in activity of sellers. But when volume supports downwards movement, it may be more sustainable, at least for the short term.

This downwards breakout was predicted by strongest volume during the consolidation being a downwards day.

This volume analysis technique looks at the presence or absence of support from volume on the breakout after a consolidation period to tells us how reliable the breakout may be.

Original post published @ 12:17 a.m. EST on 12th August, 2017, on Elliott Wave Gold.

Volume and Breakouts – Is it Necessary? | 9th August, 2017

After a consolidation price will break out. The presence or absence of support from volume on the breakout tells us how reliable the breakout may be.

Gold Daily 2017
Click chart to enlarge.

Pennant patterns are one of the most reliable continuation patterns. But in an upwards trend the breakout should have support from volume.

For price to keep rising it requires increased activity of buyers. Upwards breakouts that do not have support from volume are suspicious.

This upwards breakout comes on a day with slightly higher volume, but the balance of volume for the session is downwards. Stronger volume during the session supported downwards movement, not upwards.

The breakout is suspicious and may turn out to be false.

While volume is important for upwards breakouts, it is not so important for downwards breakouts. The market may fall of its own weight.

Original post published @ 04:47 p.m. EST on Elliott Wave Gold.

Non Farm Payroll – What Direction for the S&P500? | 3rd August, 2017

A simple classic technical analysis pattern may answer the question of what direction to expect tomorrow from the S&P500 upon release of Non Farm Payroll data. This release is expected to move markets strongly:.

Gold Daily 2017
Click chart to enlarge.

Pennants are reliable continuation patterns. The pattern is supported if volume declines as the pattern forms. Pennants normally appear about halfway within a trend.

The measured rule takes the flag pole which precedes the pattern and adds that length to the expected breakout of the pattern.

If this pattern is correct, then tomorrow may see an upwards breakout to new all time highs for the S&P500.

Original post published @ 06:28 a.m. EST on Elliott Wave Gold.

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

The consolidation continues sideways and support is still at about 2,380.

Summary: A small flag pattern may be completing. Volume suggests the breakout is more likely to be upwards. The measured rule gives a target about 2,459. The Elliott wave analysis gives a target about 2,469. Support continues to hold about 2,380.

If the last gap is closed with a new low below 2,376, then it would be an exhaustion gap. If that happens, then expect price to move substantially lower to make at least a slight new low below 2,328.95.

Always remember my two Golden Rules for trading:

1. Always use a stop.

2. Invest only 1-5% of equity on any one trade.

New updates to this analysis are in bold.

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 sees the middle of primary wave 3 a stretched out extension, which is the most typical scenario for this market.

Primary wave 3 may be incomplete. A target is now calculated for it on the daily chart.

There is alternation within primary wave 3 impulse, between the double zigzag of intermediate wave (2) and the possible triangle or combination of intermediate wave (4).

When primary wave 3 is a complete impulse, then a large correction would be expected for primary wave 4. This may be shallow.

Thereafter, primary wave 5 may be expected to be relatively short, ending about the final target at 2,500.

DAILY CHART

S&P 500 Daily 2017
Click chart to enlarge.

Primary wave (4) may be a complete regular contracting triangle. It may have come to a surprisingly swift end with a very brief E wave.

There is already a Fibonacci ratio between intermediate waves (3) and (1). This makes it a little less likely that intermediate wave (5) will exhibit a Fibonacci ratio to either of intermediate waves (1) or (3); the S&P often exhibits a Fibonacci ratio between two of its three actionary waves but does not between all three.

Within intermediate wave (5), no second wave correction may move beyond the start of its first wave below 2,344.51.

HOURLY CHART

S&P 500 hourly 2017
Click chart to enlarge.

The triangle may have come to a surprisingly quick end. Triangles normally take their time, so this quick end does slightly reduce the probability of this first wave count. A rare running flat within minor wave D of the triangle also slightly reduces the probability. For these reasons an alternate is provided below.

If the triangle is over, then the next wave up has begun. A five up may be complete.

Minor wave 2 can be seen as a complete corrective structure, a double combination. These are very common structures. The first structure in the double labelled minute wave w is a zigzag. The second structure within the double labelled minute wave y is a regular flat correction.

If the last gap is correctly named as a measuring gap, then it may not be filled; the lower edge may provide support. If this is the case, then minor wave 2 may be a relatively shallow correction. Within a new trend for this market, the early second wave corrections are often surprisingly brief and shallow.

If price closes the gap, then use the 0.618 Fibonacci ratio as the next target for minor wave 2. However, this wave count may switch to an alternate and the alternate below may become the main wave count if the gap is closed.

Minor wave 2 may not move beyond the start of minor wave 1 below 2,344.51.

If price does make a new low below 2,344.51, then the alternate below shall be used.

ALTERNATE DAILY CHART

S&P 500 Daily 2017
Click chart to enlarge.

What if intermediate wave (4) was not a complete triangle but is still unfolding as a double combination?

Double combinations are very common structures. This would still provide perfect alternation in structure with the double zigzag of intermediate wave (2). Although double zigzags and double combinations are both labelled W-X-Y, they are very different structures and belong to different groups of corrections.

The purpose of combinations is the same as triangles, to take up time and move price sideways. Intermediate wave (2) lasted 58 days. So far intermediate wave (4) has lasted 44 days. If it continues for another two or three weeks, it would still have excellent proportion with intermediate wave (2).

Although this wave count actually has a better look than the main wave count, it does not have support from classic technical analysis. For this reason it will be published as an alternate with a lower probability.

ALTERNATE HOURLY CHART

S&P 500 Hourly 2017
Click chart to enlarge.

The problem of the running flat within the main wave count is here resolved.

The second structure of the combination for the larger correction of intermediate wave (4) may be an expanded flat labelled minor wave Y. There is no rule regarding the maximum length of B waves within flats, but there is an Elliott wave convention that states when the potential B wave reaches twice the length of the A wave the idea of a flat should be discarded based upon a very low probability. That price point would be at 2,427.77.

The zigzag for minute wave b upwards may be incomplete. Sideways movement for the last five days is seen in exactly the same way now for both wave counts, as a double combination. This may be minuette wave (b) and may now be complete.

TECHNICAL ANALYSIS

WEEKLY CHART

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

This chart is bullish and strongly supports the main wave count. However, it is concerning that ADX is extreme. This does not mean price must turn down here; it only puts some doubt on how much further price can go up.

DAILY CHART

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

So far the last gap labelled a measuring gap is holding support. Assume this gap is a measuring gap while it remains open, until proven otherwise.

Sideways movement for the last five sessions now looks like a bull flag pattern, one of the most reliable continuation patterns. There are now at least two anchor points for the resistance and support lines, so these lines may now be drawn. The pattern has a downwards slope and that increases its effectiveness. However, volume is not declining as price moves sideways. This does not rule out a flag pattern, but it is nice to see consolidations supported by declining volume.

During the consolidation it is upwards days which have strongest volume, suggesting an upwards breakout is more likely than downwards.

The measured rule uses the start of the flag pole on the 13th of April to its end on the 26th of April. This length is applied to an approximate breakout point about 2,390 giving a target about 2,459.

A classic breakout would be an upwards day closing above the resistance line with an increase in volume.

During a trend Stochastics may remain extreme for long periods of time. Overbought Stochastics does not signal price must move down here. Only when Stochastics has remained extreme and then exhibits divergence with price, preferably multiple divergence, is it a strong warning of an impending trend change. That is not the case yet.

This classic analysis offers more support for the main Elliott wave count than the alternate.

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.

It is noted that there are now six multi day instances of bullish divergence between price and inverted VIX, and all have been followed so far by at least one upwards day if not more. This signal seems to again be working more often than not. It will again be given some weight in analysis.

There is weak short term bullish divergence today between price and inverted VIX: price has made a slight new low below the low three days ago, but VIX has not made a corresponding new low. This indicates weakness in downwards movement from price today and is bullish.

BREADTH – AD LINE

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

No new divergence is noted today between price and the AD line. There is still longer term bearish divergence, but this has not proven reliable lately, so it will not be considered.

DOW THEORY

The DJIA, DJT, S&P500 and Nasdaq continue to make new all time highs. This confirms a bull market continues.

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.

This analysis is published @ 09:17 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 May, 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.