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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.

S&P 500 Elliott Wave Technical Analysis – 13th January, 2017

Downwards movement was again expected, but this time did not eventuate for Friday.

Price moved higher but did not make a new high, and volume was weaker.

Note: NYSE is closed on Monday, so there will be no new price action from BarChart to analyse. Next analysis of this market will be after Tuesday’s close.

Summary: Some downwards movement to find support at the lilac / purple trend line is expected, about 2,211. If this target is wrong, it may be a little too low. Use the trend line as a preference. If this correction ends in a total Fibonacci 34 sessions, it may end on the 2nd of February. Thereafter, the bull market should resume.

This bull market is strong and healthy. Use this correction as another opportunity to join the trend.

New updates to this analysis are in bold.

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

DAILY CHART

S&P 500 Daily 2017
Click chart to enlarge.

Intermediate wave (4) is exhibiting alternation with intermediate wave (2). Intermediate wave (2) is a double zigzag and intermediate wave (4) is an incomplete expanded flat.

Along the way up to the final target at 2,500 a more time consuming fourth wave correction for primary wave 4 would be expected for this wave count.

The purple trend line is the most important piece of technical analysis on all charts. Draw it carefully from prior all time highs of 2,134.28 on the 21st of May, 2015, to 2,193.81 on the 15th of August, 2016. Extend it out. Daily charts are on a semi log scale.

The correction for intermediate wave (4) should end if price comes down to touch the purple trend line.

Intermediate wave (4) may not move into intermediate wave (1) price territory below 2,193.81.

At this stage, intermediate wave (4) has lasted 21 sessions. With the very slow rate of this correction it may now be possible for it to continue for another 13 sessions to total a Fibonacci 34. This would see it end on the 2nd of February.

HOURLY CHART

S&P 500 hourly 2017
Click chart to enlarge.

If the target calculated is wrong, it may be too low. Price may find strong support just above the target at the purple trend line. This line is copied over carefully from daily and weekly charts, which are both on semi log scales. This hourly chart is on an arithmetic scale, meaning the line will sit slightly differently. Both should be watched carefully.

Minor wave C must complete as a five wave structure. It is extremely likely to make at least a slight new low below the end of minor wave A at 2,233.62 to avoid a truncation and a very rare running flat.

The green resistance line drawn in last analysis was breached and is no longer useful, so it is removed.

An invalidation point is added within minor wave C. Minute wave ii may not move beyond the start of minute wave i above 2,282.10.

Minute wave ii may be a complete expanded flat correction. If this labelling is correct, then when markets open for Tuesday minute wave ii may begin with a very little upwards movement to move minuette wave (c) above the end of minuette wave (a) at 2,279.27 to avoid a truncation and a very rare running flat.

Thereafter, downwards movement should show some increase in momentum as a low degree third wave unfolds.

TECHNICAL ANALYSIS

WEEKLY CHART

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

This week completes an inside week for a Dragonfly doji. Doji are common within consolidations, so this does not signal any trend change but does support the idea that price is consolidating for this week.

The week completed with stronger volume, the balance of which was downwards. There was some support for downwards movement during the week and this also supports the idea that price is within a consolidation that may move lower.

RSI is not extreme. There is room still for price to continue higher when the consolidation is complete.

ADX indicates price is most likely in the early stages of a new trend. The black ADX line is increasing and above 15 but below both directional lines, so the trend is young. The +DX line is above the -DX line, so the trend is indicated as upwards.

DAILY CHART

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

An upwards day with a longer upper wick and almost no lower wick completes a small range day. This comes with a further decline in volume. There was not support for the upwards movement in price today. This may resolve the bullishness seen in the long lower wicks of the two daily candlesticks prior, noted in last analysis.

Overall, price is now consolidating sideways. This view is supported by small range days coming on declining volume. Another small bull flag pattern may be completing, delineated by light blue trend lines. However, with some weakness (divergence) at the last high, this flag pattern may not work. If it does, then it needs an upwards breakout above resistance on a day with an increase in volume. The measured rule gives a target of about 2,323.

The bear flag pattern here is an opposite view to the Elliott wave count. If the hourly Elliott wave chart is invalidated by a new high, then use the measured rule given from the flag pattern.

The trend is still up. The short term Fibonacci 13 day average is above the mid term Fibonacci 55 day average, and both are above the long term average. All three are pointing up. Price may find support at the short term average for smaller corrections within the trend, and at the mid term average for larger corrections within the trend.

On Balance Volume remains tightly constrained, and these trend lines now have good technical significance, particularly the purple resistance line. This may assist to halt the rise in price for Friday here. A breakout would be a strong signal in either direction here.

At the last high, RSI exhibited some divergence with price to indicate the last wave up was relatively weak. This supports the Elliott wave count short term.

MACD is bearish. This also offers some small support for the Elliott wave count short term.

Bollinger Bands remain tightly constrained. Expect them to begin to widen again as volatility returns to the market.

VOLATILITY – INVERTED VIX CHART

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

There are a few instances of multi day divergence between price and inverted VIX noted here. Bearish divergence is blue. Bullish divergence is yellow. It appears so far that divergence between inverted VIX and price is mostly working to indicate short term movements spanning one or two days. While this seems to be working more often than not, it is not always working. As with everything in technical analysis, there is nothing that is certain. This is an exercise in probability.

Short term hidden bearish divergence is noted today between price and inverted VIX: price has made a lower high, but inverted VIX has made a new high. This indicates weakness to upwards movement from price, and it may be followed by one or two days of downwards movement.

BREADTH – AD LINE

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

Short term bullish and bearish divergence is again working between price and the AD line to show the direction for the following one or two days.

The AD line today made a new all time high, but price failed to make a corresponding new high. This is hidden bearish divergence and indicates weakness within upwards movement today from price. This may now be followed by one or two days of downwards movement.

DOW THEORY

The DJIA, DJT, S&P500 and Nasdaq have made new all time highs in December of 2016. This confirms a bull market continues.

This analysis is published @ 06:58 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 – 13th January, 2017

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.

S&P 500 Elliott Wave Technical Analysis – 30th September, 2016

A red daily candlestick or doji was expected for Friday, but this did not happen.

Upwards movement slightly breached the invalidation point on the hourly chart.

Summary: Two days of downwards movement to 2,137 is expected. Divergence with price and the AD line and VIX supports the view that price is likely to move lower for one or two days. Thereafter, price should turn up to make a new high above 2,179.58.

Last monthly chart for the main wave count is here.

New updates to this analysis are in bold.

MAIN WAVE COUNT

WEEKLY CHART

S&P 500 weekly 2016
Click chart to enlarge.

Cycle wave V must subdivide as a five wave structure. I have two wave counts for upwards movement of cycle wave V. This main wave count is presented first only because we should assume the trend remains the same until proven otherwise. Assume that downwards movement is a correction within the upwards trend, until proven it is not.

Primary wave 3 is shorter than primary wave 1, but shows stronger momentum and volume as a third wave normally does. Because primary wave 3 is shorter than primary wave 1 this will limit primary wave 5 to no longer than equality in length with primary wave 3, so that the core Elliott wave rule stating a third wave may not be the shortest is met. Primary wave 5 has a limit at 2,302.47.

Primary wave 2 was a shallow 0.40 expanded flat correction. Primary wave 4 may be exhibiting alternation as a more shallow combination.

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

It is also possible to move the degree of labelling within cycle wave V all down one degree. It may be only primary wave 1 unfolding. The invalidation point for this idea is at 1,810.10. That chart will not be published at this time in order to keep the number of charts manageable. The probability that this upwards impulse is only primary wave 1 is even with the probability that it is cycle wave V in its entirety.

DAILY CHART

S&P 500 daily 2016
Click chart to enlarge.

Primary wave 4 may be now complete as a double combination.

It is possible now that primary wave 4 could continue further as a triple, but because triples are very rare the probability of this is very low. If it is over here, then the proportion with primary wave 2 looks right. Within primary wave 5, no second wave correction may move beyond the start of its first wave below 2,119.12.

Primary wave 1 lasted 47 days, primary wave 2 was even in duration at 47 days, primary wave 3 lasted 16 days, and primary wave 4 has lasted 37 days. The proportions between these waves are acceptable.

If primary wave 5 has begun here, then at 2,233 it would reach 0.618 the length of primary wave 1.

At this stage, an impulse for primary wave 5 looks unlikely with invalidation of that idea at the hourly chart level. An ending diagonal now looks more likely for primary wave 5. Ending diagonals are choppy overlapping structures. The classic technical analysis equivalent is a rising wedge. They are terminal structures, doomed to full retracement at their end.

If primary wave 5 comes up to touch the upper edge of the maroon channel, it may end there.

HOURLY CHART

S&P 500 hourly 2016
Click chart to enlarge.

If primary wave 5 is subdividing as an ending diagonal, then all sub-waves must subdivide as zigzags. Intermediate wave (1) may be a completed zigzag.

Second and fourth waves within diagonals have a normal depth of from 0.66 to 0.81 the prior wave. This gives a target range for intermediate wave (2) from 2,140 to 2,131.

Intermediate wave (2) must subdivide as a zigzag. It may not move beyond the start of intermediate wave (1) below 2,119.12.

Intermediate wave (1) lasted a Fibonacci eight days.

If intermediate wave (2) ends in two more days, it too would last a Fibonacci eight days. At 2,137 minor wave C would reach equality in length with minor wave A. Price may find support about the lower edge of the blue channel drawn here about the zigzag of intermediate wave (2).

Minor wave B moved a little higher to complete as a double zigzag during Friday’s session. If it moves any higher when Monday’s session begins, then it may not move beyond the start of minor wave A above 2,179.58.

ALTERNATE WAVE COUNT

WEEKLY CHART

S&P 500 weekly 2016
Click chart to enlarge.

What if an impulse upwards is complete? The implications are important. If this is possible, then primary wave 1 within cycle wave V may be complete.

With downwards movement from the high of primary wave 1 now clearly a three and not a five, the possibility that cycle wave V and Super Cycle wave (V) are over has substantially reduced. This possibility would be eliminated if price can make a new all time high above 2,193.81.

If an impulse upwards is complete, then a second wave correction may be unfolding for primary wave 2. Expectations on how deep primary wave 2 is likely to be are now adjusted. It may be expected now to more likely only reach the 0.382 Fibonacci ratio about 2,038.

At this stage, it looks like price has found strong support at the lilac trend line.

Primary wave 2 may not move beyond the start of primary wave 1 below 1,810.10.

DAILY CHART

S&P 500 daily 2016
Click chart to enlarge.

If an impulse upwards is complete, then how may it subdivide and are proportions good?

Intermediate wave (1) was an impulse lasting 47 days. Intermediate wave (2) was an expanded flat lasting 47 days. Intermediate wave (3) fits as an impulse lasting 16 days, and it is 2.04 points short of 0.618 the length of intermediate wave (1). So far this alternate wave count is identical to the main wave count (with the exception of the degree of labelling, but here it may also be moved up one degree).

Intermediate wave (4) may have been a running contracting triangle lasting 22 days and very shallow at only 0.0027 the depth of intermediate wave (3). At its end it effected only a 0.5 point retracement. There is perfect alternation between the deeper expanded flat of intermediate wave (2) and the very shallow triangle of intermediate wave (4). All subdivisions fit and the proportion is good.

Intermediate wave (5) would be very brief at only 18.29 points. Intermediate wave (5) is 1.43 points longer than 0.056 the length of intermediate wave (1).

At this stage, primary wave 2 now has a completed zigzag downwards that did not reach the 0.236 Fibonacci ratio. It is very unlikely for this wave count that primary wave 2 is over there; the correction is too brief and shallow. Upwards movement labelled intermediate wave (X) is so far less than 0.9 the length of the prior wave down labelled intermediate wave (W). The minimum for a flat correction has not been met. Primary wave 2 may continue lower as a double zigzag. A second zigzag in the double may be required to deepen the correction closer to the 0.382 Fibonacci ratio.

Intermediate wave (W) lasted a Fibonacci 13 sessions. Intermediate wave (X) has now lasted a Fibonacci eight sessions. If intermediate wave (Y) is equal in duration with intermediate wave (W), that would give the wave count a satisfying look.

Primary wave 2 may not move beyond the start of primary wave 1 below 1,810.10. A new low below this point would see the degree of labelling within cycle wave V moved up one degree. At that stage, a trend change at Super Cycle degree would be expected and a new bear market to span several years would be confirmed.

I will not publish an hourly chart for this alternate at the end of this week. The double zigzag of primary wave 2 is not looking right, so I do not have reasonable confidence in this wave count. Publication of an hourly chart for it would give it too much weight.

TECHNICAL ANALYSIS

WEEKLY CHART

S&P 500 weekly 2016
Click chart to enlarge. Chart courtesy of StockCharts.com.

The lilac trend line has strong technical significance. Price has broken through resistance, turned down to test support, and is now moving up and away from this line. It is reasonable to conclude that a new all time high is a likely consequence of this typical behaviour.

This week closes green and has some support from volume. A further rise in price overall would be expected to follow.

On Balance Volume has this week come up to touch the purple trend line. It may find some resistance there. A break above this line would be a weak bullish signal. There is divergence with the high this week and the prior high seven weeks ago: OBV has made a higher high but price has made a lower high. This divergence is bearish and indicates weakness in price. This old bull market continues to show internal weakness.

RSI is not extreme and exhibits no divergence at the weekly chart level to indicate weakness in price. There is room for price to rise further.

DAILY CHART

S&P 500 daily 2016
Click chart to enlarge. Chart courtesy of StockCharts.com.

A green daily candlestick with a higher low and higher high shows support from volume. Overall, price has been moving upwards for four days now on increasing volume. More upwards movement would be a reasonable expectation following this behaviour.

Price may find some resistance here about 2,175.

ADX is declining, indicating the market is not trending. ATR is overall flat, in agreement with ADX. Bollinger Bands are now very slightly contracting. This market is not trending. This market is consolidating.

Within this long consolidation, which began back on about 11th of July, it is three downwards days that have strongest volume. This suggests a downwards breakout is more likely than upwards. This trick may or may not work for the S&P at this time. It is one piece of evidence to weigh up. This consolidation is bounded by resistance at 2,190 and support at 2,120.

On Balance Volume has moved up from the lower yellow line and is now sitting on the upper yellow line. There is some leeway in exactly how the upper yellow line may be drawn, so for a bullish signal OBV needs to break clearly above this line. This line may provide some resistance and halt the rise in price here.

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

Stochastics has not yet reached overbought. Overall, a continuation of an upwards swing within this consolidation may be expected until price finds resistance and Stochastics reaches overbought at the same time. There is weak bearish divergence today between price and Stochastics, but this signal is so unreliable it is noted but should be given no weight.

There are three moving averages on this chart: a short term Fibonacci 13 days (gold), a mid term Fibonacci 55 days (purple), and a long term 200 days (lime). Both the mid and long term averages are still pointing up, and the mid term average is above the long term average. The longer term trend should be assumed to be up, until these averages prove it is not. The short term average has come down to kiss the mid term average and today it remains above the mid term average. The short term trend is fluctuating, exactly as expected within a consolidating market.

VOLATILITY – INVERTED VIX CHART

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

There are a few instances of multi day divergence between price and inverted VIX noted here. Bearish divergence is blue. Bullish divergence is yellow. It appears so far that divergence between inverted VIX and price is again working to indicate short term movements spanning one or two days.

There is short term bearish divergence today between price and VIX: Friday’s session made a new high for price above the high two days prior, but inverted VIX has failed to make a corresponding new high. This indicates weakness in price. It is likely to be followed by one or two days of overall downwards movement, and this fits neatly with the Elliott wave count.

BREADTH – AD LINE

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

There is support from market breadth as price is rising.

Short term bullish and bearish divergence is again working between price and the AD line to show the direction for the following one or two days.

There is short term bearish divergence today between price and the AD line: Friday’s session made a new high for price above the high two days prior, but the AD line failed to make a corresponding new high. This indicates weakness in price. It is likely to be followed by one or two days of overall downwards movement, and this fits neatly with the Elliott wave count.

DOW THEORY

Major lows within the old bull market:

DJIA: 15,855.12 (15th October, 2014) – closed below on 25th August, 2015.

DJT: 7,700.49 (12th October, 2014) – closed below on 24th August, 2015.

S&P500: 1,821.61 (15th October, 2014) – has not closed below this point yet.

Nasdaq: 4,117.84 (15th October, 2014) – has not closed below this point yet.

Major highs within the bear market from November 2014:

DJIA: 17,977.85 (4th November, 2015) – closed above on 18th April, 2016.

DJT: 8,358.20 (20th November, 2015) – has not closed above this point yet.

S&P500: 2,116.48 (3rd November, 2015) – closed above this point on 8th June, 2016.

Nasdaq: 5,176.77 (2nd December, 2015) – closed above this point on 1st August, 2016.

Dow Theory Conclusion: Original Dow Theory still sees price in a bear market because the transportations have failed to confirm an end to that bear market. Modified Dow Theory (adding S&P and Nasdaq) has failed still to confirm an end to the old bull market, modified Dow Theory sees price still in a bull market.

This analysis is published @ 08:56 p.m. EST on 1st October, 2016.

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

Continue reading S&P 500 Elliott Wave Technical Analysis – 30th September, 2016

S&P 500 Elliott Wave Technical Analysis – 29th September, 2016

Yesterday’s analysis was indecisive. The preferred Elliott wave count required downwards movement, but volume suggested this might not happen.

Price did move lower. The preferred Elliott wave count now looks right and on track.

Summary: Tomorrow should see another red daily candlestick or doji towards the target at 2,135. This target may be reached in one to three days time.

Last monthly chart for the main wave count is here.

New updates to this analysis are in bold.

MAIN WAVE COUNT

WEEKLY CHART

S&P 500 weekly 2016
Click chart to enlarge.

Cycle wave V must subdivide as a five wave structure. I have two wave counts for upwards movement of cycle wave V. This main wave count is presented first only because we should assume the trend remains the same until proven otherwise. Assume that downwards movement is a correction within the upwards trend, until proven it is not.

Primary wave 3 is shorter than primary wave 1, but shows stronger momentum and volume as a third wave normally does. Because primary wave 3 is shorter than primary wave 1 this will limit primary wave 5 to no longer than equality in length with primary wave 3, so that the core Elliott wave rule stating a third wave may not be the shortest is met. Primary wave 5 has a limit at 2,302.47.

Primary wave 2 was a shallow 0.40 expanded flat correction. Primary wave 4 may be exhibiting alternation as a more shallow combination.

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

It is also possible to move the degree of labelling within cycle wave V all down one degree. It may be only primary wave 1 unfolding. The invalidation point for this idea is at 1,810.10. That chart will not be published at this time in order to keep the number of charts manageable. The probability that this upwards impulse is only primary wave 1 is even with the probability that it is cycle wave V in its entirety.

DAILY CHART

S&P 500 daily 2016
Click chart to enlarge.

Primary wave 4 may be now complete as a double combination.

It is possible now that primary wave 4 could continue further as a triple, but because triples are very rare the probability of this is very low. If it is over here, then the proportion with primary wave 2 looks right. Within primary wave 5, no second wave correction may move beyond the start of its first wave below 2,119.12.

Primary wave 1 lasted 47 days, primary wave 2 was even in duration at 47 days, primary wave 3 lasted 16 days, and primary wave 4 has lasted 37 days. The proportions between these waves are acceptable.

If primary wave 5 has begun here, then at 2,233 it would reach 0.618 the length of primary wave 1.

At this stage, an impulse for primary wave 5 looks unlikely with invalidation of that idea at the hourly chart level. An ending diagonal now looks more likely for primary wave 5. Ending diagonals are choppy overlapping structures. The classic technical analysis equivalent is a rising wedge. They are terminal structures, doomed to full retracement at their end.

If primary wave 5 comes up to touch the upper edge of the maroon channel, it may end there.

HOURLY CHART

S&P 500 hourly 2016
Click chart to enlarge.

If primary wave 5 is subdividing as an ending diagonal, then all sub-waves must subdivide as zigzags. Intermediate wave (1) may be a completed zigzag.

Second and fourth waves within diagonals have a normal depth of from 0.66 to 0.81 the prior wave. This gives a target range for intermediate wave (2) from 2,140 to 2,131.

Intermediate wave (2) must subdivide as a zigzag. It may not move beyond the start of intermediate wave (1) below 2,119.12.

Intermediate wave (1) lasted a Fibonacci eight days.

Intermediate wave (2) may be just over half way through and has so far lasted five days. It may continue for another three if it is even in duration with intermediate wave (1) and exhibits a Fibonacci number of eight days. It does not have to take this long and may end more quickly now.

Intermediate wave (2) should be expected to be a big obvious three wave structure. So far minor wave B shows at the daily chart level as two green daily candlesticks. Minor wave C downwards now looks like it has begun with one strong red daily candlestick.

At 2,135 minor wave C would reach equality in length with minor wave A. This target is within the range of 2,140 – 2,131.

So far, within minor wave C, minute wave i may be coming to an end. This degree of labelling is chosen because it would allow minor wave C to continue for three more sessions. When minute wave i is a complete five wave impulse downwards, then minute wave ii upwards should unfold and may not move beyond the start of minute wave i above 2,172.67.

ALTERNATE WAVE COUNT

WEEKLY CHART

S&P 500 weekly 2016
Click chart to enlarge.

What if an impulse upwards is complete? The implications are important. If this is possible, then primary wave 1 within cycle wave V may be complete.

With downwards movement from the high of primary wave 1 now clearly a three and not a five, the possibility that cycle wave V and Super Cycle wave (V) are over has substantially reduced. This possibility would be eliminated if price can make a new all time high above 2,193.81.

If an impulse upwards is complete, then a second wave correction may be unfolding for primary wave 2. Expectations on how deep primary wave 2 is likely to be are now adjusted. It may be expected now to more likely only reach the 0.382 Fibonacci ratio about 2,038.

At this stage, it looks like price has found strong support at the lilac trend line.

Primary wave 2 may not move beyond the start of primary wave 1 below 1,810.10.

DAILY CHART

S&P 500 daily 2016
Click chart to enlarge.

If an impulse upwards is complete, then how may it subdivide and are proportions good?

Intermediate wave (1) was an impulse lasting 47 days. Intermediate wave (2) was an expanded flat lasting 47 days. Intermediate wave (3) fits as an impulse lasting 16 days, and it is 2.04 points short of 0.618 the length of intermediate wave (1). So far this alternate wave count is identical to the main wave count (with the exception of the degree of labelling, but here it may also be moved up one degree).

Intermediate wave (4) may have been a running contracting triangle lasting 22 days and very shallow at only 0.0027 the depth of intermediate wave (3). At its end it effected only a 0.5 point retracement. There is perfect alternation between the deeper expanded flat of intermediate wave (2) and the very shallow triangle of intermediate wave (4). All subdivisions fit and the proportion is good.

Intermediate wave (5) would be very brief at only 18.29 points. Intermediate wave (5) is 1.43 points longer than 0.056 the length of intermediate wave (1).

At this stage, primary wave 2 now has a completed zigzag downwards that did not reach the 0.236 Fibonacci ratio. It is very unlikely for this wave count that primary wave 2 is over there; the correction is too brief and shallow. Upwards movement labelled intermediate wave (X) is so far less than 0.9 the length of the prior wave down labelled intermediate wave (W). The minimum for a flat correction has not been met. Primary wave 2 may continue lower as a double zigzag. A second zigzag in the double may be required to deepen the correction closer to the 0.382 Fibonacci ratio.

Intermediate wave (W) lasted a Fibonacci 13 sessions. Intermediate wave (X) has now lasted a Fibonacci eight sessions. If intermediate wave (Y) is equal in duration with intermediate wave (W), that would give the wave count a satisfying look.

Primary wave 2 may not move beyond the start of primary wave 1 below 1,810.10. A new low below this point would see the degree of labelling within cycle wave V moved up one degree. At that stage, a trend change at Super Cycle degree would be expected and a new bear market to span several years would be confirmed.

HOURLY CHART

S&P 500 hourly 2016
Click chart to enlarge.

This wave count now expects downwards movement for a Fibonacci 13 sessions overall most likely, to end about 2,038.

TECHNICAL ANALYSIS

WEEKLY CHART

S&P 500 weekly 2016
Click chart to enlarge. Chart courtesy of StockCharts.com.

The lilac trend line has provided very strong support whereas previously provided strong resistance. The strength of this line is reinforced. If price turns down from here, it should be again expected to provide support. A break below it would be a strong bearish signal.

Price broke above the long term lilac trend line in July 2016. The low two weeks ago almost perfectly found support at this line, and now price is moving up and away from the line. This looks like a typical breakout followed by a back test for support. It is a reasonable conclusion that price will move further up and away from this line. This view is in alignment with the main Elliott wave count.

On Balance Volume has made a new high above the high for the week of the 6th of August, but price has failed to make a corresponding new high. This divergence is bearish and indicates weakness in price. It does not say that price must turn down from here, only that price is weak. The bull market is unhealthy.

RSI is not extreme. There is room for price to rise further. There is no divergence between RSI and price at the weekly chart level to indicate weakness.

DAILY CHART

S&P 500 daily 2016
Click chart to enlarge. Chart courtesy of StockCharts.com.

A strong downwards day with an increase in volume is bearish today. The fall in price had support from volume for Thursday’s session, so more downwards movement for Friday at least would be a reasonable expectation. The next line of support for price is about 2,134, the prior all time high. This fits neatly with the target for the Elliott wave count. Following that, final support is at 2,120.

ADX is declining, indicating the market is not trending. ATR is overall flat, in agreement with ADX. Bollinger Bands are now very slightly contracting. This market is not trending. This market is consolidating.

Within this long consolidation, which began back on about 11th of July, it is three downwards days that have strongest volume. This suggests a downwards breakout is more likely than upwards. This trick may or may not work for the S&P at this time. It is one piece of evidence to weigh up. This consolidation is bounded by resistance at 2,190 and support at 2,120.

On Balance Volume has turned down from the long horizontal yellow resistance line. The strength of this line is reinforced. A new short support line is added today, in yellow, and this may provide a little support here. A break below the new yellow line would be a small bearish indicator. But this line is too short, sloped, and has only been tested once, so it does not have good technical significance. The purple line, which does have reasonable technical significance, should provide final support for OBV.

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

Stochastics has not yet reached overbought. Overall, a continuation of an upwards swing within this consolidation may be expected until price finds resistance and Stochastics reaches overbought at the same time.

There are three moving averages on this chart: a short term Fibonacci 13 days (gold), a mid term Fibonacci 55 days (purple), and a long term 200 days (lime). Both the mid and long term averages are still pointing up, and the mid term average is above the long term average. The longer term trend should be assumed to be up, until these averages prove it is not. The short term average has come down to kiss the mid term average and today it remains above the mid term average. The short term trend is fluctuating, exactly as expected within a consolidating market.

VOLATILITY – INVERTED VIX CHART

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

There are a few instances of multi day divergence between price and inverted VIX noted here. Bearish divergence is blue. Bullish divergence is yellow. It appears so far that divergence between inverted VIX and price is again working to indicate short term movements spanning one or two days.

At this stage, no further short term divergence is noted between price and VIX to indicate any weakness either way.

BREADTH – AD LINE

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

There is support from market breadth as price is rising.

Short term bullish and bearish divergence is again working between price and the AD line to show the direction for the following one or two days.

No short term divergence between price and the AD line is noted today.

DOW THEORY

Major lows within the old bull market:

DJIA: 15,855.12 (15th October, 2014) – closed below on 25th August, 2015.

DJT: 7,700.49 (12th October, 2014) – closed below on 24th August, 2015.

S&P500: 1,821.61 (15th October, 2014) – has not closed below this point yet.

Nasdaq: 4,117.84 (15th October, 2014) – has not closed below this point yet.

Major highs within the bear market from November 2014:

DJIA: 17,977.85 (4th November, 2015) – closed above on 18th April, 2016.

DJT: 8,358.20 (20th November, 2015) – has not closed above this point yet.

S&P500: 2,116.48 (3rd November, 2015) – closed above this point on 8th June, 2016.

Nasdaq: 5,176.77 (2nd December, 2015) – closed above this point on 1st August, 2016.

Dow Theory Conclusion: Original Dow Theory still sees price in a bear market because the transportations have failed to confirm an end to that bear market. Modified Dow Theory (adding S&P and Nasdaq) has failed still to confirm an end to the old bull market, modified Dow Theory sees price still in a bull market.

This analysis is published @ 09:13 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 – 29th September, 2016

S&P 500 Elliott Wave Technical Analysis – 28th September, 2016

Upwards movement was expected for Wednesday’s session. This is what happened.

Summary: Classic technical analysis suggests more upwards movement tomorrow, but the preferred Elliott wave count requires downwards movement. If price makes a new high above 2,179.58, then expect upwards movement to continue to a target at 2,188. If price makes a new low tomorrow below 2,151.79, then expect downwards movement to continue to a target at 2,134.

Last monthly chart for the main wave count is here.

New updates to this analysis are in bold.

MAIN WAVE COUNT

WEEKLY CHART

S&P 500 weekly 2016
Click chart to enlarge.

Cycle wave V must subdivide as a five wave structure. I have two wave counts for upwards movement of cycle wave V. This main wave count is presented first only because we should assume the trend remains the same until proven otherwise. Assume that downwards movement is a correction within the upwards trend, until proven it is not.

Primary wave 3 is shorter than primary wave 1, but shows stronger momentum and volume as a third wave normally does. Because primary wave 3 is shorter than primary wave 1 this will limit primary wave 5 to no longer than equality in length with primary wave 3, so that the core Elliott wave rule stating a third wave may not be the shortest is met. Primary wave 5 has a limit at 2,302.47.

Primary wave 2 was a shallow 0.40 expanded flat correction. Primary wave 4 may be exhibiting alternation as a more shallow combination.

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

It is also possible to move the degree of labelling within cycle wave V all down one degree. It may be only primary wave 1 unfolding. The invalidation point for this idea is at 1,810.10. That chart will not be published at this time in order to keep the number of charts manageable. The probability that this upwards impulse is only primary wave 1 is even with the probability that it is cycle wave V in its entirety.

DAILY CHART

S&P 500 daily 2016
Click chart to enlarge.

Primary wave 4 may be now complete as a double combination.

It is possible now that primary wave 4 could continue further as a triple, but because triples are very rare the probability of this is very low. If it is over here, then the proportion with primary wave 2 looks right. Within primary wave 5, no second wave correction may move beyond the start of its first wave below 2,119.12.

Primary wave 1 lasted 47 days, primary wave 2 was even in duration at 47 days, primary wave 3 lasted 16 days, and primary wave 4 has lasted 37 days. The proportions between these waves are acceptable.

If primary wave 5 has begun here, then at 2,233 it would reach 0.618 the length of primary wave 1.

At this stage, an impulse for primary wave 5 looks unlikely with invalidation of that idea at the hourly chart level. An ending diagonal now looks more likely for primary wave 5. Ending diagonals are choppy overlapping structures. The classic technical analysis equivalent is a rising wedge. They are terminal structures, doomed to full retracement at their end.

If primary wave 5 comes up to touch the upper edge of the maroon channel, it may end there.

HOURLY CHART

S&P 500 hourly 2016
Click chart to enlarge.

If primary wave 5 is subdividing as an ending diagonal, then all sub-waves must subdivide as zigzags. Intermediate wave (1) may be a completed zigzag.

Second and fourth waves within diagonals have a normal depth of from 0.66 to 0.81 the prior wave. This gives a target range for intermediate wave (2) from 2,140 to 2,131.

Intermediate wave (2) must subdivide as a zigzag. It may not move beyond the start of intermediate wave (1) below 2,119.12.

Intermediate wave (1) lasted a Fibonacci eight days.

Intermediate wave (2) may be just over half way through and has so far lasted four days. It may continue for another four if it is even in duration with intermediate wave (1) and exhibits a Fibonacci number of eight days.

Intermediate wave (2) should be expected to be a big obvious three wave structure. So far minor wave B shows at the daily chart level as two green daily candlesticks. Minor wave B may not move beyond the start of minor wave A above 2,179.58.

Minor wave B now looks like a completed zigzag. It is now most likely to be over here, if this hourly wave count is correct. Minute wave c is 1.8 points short of equality in length with minute wave a.

At 2,134 minor wave C would reach equality in length with minor wave A. This target is within the range of 2,140 – 2,131.

SECOND HOURLY CHART

S&P 500 hourly 2016
Click chaIIrt to enlarge.

There was support today for upwards movement from volume, and this suggests another green daily candlestick tomorrow. If that happens, then what would the Elliott wave count look like and what is the probability?

It is possible that intermediate wave (1) ended at the high for 22nd of September and did not have a truncated fifth wave. This wave count avoids a truncation (which the first hourly chart has) which slightly increases its probability.

If intermediate wave (2) was over at the last swing low, then it will subdivide as a zigzag, but it does not look like a big obvious three wave structure at the daily chart level because it is too brief and straight. This reduces the probability by a reasonable amount.

Intermediate wave (2) would be just above the normal depth of 0.66 to 0.81 of intermediate wave (1), and it is only 0.63. This is not too far from normal, so it only reduces the probability of this idea by a little.

If the first hourly chart is invalidated tomorrow with a new high above 2,179.58, then this second idea may be considered confirmed. At that stage, intermediate wave (3) may be expected to be underway.

Within intermediate wave (3), at 2,188 minor wave C would reach 1.618 the length of minor wave A. This target would see intermediate wave (3) shorter than intermediate wave (1), so the diagonal would be contracting. Contracting diagonals are more common than expanding.

At 2,202.42 intermediate wave (3) would reach equality in length with intermediate wave (1). It is likely to end before this point because contracting diagonals are more common than expanding diagonals.

Within minor wave C, no second wave correction may move beyond the start of its first wave below 2,151.79.

ALTERNATE WAVE COUNT

WEEKLY CHART

S&P 500 weekly 2016
Click chart to enlarge.

What if an impulse upwards is complete? The implications are important. If this is possible, then primary wave 1 within cycle wave V may be complete.

With downwards movement from the high of primary wave 1 now clearly a three and not a five, the possibility that cycle wave V and Super Cycle wave (V) are over has substantially reduced. This possibility would be eliminated if price can make a new all time high above 2,193.81.

If an impulse upwards is complete, then a second wave correction may be unfolding for primary wave 2. Expectations on how deep primary wave 2 is likely to be are now adjusted. It may be expected now to more likely only reach the 0.382 Fibonacci ratio about 2,038.

At this stage, it looks like price has found strong support at the lilac trend line.

Primary wave 2 may not move beyond the start of primary wave 1 below 1,810.10.

DAILY CHART

S&P 500 daily 2016
Click chart to enlarge.

If an impulse upwards is complete, then how may it subdivide and are proportions good?

Intermediate wave (1) was an impulse lasting 47 days. Intermediate wave (2) was an expanded flat lasting 47 days. Intermediate wave (3) fits as an impulse lasting 16 days, and it is 2.04 points short of 0.618 the length of intermediate wave (1). So far this alternate wave count is identical to the main wave count (with the exception of the degree of labelling, but here it may also be moved up one degree).

Intermediate wave (4) may have been a running contracting triangle lasting 22 days and very shallow at only 0.0027 the depth of intermediate wave (3). At its end it effected only a 0.5 point retracement. There is perfect alternation between the deeper expanded flat of intermediate wave (2) and the very shallow triangle of intermediate wave (4). All subdivisions fit and the proportion is good.

Intermediate wave (5) would be very brief at only 18.29 points. Intermediate wave (5) is 1.43 points longer than 0.056 the length of intermediate wave (1).

At this stage, primary wave 2 now has a completed zigzag downwards that did not reach the 0.236 Fibonacci ratio. It is very unlikely for this wave count that primary wave 2 is over there; the correction is too brief and shallow. Upwards movement labelled intermediate wave (X) is so far less than 0.9 the length of the prior wave down labelled intermediate wave (W). The minimum for a flat correction has not been met. Primary wave 2 may continue lower as a double zigzag. A second zigzag in the double may be required to deepen the correction closer to the 0.382 Fibonacci ratio.

Intermediate wave (W) lasted a Fibonacci 13 sessions. Intermediate wave (X) has now lasted a Fibonacci eight sessions. If intermediate wave (Y) is equal in duration with intermediate wave (W), that would give the wave count a satisfying look.

Primary wave 2 may not move beyond the start of primary wave 1 below 1,810.10. A new low below this point would see the degree of labelling within cycle wave V moved up one degree. At that stage, a trend change at Super Cycle degree would be expected and a new bear market to span several years would be confirmed.

HOURLY CHART

S&P 500 hourly 2016
Click chart to enlarge.

This wave count now expects downwards movement for a Fibonacci 13 sessions overall most likely, to end about 2,038.

TECHNICAL ANALYSIS

WEEKLY CHART

S&P 500 weekly 2016
Click chart to enlarge. Chart courtesy of StockCharts.com.

The lilac trend line has provided very strong support whereas previously provided strong resistance. The strength of this line is reinforced. If price turns down from here, it should be again expected to provide support. A break below it would be a strong bearish signal.

Price broke above the long term lilac trend line in July 2016. The low two weeks ago almost perfectly found support at this line, and now price is moving up and away from the line. This looks like a typical breakout followed by a back test for support. It is a reasonable conclusion that price will move further up and away from this line. This view is in alignment with the main Elliott wave count.

On Balance Volume has made a new high above the high for the week of the 6th of August, but price has failed to make a corresponding new high. This divergence is bearish and indicates weakness in price. It does not say that price must turn down from here, only that price is weak. The bull market is unhealthy.

RSI is not extreme. There is room for price to rise further. There is no divergence between RSI and price at the weekly chart level to indicate weakness.

DAILY CHART

S&P 500 daily 2016
Click chart to enlarge. Chart courtesy of StockCharts.com.

Price has moved higher on increasing volume for two days in a row now. Volume for these two upwards days is stronger than the prior two downwards days, so the rise in price is supported by volume. Wednesday’s long lower wick is bullish. This suggests that more upwards movement may follow, so another green daily candlestick would be a reasonable expectation here. This supports the second hourly Elliott wave chart and not the first.

ADX is declining, indicating the market is not trending. ATR is flat to declining, in agreement with ADX. Bollinger Bands have widened but are now remaining steady. This market is not trending. This market is consolidating.

Within this long consolidation, which began back on about 11th of July, it is three downwards days thay have strongest volume. This suggests a downwards breakout is more likely than upwards. This trick may or may not work for the S&P at this time. It is one piece of evidence to weigh up. This consolidation is bounded by resistance at 2,190 and support at 2,120.

On Balance Volume has now come up to touch the upper yellow resistance line. It may be expected to stop here, so this may halt the rise in price. This supports the first hourly Elliott wave chart over the second.

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

Stochastics has not yet reached overbought. Overall, a continuation of an upwards swing within this consolidation may be expected until price finds resistance and Stochastics reaches overbought at the same time.

There are three moving averages on this chart: a short term Fibonacci 13 days (gold), a mid term Fibonacci 55 days (purple), and a long term 200 days (lime). Both the mid and long term averages are still pointing up, and the mid term average is above the long term average. The longer term trend should be assumed to be up, until these averages prove it is not. The short term average has come down to kiss the mid term average and today it remains above the mid term average. The short term trend is fluctuating, exactly as expected within a consolidating market.

VOLATILITY – INVERTED VIX CHART

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

There are a few instances of multi day divergence between price and inverted VIX noted here. Bearish divergence is blue. Bullish divergence is yellow. It appears so far that divergence between inverted VIX and price is again working to indicate short term movements spanning one or two days.

At this stage, no further short term divergence is noted between price and VIX to indicate any weakness either way.

BREADTH – AD LINE

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

There is support from market breadth as price is rising.

Short term bullish and bearish divergence is again working between price and the AD line to show the direction for the following one or two days.

No short term divergence between price and the AD line is noted today.

DOW THEORY

Major lows within the old bull market:

DJIA: 15,855.12 (15th October, 2014) – closed below on 25th August, 2015.

DJT: 7,700.49 (12th October, 2014) – closed below on 24th August, 2015.

S&P500: 1,821.61 (15th October, 2014) – has not closed below this point yet.

Nasdaq: 4,117.84 (15th October, 2014) – has not closed below this point yet.

Major highs within the bear market from November 2014:

DJIA: 17,977.85 (4th November, 2015) – closed above on 18th April, 2016.

DJT: 8,358.20 (20th November, 2015) – has not closed above this point yet.

S&P500: 2,116.48 (3rd November, 2015) – closed above this point on 8th June, 2016.

Nasdaq: 5,176.77 (2nd December, 2015) – closed above this point on 1st August, 2016.

Dow Theory Conclusion: Original Dow Theory still sees price in a bear market because the transportations have failed to confirm an end to that bear market. Modified Dow Theory (adding S&P and Nasdaq) has failed still to confirm an end to the old bull market, modified Dow Theory sees price still in a bull market.

This analysis is published @ 09:55 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 September, 2016

S&P 500 Elliott Wave Technical Analysis – 27th September, 2016

Upwards movement was expected for Tuesday’s session. This is what happened.

Summary: The next two or three sessions may be very choppy and overlapping. Support from volume suggests overall upwards movement tomorrow. The target for the mid term remains at 2,233.

Last monthly chart for the main wave count is here.

New updates to this analysis are in bold.

MAIN WAVE COUNT

WEEKLY CHART

S&P 500 weekly 2016
Click chart to enlarge.

Cycle wave V must subdivide as a five wave structure. I have two wave counts for upwards movement of cycle wave V. This main wave count is presented first only because we should assume the trend remains the same until proven otherwise. Assume that downwards movement is a correction within the upwards trend, until proven it is not.

Primary wave 3 is shorter than primary wave 1, but shows stronger momentum and volume as a third wave normally does. Because primary wave 3 is shorter than primary wave 1 this will limit primary wave 5 to no longer than equality in length with primary wave 3, so that the core Elliott wave rule stating a third wave may not be the shortest is met. Primary wave 5 has a limit at 2,302.47.

Primary wave 2 was a shallow 0.40 expanded flat correction. Primary wave 4 may be exhibiting alternation as a more shallow combination.

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

It is also possible to move the degree of labelling within cycle wave V all down one degree. It may be only primary wave 1 unfolding. The invalidation point for this idea is at 1,810.10. That chart will not be published at this time in order to keep the number of charts manageable. The probability that this upwards impulse is only primary wave 1 is even with the probability that it is cycle wave V in its entirety.

DAILY CHART

S&P 500 daily 2016
Click chart to enlarge.

Primary wave 4 may be now complete as a double combination.

It is possible now that primary wave 4 could continue further as a triple, but because triples are very rare the probability of this is very low. If it is over here, then the proportion with primary wave 2 looks right. Within primary wave 5, no second wave correction may move beyond the start of its first wave below 2,119.12.

Primary wave 1 lasted 47 days, primary wave 2 was even in duration at 47 days, primary wave 3 lasted 16 days, and primary wave 4 has lasted 37 days. The proportions between these waves are acceptable.

If primary wave 5 has begun here, then at 2,233 it would reach 0.618 the length of primary wave 1.

At this stage, an impulse for primary wave 5 looks unlikely with invalidation of that idea at the hourly chart level. An ending diagonal now looks more likely for primary wave 5. Ending diagonals are choppy overlapping structures. The classic technical analysis equivalent is a rising wedge. They are terminal structures, doomed to full retracement at their end.

If primary wave 5 comes up to touch the upper edge of the maroon channel, it may end there.

HOURLY CHART

S&P 500 hourly 2016
Click chart to enlarge.

If primary wave 5 is subdividing as an ending diagonal, then all sub-waves must subdivide as zigzags. Intermediate wave (1) may be a completed zigzag.

Second and fourth waves within diagonals have a normal depth of from 0.66 to 0.81 the prior wave. This gives a target range for intermediate wave (2) from 2,140 to 2,131.

Intermediate wave (2) must subdivide as a zigzag. It may not move beyond the start of intermediate wave (1) below 2,119.12.

Intermediate wave (1) lasted a Fibonacci eight days.

Intermediate wave (2) may be expected to last either a Fibonacci five or eight days for the proportions of this wave count to have the right look, with five the first expectation. So far it has lasted three, so it may end in two more sessions or six more sessions.

Intermediate wave (2) should be expected to be a big obvious three wave structure. So far minor wave B shows at the daily chart level as one green daily candlestick. Minor wave B may not move beyond the start of minor wave A above 2,179.58.

Minor wave B may be any one of more than 23 possible corrective structures.

So far, within minor wave B, it looks like a five up may be almost complete. This may be minute wave a of a larger zigzag. Minute wave b may unfold tomorrow. Minute wave b may be any one of more than 23 possible corrective structures, and B waves within B waves are commonly complicated and sometimes quite time consuming. When minute wave b is complete, then minute wave c upwards may unfold to complete minor wave B if it is a zigzag.

Alternatively, minor wave B may be unfolding as a flat correction. A three up may be complete and tomorrow may see a deep wave down for minute wave b.

Minor wave B may also be unfolding as a combination. The first structure may be a complete zigzag. The second structure may unfold as a sideways flat or triangle.

Finally, it is possible that minor wave B is over as a quick sharp zigzag that ended at today’s high. This is possible, but for the wave count to have better proportions it is my judgement that the probability is lower than minor wave B continuing further.

When minor wave B is complete, then minor wave C downwards should unfold ending within the target range. When minor wave B is complete and the start of minor wave C is known, then the ratio between minor waves A and C may be used to calculate a target within the zone. That cannot be done yet.

ALTERNATE WAVE COUNT

WEEKLY CHART

S&P 500 weekly 2016
Click chart to enlarge.

What if an impulse upwards is complete? The implications are important. If this is possible, then primary wave 1 within cycle wave V may be complete.

With downwards movement from the high of primary wave 1 now clearly a three and not a five, the possibility that cycle wave V and Super Cycle wave (V) are over has substantially reduced. This possibility would be eliminated if price can make a new all time high above 2,193.81.

If an impulse upwards is complete, then a second wave correction may be unfolding for primary wave 2. Expectations on how deep primary wave 2 is likely to be are now adjusted. It may be expected now to more likely only reach the 0.382 Fibonacci ratio about 2,038.

At this stage, it looks like price has found strong support at the lilac trend line.

Primary wave 2 may not move beyond the start of primary wave 1 below 1,810.10.

DAILY CHART

S&P 500 daily 2016
Click chart to enlarge.

If an impulse upwards is complete, then how may it subdivide and are proportions good?

Intermediate wave (1) was an impulse lasting 47 days. Intermediate wave (2) was an expanded flat lasting 47 days. Intermediate wave (3) fits as an impulse lasting 16 days, and it is 2.04 points short of 0.618 the length of intermediate wave (1). So far this alternate wave count is identical to the main wave count (with the exception of the degree of labelling, but here it may also be moved up one degree).

Intermediate wave (4) may have been a running contracting triangle lasting 22 days and very shallow at only 0.0027 the depth of intermediate wave (3). At its end it effected only a 0.5 point retracement. There is perfect alternation between the deeper expanded flat of intermediate wave (2) and the very shallow triangle of intermediate wave (4). All subdivisions fit and the proportion is good.

Intermediate wave (5) would be very brief at only 18.29 points. Intermediate wave (5) is 1.43 points longer than 0.056 the length of intermediate wave (1).

At this stage, primary wave 2 now has a completed zigzag downwards that did not reach the 0.236 Fibonacci ratio. It is very unlikely for this wave count that primary wave 2 is over there; the correction is too brief and shallow. Upwards movement labelled intermediate wave (X) is so far less than 0.9 the length of the prior wave down labelled intermediate wave (W). The minimum for a flat correction has not yet been met. Primary wave 2 may continue lower as a double zigzag. A second zigzag in the double may be required to deepen the correction closer to the 0.382 Fibonacci ratio.

Intermediate wave (W) lasted a Fibonacci 13 sessions. Intermediate wave (X) has now lasted a Fibonacci eight sessions. If intermediate wave (Y) is equal in duration with intermediate wave (W), that would give the wave count a satisfying look.

Primary wave 2 may not move beyond the start of primary wave 1 below 1,810.10. A new low below this point would see the degree of labelling within cycle wave V moved up one degree. At that stage, a trend change at Super Cycle degree would be expected and a new bear market to span several years would be confirmed.

HOURLY CHART

S&P 500 hourly 2016
Click chart to enlarge.

This alternate looks at the possibility that upwards movement for Tuesday’s session is a completed zigzag. This would more likely be only minute wave i within minor wave A, and not minor wave A in its entirety.

This wave count now expects downwards movement for a Fibonacci 13 sessions overall most likely, to end about 2,038.

TECHNICAL ANALYSIS

WEEKLY CHART

S&P 500 weekly 2016
Click chart to enlarge. Chart courtesy of StockCharts.com.

The lilac trend line has provided very strong support whereas previously provided strong resistance. The strength of this line is reinforced. If price turns down from here, it should be again expected to provide support. A break below it would be a strong bearish signal.

Price broke above the long term lilac trend line in July 2016. The low two weeks ago almost perfectly found support at this line, and now price is moving up and away from the line. This looks like a typical breakout followed by a back test for support. It is a reasonable conclusion that price will move further up and away from this line. This view is in alignment with the main Elliott wave count.

On Balance Volume has made a new high above the high for the week of the 6th of August, but price has failed to make a corresponding new high. This divergence is bearish and indicates weakness in price. It does not say that price must turn down from here, only that price is weak. The bull market is unhealthy.

RSI is not extreme. There is room for price to rise further. There is no divergence between RSI and price at the weekly chart level to indicate weakness.

DAILY CHART

S&P 500 daily 2016
Click chart to enlarge. Chart courtesy of StockCharts.com.

Tuesday’s green daily candlestick has a small increase in volume. The rise in price today has support from volume, and another green daily candlestick would be a reasonable expectation here.

ADX is declining, indicating the market is not trending. ATR is flat to declining, in agreement with ADX. Bollinger Bands have widened but are now remaining steady. This market is not trending. This market is consolidating.

Within this long consolidation, which began back on about 11th of July, it is three downwards days thay have strongest volume. This suggests a downwards breakout is more likely than upwards. This trick may or may not work for the S&P at this time. It is one piece of evidence to weigh up. This consolidation is bounded by resistance at 2,190 and support at 2,120.

On Balance Volume gives another bullish signal today with a move up and away from the purple line. A green daily candlestick for Wednesday would be a reasonable expectation.

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

Stochastics has not yet reached overbought. Overall, a continuation of an upwards swing within this consolidation may be expected until price finds resistance and Stochastics reaches overbought at the same time.

There are three moving averages on this chart: a short term Fibonacci 13 days (gold), a mid term Fibonacci 55 days (purple), and a long term 200 days (lime). Both the mid and long term averages are still pointing up, and the mid term average is above the long term average. The longer term trend should be assumed to be up, until these averages prove it is not. The short term average has come down to kiss the mid term average and today it remains above the mid term average. The short term trend is fluctuating, exactly as expected within a consolidating market.

VOLATILITY – INVERTED VIX CHART

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

There are a few instances of multi day divergence between price and inverted VIX noted here. Bearish divergence is blue. Bullish divergence is yellow. It appears so far that divergence between inverted VIX and price is again working to indicate short term movements spanning one or two days.

At this stage, no further short term divergence is noted between price and VIX to indicate any weakness either way.

BREADTH – AD LINE

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

There is support from market breadth as price is rising.

Short term bullish and bearish divergence is again working between price and the AD line to show the direction for the following one or two days.

There is mid term bearish divergence between price and the AD line. The AD line made a new all time high, but price has not yet followed. This divergence suggests weakness in price. So far it has been followed by two days of downwards movement. It is reasonable to now expect this divergence is resolved.

DOW THEORY

Major lows within the old bull market:

DJIA: 15,855.12 (15th October, 2014) – closed below on 25th August, 2015.

DJT: 7,700.49 (12th October, 2014) – closed below on 24th August, 2015.

S&P500: 1,821.61 (15th October, 2014) – has not closed below this point yet.

Nasdaq: 4,117.84 (15th October, 2014) – has not closed below this point yet.

Major highs within the bear market from November 2014:

DJIA: 17,977.85 (4th November, 2015) – closed above on 18th April, 2016.

DJT: 8,358.20 (20th November, 2015) – has not closed above this point yet.

S&P500: 2,116.48 (3rd November, 2015) – closed above this point on 8th June, 2016.

Nasdaq: 5,176.77 (2nd December, 2015) – closed above this point on 1st August, 2016.

Dow Theory Conclusion: Original Dow Theory still sees price in a bear market because the transportations have failed to confirm an end to that bear market. Modified Dow Theory (adding S&P and Nasdaq) has failed still to confirm an end to the old bull market, modified Dow Theory sees price still in a bull market.

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