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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.]

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