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S&P 500 Elliott Wave Analysis – 17th April, 2018 – Grand Super Cycle

S&P 500 Grand Super Cycle Elliott wave analysis.

Summary: From last analysis two wave counts are published. The main wave count remains valid. The alternate bearish wave count is not invalidated but should be now discarded due to a very low probability.

MAIN WAVE COUNT – BULLISH

YEARLY CHART

S&P 500 historic 2018
Click chart to enlarge.

The data prior to the inception of the S&P500 index is an amalgamation of the US stock market back to that date.

There are two approaches to the S&P500 long term analysis: either look only at data since the inception of the S&P500 in 1957, or to include an amalgamation of the entire US stock market before that date as part of the analysis. I have chosen to look at the entire market.

The data I have only goes back to 1871. This bull wave count assumes up to the market peak of 1929 a five wave impulse can be counted. This may have been a Super Cycle wave (I), and the Great Depression a Super Cycle wave (II) correction. If this assumption is wrong, then the bull wave count would not work.

If Super Cycle wave (III) began at the end of the Great Depression in 1933, then it may have ended in 2000. Super Cycle wave (III) would have lasted 67 years and moved price 1,523 points.

Within Super Cycle wave (III), there are no adequate Fibonacci ratios between cycle waves I, III and V. Cycle wave II is a deep 0.82 zigzag lasting 5 years, and cycle wave IV is a shallow 0.42 zigzag lasting 2 years. There is alternation in depth cycle waves II and IV.

Super Cycle wave (II) lasted only four years (a relatively deep quick zigzag). Super Cycle wave (IV) may be over as a more shallow flat correction, lasting 8.5 years. There is perfect alternation between Super Cycle waves (II) and (IV).

This wave count expects that Super Cycle wave (V) is underway to finally end Grand Super Cycle wave I.

Both Super Cycle waves (I) and (III) look to be extended in this analysis. If this is correct, then Super Cycle wave (V) may not extend.

MONTHLY CHART

S&P 500 Monthly 2018
Click chart to enlarge.

This monthly chart shows all of the possible Super Cycle wave (IV) and Super Cycle wave (V) so far.

Super Cycle wave (IV) fits as a regular flat correction, and within it cycle wave b is a 1.03 length of cycle wave a. Cycle wave c exhibits no Fibonacci ratio to cycle wave a, but it does move below the end of cycle wave a avoiding a truncation.

All subdivisions within Super Cycle wave (IV) have a good fit for this wave count. Cycle wave a fits best as a zigzag. Cycle wave b fits best as a zigzag. Cycle wave c fits best as an impulse.

Super Cycle wave (V) may be nearing completion. The Elliott channel will be important. While price remains above the lower edge of the channel, it should be assumed that Super Cycle wave (V) will continue higher. If the channel is breached by downwards movement, that may be an early indication that the upwards wave labelled Super Cycle wave (V) should be over and a new wave down should then be underway. Draw the channel from the ends of cycle waves I to III (note that cycle wave I ends with a truncation), then place a parallel copy on the end of cycle wave II. This channel was only slightly overshot at the end of cycle wave IV, but not breached. This channel has now been held for 9 years.

ALTERNATE WAVE COUNT – BEARISH

YEARLY

S&P 500 historic bear 2018
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This bear wave count expects that the Depression of the 1840’s was a Super Cycle wave (II) and the Great Depression of the 1930’s was its counterpart Super Cycle wave (IV). From an historic perspective both depressions were significant, so this idea makes sense.

The rise since the end of the Great Depression in 1933 would be a Super Cycle wave (V). Which means that a Grand Super Cycle wave I may have ended in 2000.

Within Super Cycle wave (V), the subdivisions are seen in the same way as for the bull wave count. There are no adequate Fibonacci ratios at cycle degree.

If Grand Super Cycle wave II began there, then it would most likely be incomplete. Grand Super Cycle waves should last generations, not just 8.5 years. The first flat correction would most likely be Super Cycle wave (A) of an expanded flat. But it may also be Super Cycle wave (W) of a double flat or combination.

However, this wave count now suffers from a very big problem. If Grand Super Cycle wave II is continuing, then within it Super Cycle wave (B) is now well longer than twice the length of Super Cycle wave (A). At the last all time high in January 2018, Super Cycle wave (B) would have been 2.48 times the length of Super Cycle wave (A).

While there is no Elliott wave rule stating a maximum limit for B waves within flat corrections, they are most commonly between 1 to 1.38 times the length of their A waves. There is a convention within Elliott wave that states when the B wave passes 2 times the length of the A wave, the idea of a flat correction should be discarded based upon a very low probability. For this reason this wave count should now be discarded.

This analysis is published about 5:55 a.m. EST.

S&P 500 Elliott Wave Technical Analysis – 6th November, 2017

Last analysis expected more upwards movement to begin the new trading week, which is what has happened.

The Elliott wave target is just one point off a target using the measured rule and a reliable continuation pattern.

Continue reading S&P 500 Elliott Wave Technical Analysis – 6th November, 2017

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

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

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

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

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

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

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

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

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

MAIN ELLIOTT WAVE COUNT

WEEKLY CHART

S&P 500 Weekly 2017
Click chart to enlarge.

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

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

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

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

DAILY CHART

S&P 500 Daily 2017
Click chart to enlarge.

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

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

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

HOURLY CHART

S&P 500 Hourly 2017
Click chart to enlarge.

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

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

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

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

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

ALTERNATE HOURLY CHART

S&P 500 Hourly 2017
Click chart to enlarge.

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

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

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

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

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

TECHNICAL ANALYSIS

WEEKLY CHART

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

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

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

DAILY CHART

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

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

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

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

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

VOLATILITY – INVERTED VIX CHART

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

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

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

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

BREADTH – AD LINE

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

There is normally 4-6 months divergence between price and market breadth prior to a full fledged bear market. This has been so for all major bear markets within the last 90 odd years. With no longer term divergence yet at this point, any decline in price should be expected to be a pullback within an ongoing bull market and not necessarily the start of a bear market.

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

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

DOW THEORY

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

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

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

DJIA: 17,883.56.

DJT: 7,029.41.

S&P500: 2,083.79.

Nasdaq: 5,034.41.

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

Published @ 06:12 p.m. EST.

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

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