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S&P 500 Elliott Wave Technical Analysis – 27th January, 2017

Careful analysis of volume, On Balance Volume, and VIX may assist to find an entry to join the current trend.

Summary: Price has broken out upwards from a flag pattern. A target using the measured rule is 2,323 and an Elliott wave target is 2,382. Monday, and maybe Tuesday as well, may see price move a little lower; the target is at 2,284. A new low below 2,257.02 would indicate a deeper pullback to the purple trend line. If looking for a point to enter long, always use a stop and do not invest more than 1-5% of equity on any one trade.

Volume declined for Friday, On Balance Volume is very close to support, but VIX diverged from price on Friday. The last time VIX did this was during a consolidation which moved price overall lower. That is one reason why I expect some more downwards movement. But look out, the alternate is possible.

New updates to this analysis are in bold.

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

MAIN ELLIOTT WAVE COUNT

WEEKLY CHART

S&P 500 Weekly 2017
Click chart to enlarge.

Cycle wave V is an incomplete structure. Within cycle wave V, primary wave 3 may be relatively close to completion.

When primary wave 3 is complete, then the following correction for primary wave 4 may not move into primary wave 1 price territory below 2,111.05.

Primary wave 2 was a flat correction lasting 47 days (not a Fibonacci number). Primary wave 4 may be expected to most likely be a zigzag, but it may also be a triangle if its structure exhibits alternation. If it is a zigzag, it may be more brief than primary wave 2, so a Fibonacci 21 sessions may be the initial expectation. If it is a triangle, then it may be a Fibonacci 34 or 55 sessions.

Primary wave 3 at this stage though is incomplete and may continue to move price higher.

DAILY CHART

S&P 500 Daily 2017
Click chart to enlarge.

It is possible that intermediate wave (4) is a complete combination: zigzag – X – flat. It would have been even in duration with intermediate wave (3), both lasting 26 days.

Intermediate wave (3) is shorter than intermediate wave (1). One of the core Elliott wave rules states a third wave may never be the shortest wave, so this limits intermediate wave (5) to no longer than equality in length with intermediate wave (3) at 2,450.76.

Within intermediate wave (5), no second wave correction may move beyond its start below 2,257.02.

Intermediate wave (5) has so far lasted just four days. It may be expected to be shorter both in length and duration compared to intermediate wave (3). At this stage, an expectation of a Fibonacci 13 days total for intermediate wave (5) looks reasonable, so it may now continue for another 9 days or sessions.

The proportion here between intermediate waves (2) and (4) is acceptable. There is alternation. Both are labelled W-X-Y, but double zigzags are quite different structures to double combinations.

HOURLY CHART

S&P 500 hourly 2017
Click chart to enlarge.

Intermediate wave (5) must subdivide as a five wave structure, either an impulse or an ending diagonal. At this stage, it is not possible to eliminate either option.

Within intermediate wave (5), minor wave 1 may be complete.

Minor wave 2 may be relatively brief and shallow. This was the pattern within the last upwards wave of intermediate wave (3) (from the 4th November, 2016, to the 13th December, 2016, seen on the daily chart). There, minor wave 2 was just 0.34 of minor wave 1 and was over within one session. Look out for this tendency again.

Within intermediate wave (3), the longest duration for a correction was four days for minor wave 4.

Within intermediate wave (1), minor wave 2 was brief lasting only two days. It was also shallow at only 0.30 of minor wave 1.

This does not mean that minor wave 2 within intermediate wave (5) must also be brief and shallow, only that the balance of probability points to this.

The preferred target for minor wave 2 will be about 2,284.

Analysis of the structure of minor wave 2 at the five minute chart level shows it is most likely incomplete. Minute wave a subdivides as a leading contracting diagonal and minute wave b subdivides as a three. Minute wave c must be a five wave structure. But as of Friday’s low that does not fit, so it looks likely to move lower.

If price moves below 2,257.02, this main wave count would be invalidated and the alternate below would be confirmed.

ALTERNATE ELLIOTT WAVE COUNT

DAILY CHART

S&P 500 Daily 2017
Click chart to enlarge.

This was the main wave count until recently. With classic analysis now very bullish, it is now an alternate as it has less support.

It remains possible that intermediate wave (4) is an incomplete expanded flat correction. With On Balance Volume breaking below support on Friday, this alternate wave count has increased in probability. It illustrates the risk to entering long positions based upon the main wave count here.

So far intermediate wave (4) may have lasted 30 sessions. It may continue for another four to total a Fibonacci 34 days or sessions.

No target is given for minor wave C downwards because a target calculated using the Fibonacci ratio of 1.618 to minor wave A results in price falling short of the purple trend line. Minor wave C may end only when price comes down to touch the trend line again.

Minor wave B is now a 1.53 length to minor wave A. This is longer than the normal length of up to 1.38 but within the allowable convention of 2. The length of minor wave B has reduced the probability of this wave count.

Intermediate wave (4) may not move into intermediate wave (1) price territory below 2,193.81. It should find very strong support at the purple trend line and stop there.

TECHNICAL ANALYSIS

WEEKLY CHART

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

A strong upwards week comes with an increase in volume. The rise in price is supported by volume.

On Balance Volume has found support and moved up and away from the long yellow support line. This is a bullish signal. OBV has not yet reached resistance. It may find some resistance at the purple line.

RSI is not yet overbought and exhibits no divergence with price. There is room still for price to rise further.

ADX indicates the beginning of an upwards trend. This is not extreme. There is plenty of room for the trend to continue.

DAILY CHART

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

A bull flag pattern has completed and an upwards breakout closed above prior resistance. The flag pole is short, only 48.48 points, so a target using the measured rule would be about 2,323.

A downwards day for Friday comes with a decline in volume. The fall in price is not supported by volume. Volume suggests that downwards movement may end here or very soon short term.

The breakaway gap may now offer support. If any members hold long positions, this may be used to pull up stops. Or if entering a long position, the lower edge of the gap may provide a good point for a stop.

Price found resistance about the round number pivot at 2,300.

ADX today is increasing from yesterday and it is above 15. An upwards trend is indicated, which is not extreme, so there is room for this trend to continue for a reasonable distance.

ATR is now overall flat with a small range day today. ATR increased while price moved higher, so there is still some strength within this trend.

On Balance Volume gave a strong bullish signal with a break above the purple trend line. Now OBV has moved below the purple trend line, negating the strong bullish signal. The yellow line is close by and may offer some support. This may assist to halt the fall in price. If price moves lower early next week, it may not be by much.

There is still strong and long held divergence between price and RSI. This may disappear, but it does offer some support to the Elliott wave count which sees this upwards wave as a fifth wave. Fifth waves very commonly exhibit divergence as they end.

RSI is not yet overbought, so there is room still for price to rise further.

There is strong and long held divergence between price and Stochastics. This may persist for reasonable periods of time during a trending market.

MACD shows a bullish crossover.

Bollinger Bands continue to expand. Volatility may be returning to the market after the breakout. There is plenty of room for volatility to increase further.

Price closed close to the upper edge of Bollinger Bands today, but this does not necessarily mean that price must move lower tomorrow. The last upwards trend saw price close above the upper range of Bollinger Bands for three days in a row, but the end of that trend was still not seen for a following three days. Price can sit at the extreme of Bollinger Bands for several days when a trend is strong.

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.

Price moved lower during Friday’s session and the balance of volume during the session was down. Normally, inverted VIX would also move lower indicating an increase in volatility as price declines. However, inverted VIX moved higher on Friday indicating a decline in volatility. The fall in price is not accompanied by a corresponding decline in volatility. This is abnormal.

The last two times this occurred are noted with blue arrows. It is noted that on those occasions divergence was followed overall by a further decline in price. Not immediately, but this was during a consolidation that ended lower.

That may happen again here. Normally, I would interpret this divergence as bullish, but it may actually be bearish considering recent behaviour.

BREADTH – AD LINE

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

No new divergence at today’s new high is noted between price and the AD line.

The AD line moved lower for Friday. The fall in price was accompanied by a normal decline in market breadth.

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 @ 12:19 a.m. EST on 28th January, 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 – 27th January, 2017

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