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S&P 500 Elliott Wave Technical Analysis – 21st December, 2017

A small bounce was expected for the very short term for today’s session. This is exactly what happened.

Summary: A small fourth wave correction may continue for a few more days overall, and may end within the fourth wave of one lesser degree price territory from 2,671.88 to 2,652.01. The target within this zone is now calculated at 2,662.

A new all time high tomorrow would substantially change this view; expect an increase in upwards momentum to the next target at 2,833.

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

The biggest picture, Grand Super Cycle analysis, is here.

MAIN ELLIOTT WAVE COUNT

WEEKLY CHART

S&P 500 Weekly 2017
Click chart to enlarge.

Cycle wave V must complete as a five structure, which should look clear at the weekly chart level. It may only be an impulse or ending diagonal. At this stage, it is clear it is an impulse.

Within cycle wave V, the third waves at all degrees may only subdivide as impulses.

Within cycle wave V, the corrections for primary wave 2 and intermediate wave (2) both show up clearly, both lasting several weeks. The respective corrections for intermediate wave (4) and primary wave 4 should also last several weeks, so that they show up at weekly and monthly time frames. The right proportions between second and fourth wave corrections give a wave count the right look. This wave count expects to see two large multi week corrections coming up.

Cycle wave V has passed equality in length with cycle wave I, which would be the most common Fibonacci ratio for it to have exhibited. The next most common Fibonacci ratio would be 1.618 the length of cycle wave I.

Intermediate wave (3) has passed equality in length with intermediate wave (1). It has also now passed both 1.618 and 2.618 the length of intermediate wave (1), so it may not exhibit a Fibonacci ratio to intermediate wave (1). The target calculation for intermediate wave (3) to end may have to be done at minor degree; when minor waves 3 and 4 are complete, then a target may be calculated for intermediate wave (3) to end. That cannot be done yet.

When minor wave 3 is complete, then the following multi week correction for minor wave 4 may not move into minor wave 1 price territory below 2,400.98.

DAILY CHART

S&P 500 Daily 2017
Click chart to enlarge.

This wave count looks at the possibility that minute wave iii may have ended at the last high and minute wave iv may have just arrived.

There are better Fibonacci ratios in this wave count when compared to the alternate.

Draw an Elliott channel about this impulse. Minute wave iv may find strong support and remain within the channel, if it gets down that low. Minute wave iv may end within the price territory of the fourth wave of one lesser degree; minuette wave (iv) has its territory from 2,671.88 to 2,652.01.

Minute wave ii lasted nine days. For the wave count to have the right look (reasonable proportion), minute wave iv may be expected to most likely last either a Fibonacci five, eight, or possibly even thirteen days.

Minute wave ii was a zigzag. To exhibit alternation minute wave iv may most likely be a flat, combination or triangle. But it may also be a zigzag though because the S&P does not always exhibit perfect alternation and a zigzags is the most common corrective structure.

Minute wave iv may not move into minute wave i price territory below 2,490.87.

HOURLY CHART

S&P 500 Hourly 2017
Click chart to enlarge.

At this stage, I will leave the degree of labelling open to being reduced. It is possible that minuette wave (a) is complete as labelled, or this may be moved down one degree and only subminuette wave a or i may be complete.

Either way, the last wave down will subdivide as a leading expanding diagonal.

There are more than 23 possible corrective structures that minute wave iv may take. As it unfolds, the labelling within the structure will change. It is impossible at the early stages to tell which structure may unfold, so the focus should be on identifying when it may be complete and not on all the possible small movements within it.

At this stage, it looks most likely incomplete.

Further confidence in this main wave count may be had if price makes a new low below 2,676.11.

The last small wave up now looks best as a completed three at the hourly chart level. This offers a little confidence today to this main wave count.

ALTERNATE DAILY CHART

S&P 500 Daily 2017
Click chart to enlarge.

Both daily charts are identical to the high labelled minute wave i, and the low labelled minute wave ii.

The daily chart looks at the middle and end of minor wave 3. There are some excellent Fibonacci ratios within this wave count.

Minor wave 3 may only subdivide as an impulse. Within minor wave 3, minute waves i, ii, iii and iv may all be complete. The final fifth wave of minute wave v then looks incomplete.

Minute wave iii is longer than minute wave i, so minute wave v is not limited. Minute wave iii will meet the core Elliott wave rule stating it may not be the shortest actionary wave.

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

There is good proportion here between the corrections of minute waves ii and iv: minute wave ii lasted nine days and minute wave iv lasted six days. Both show up at the weekly chart level, and the wave count has the right look.

Within minute wave v, minuette waves (i) and (ii) may be complete. Minuette wave (iii) may be incomplete.

Minuette wave (iii) may only subdivide as an impulse. Within minuette wave (iii), subminuette waves i through to iv may be complete. It is also possible that subminuette wave iii is not complete and is extending.

Within minuette wave (iii), no second wave correction may move beyond the start of its first wave below 2,624.85.

ALTERNATE HOURLY CHART

S&P 500 Hourly 2017
Click chart to enlarge.

If a new all time high is seen, then this would be again the only wave count.

If subminuette waves iii and iv are complete, then subminuette wave iii was shorter than subminuette wave i by 4.07 points. This would limit subminuette wave v to no longer than equality in length with subminuette wave iii at 2,719.09, so that subminuette wave iii is not the shortest actionary wave and the core Elliott wave rule is met.

Alternatively, subminuette wave iii may be extending and only micro waves 1 and 2 may be complete.

Either way, within either subminuette wave v or micro wave 3, no second wave correction may move beyond the start of the first wave below 2,676.11.

The target for minor wave 3 expects it to exhibit the most common Fibonacci ratio for a third wave.

TECHNICAL ANALYSIS

WEEKLY CHART

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

There is still no candlestick reversal signal at highs. The trend is now very extreme and overstretched, but this can continue for longer before price is ready to turn.

Overall, at this time frame, this market remains very bullish.

DAILY CHART

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

The last gap is now closed. It is now indicated as an exhaustion gap and not a breakaway gap. This is a bearish signal, at least for the short term.

The last few signals from On Balance Volume were bearish. RSI and Stochastics are bearish. But ADX indicates the trend is not yet extreme at this time frame.

There are now two bearish candlestick patterns: a bearish engulfing pattern and now a gravestone doji. Along with the closed gap, this offers some support to the main wave count.

VOLATILITY – INVERTED VIX CHART

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

So that colour blind members are included, bearish signals will be noted with blue and bullish signals with yellow.

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.

A bullish divergence noted yesterday between price and VIX has now been followed by an upwards day. This may now be resolved, or it may need another upwards day to resolve it.

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.

Only large caps made new all time highs last week. There is some weakness with mid and small caps unable to make new all time highs; this is bearish.

Breadth should be read as a leading indicator. At this stage, there is no divergence between price and the AD line to indicate weakness.

DOW THEORY

The S&P500, DJIA and Nasdaq last week all made new all time highs. DJT now also made a new all time high, confirming the ongoing bull market.

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

DJIA: 17,883.56.

DJT: 7,029.41.

S&P500: 2,083.79.

Nasdaq: 5,034.41.

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

Published @ 09:02 p.m. EST.

[Note: Analysis is public today for promotional purposes. Specific trading advice and comments will remain private for members only.]

Continue reading S&P 500 Elliott Wave Technical Analysis – 21st December, 2017

S&P 500 Elliott Wave Technical Analysis – 5th December, 2017

For the very short term, downwards movement was expected, and this is exactly what has happened for Tuesday’s session.

Only two hourly wave counts will be published today, and they both expect overall the same direction for price next.

Summary: For the short term, look now for a pullback to about 2,624 or 2,599. This may be a second wave correction. Thereafter, look for upwards movement to continue towards the target about 2,773.

If price makes a new low below 2,557.46, that would indicate a multi week (about 10) correction may have arrived.

Always trade with stops and invest only 1-5% of equity on any one trade. All trades should stick with the trend. The trend remains up.

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

The biggest picture, Grand Super Cycle analysis, is here.

MAIN ELLIOTT WAVE COUNT

WEEKLY CHART

S&P 500 Weekly 2017
Click chart to enlarge.

Cycle wave V must complete as a five structure, which should look clear at the weekly chart level. It may only be an impulse or ending diagonal. At this stage, it is clear it is an impulse.

Within cycle wave V, the corrections for primary wave 2 and intermediate wave (2) both show up clearly, both lasting several weeks. The respective corrections for intermediate wave (4) and primary wave 4 should also last several weeks, so that they show up at weekly and monthly time frames. The right proportions between second and fourth wave corrections give a wave count the right look. This wave count expects to see two large multi week corrections coming up, and the first for intermediate wave (4) may now be quite close by.

Cycle wave V has passed equality in length with cycle wave I, which would be the most common Fibonacci ratio for it to have exhibited. The next most common Fibonacci ratio would be 1.618 the length of cycle wave I.

Intermediate wave (3) may now be nearing completion (the alternate hourly wave count looks at the possibility it could be complete at yesterday’s high). When it is complete, then intermediate wave (4) should unfold and be proportional to intermediate wave (2). Intermediate wave (4) may be very likely to break out of the yellow best fit channel that contains intermediate wave (3). Intermediate wave (4) may not move into intermediate wave (1) price territory below 2,193.81.

The yellow best fit channel is redrawn. Price points are given so that members may replicate this channel. This channel is copied over to the daily chart.

DAILY CHART

S&P 500 Daily 2017
Click chart to enlarge.

We should always assume the trend remains the same until proven otherwise. Assume that minor wave 5 is incomplete while price remains above 2,557.45.

The target calculated for minor wave 5 expects it to exhibit the most common Fibonacci ratio for a fifth wave. This target would not expect a Fibonacci ratio for intermediate wave (3) to intermediate wave (1).

Within minor wave 5, no second wave correction may move beyond the start of its first wave below 2,557.45.

HOURLY CHART

S&P 500 Hourly 2017
Click chart to enlarge.

This first hourly chart follows on from labelling on the daily chart.

A five up from the low of minor wave 4 is complete. This wave count fits with MACD: the strongest momentum within this five up is the end of the third wave of minuette wave (iii), and within the third wave the strongest portion of the histogram is its middle, subminuette wave iii. At the end of the five up, there is some divergence with price and momentum for the fifth wave of minuette wave (v).

With a five up now compete, a three down should follow. If minor wave 5 is incomplete, then only minute wave i may be over at today’s high. Now minute wave ii may take a few days to complete. The most likely point for it to end may be the 0.618 Fibonacci ratio about 2,599, but the 0.382 Fibonacci ratio about 2,624 is also a reasonable target.

There is a five down complete at the hourly chart level. If my analysis of this wave down is correct, then it should be followed by a small bounce for minuette wave (b). Before this happens though, it is entirely possible that minuette wave (a) may continue lower. Use the yellow best fit channel as a guide as to when minuette wave (a) is complete and minuette wave (b) has arrived. When price breaks above the upper edge of this channel, then assume that minuette wave (b) has begun.

Minuette wave (b) may not move beyond the start of minuette wave (a) above 2,665.19.

Minute wave ii looks like it may now end closer to the 0.618 Fibonacci ratio than the 0.382 Fibonacci ratio. It may be subdividing as a simple zigzag.

ALTERNATE HOURLY CHART

S&P 500 Hourly 2017
Click chart to enlarge.

Because we should always assume the trend remains the same until proven otherwise, this wave count should be considered an alternate while price has not confirmed it.

By simply moving the degree of labelling within the five up from the end of minor wave 4 all up one degree, it is possible to see that intermediate wave (3) could be over.

If this wave count is confirmed with a new low below 2,557.46, then it would expect a multi week pullback or consolidation for intermediate wave (4) to last about ten weeks or so. If it is a complicated combination or a triangle, then it may be longer lasting, possibly a Fibonacci thirteen or even twenty-one weeks.

At this early stage, the 0.382 Fibonacci ratio of intermediate wave (3) would be a reasonable target.

For the short term (the next week or so), a trend change at intermediate degree should see a larger five down develop at the hourly chart level. So far only a first wave within that five down may be complete.

Minute wave ii may not move beyond the start of minute wave i above 2,665.19.

Both wave counts expect overall the same direction next.

TECHNICAL ANALYSIS

WEEKLY CHART

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

This last week completed the strongest volume for a year, which for an upwards week is very bullish.

The problem with divergence, and one reason why it is hopeless as a timing tool, is that sometimes it just disappears. That is what has happened between divergence with price and RSI. Still, the failure of On Balance Volume to make new all time highs with price is bearish especially if On Balance Volume is a leading indicator.

This trend is extreme, but it could still continue for a while longer. Look for a candlestick reversal pattern or a bearish signal from On Balance Volume.

DAILY CHART

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

The target using the measured rule from the last flag pattern was about 2,633. It was met and well passed. Price is now turning downwards.

RSI, Stochastics and On Balance Volume are all bearish.

This analysis gives weight to the bearish signal from On Balance Volume. This is exactly the kind of signal which turns up at trend changes of reasonable magnitude. Today, it is looking a little more like a trend change of a reasonable magnitude, and this supports the alternate hourly Elliott wave count.

VOLATILITY – INVERTED VIX CHART

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

So that colour blind members are included, bearish signals will be noted with blue and bullish signals with yellow.

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.

Another bearish signal noted yesterday between price and inverted VIX has now been followed by a downwards day. This bearishness may now be resolved, or it may require another downwards day to resolve it.

Price has moved lower today, but inverted VIX has moved higher. Downwards movement did not come with a normal increase in volatility. Volatility declined, which indicates weakness within price today and is interpreted as 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.

All of large, mid and small caps last week have made new all time highs. The rise in price has support from market breadth.

The fall in price today comes with a corresponding normal decline in market breadth. The fall in price is supported by a fall in breadth, which is bearish.

DOW THEORY

The DJIA, DJT, S&P500 and Nasdaq have last week made new all time highs. This provides confirmation of the ongoing bull market.

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

DJIA: 17,883.56.

DJT: 7,029.41.

S&P500: 2,083.79.

Nasdaq: 5,034.41.

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

Published @ 08:24 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 – 5th December, 2017