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Yesterday’s analysis expected downwards movement which is not what happened. The wave count at the hourly chart level is slightly changed.

Summary: I am expecting tomorrow to begin with a very little more upwards movement towards a target at 1,877, and thereafter tomorrow’s session should move lower and complete a red candlestick for the day. I still expect that we have seen a trend change at minor degree and that price should move lower in choppy overlapping movement for about another twelve sessions.

This analysis is published about 08:45 p.m. EST. Click on charts to enlarge.

Bullish Wave Count.

The aqua blue trend lines are critical for all wave counts. Draw the first trend line from the low of 1,158.66 on 25th November, 2011 to the next swing low at 1,266.74 on 4th June, 2012. Create a parallel copy and place it on the low at 1,560.33 on 24th June, 2013. While price remains above the lower of these two aqua blue trend lines we must assume the trend remains upwards. This is the main reason for the bullish wave count being my main wave count.

S&P 500 daily 2013

This bullish wave count expects a new bull market began at 666.79 for a cycle wave V. Within cycle wave V primary waves 1 and 2 are complete. Within primary wave 3 intermediate wave (1) is complete at 1,850.84. Intermediate wave (2) is continuing as an expanded flat correction.

Intermediate wave (2) should find strong support at the lower of the two aqua blue trend lines. Minor wave A lasted 14 days and minor wave B lasted a Fibonacci 21 days. I would expect minor wave C to be of a similar duration and to last about three to four weeks in total.

For this bullish wave count when intermediate wave (2) is complete then very strong sustained upwards movement would be expected as an intermediate degree third wave within a primary degree third wave upwards unfolds.

S&P 500 hourly 2014

There are two structural possibilities for minor wave C: either a simple impulse or an ending diagonal. Because the first wave down subdivides as a three and not a five an ending diagonal is indicated.

Within an ending diagonal all subwaves must subdivide only as single zigzags, and the fourth wave should overlap first wave price territory. The second wave may not move beyond the start of the first wave above 1,883.57.

Upwards movement for Thursday’s session has indicated the last wave down is a three and not a five. I expect that minute wave ii is not over and is completing as a single zigzag. Within it minuette wave (c) is very close to completion. At 1,877 subminuette wave v within minuette wave (c) would reach 0.618 the length of subminuette wave i.

Within diagonals subwaves 2 and 4 normally retrace between 0.66 to 0.81 of waves 1 and 3. If minute wave ii moves higher tomorrow and reaches the target at 1,877 it would be an 86% correction of minute wave i, a little above the maximum common length.

Minute wave iii must move beyond the end of minute wave i. This wave count requires a new low below 1,839.47.

There is not usually a Fibonacci ratio between first, third and fifth waves of diagonals. I must use the ratio of minuette waves (a) and (c) to calculate a target for you for minute wave iii to end. I should be able to do that tomorrow.

If this wave count is invalidated with upwards movement then it may be that minor wave B is moving higher as a double zigzag, although as minor wave B is already a 130% correction of minor wave A a double zigzag is not required to deepen the correction. I expect minor wave B is highly likely to be over.

S&P 500 5 minute 2014

Hourly Alternate Wave Count.

S&P 500 hourly alternate 2014

By moving the degree of labeling down one degree the diagonal may be leading for minute wave i. If the next wave down for a third wave is shorter than 44 points then it would be shorter than the first wave and the diagonal must be contracting. A contracting ending diagonal would not be large enough to take price below the end of minor wave A at 1,737.92 and so it would more likely be a leading diagonal for a first wave.

I will keep this alternate in mind over the next few days, if the wave count remains valid with price below 1,883.57.

This alternate has a lower probability than the main hourly wave count because leading diagonals for first waves are less common than ending diagonals for C waves.

At this stage this alternate idea does not diverge from the main hourly wave count. It still requires movement below 1,839.47.

Bearish Alternate Wave Count.

S&P 500 daily bear 2014

This bearish wave count expects that the correction was not over at 666.79, and that may have been just cycle wave a of a huge expanded flat for a super cycle wave II. Cycle wave b upwards is a close to complete zigzag.

Within flat corrections the maximum common length of B waves in relation to A waves is 138%. So far cycle wave b is a 141% correction of cycle wave a. For this reason only this wave count is an alternate.

Within primary wave C of the zigzag intermediate wave (4) would be incomplete.

The subdivisions for intermediate wave (4) would be the same as the main wave count for intermediate wave (2). I would expect it to end at the lower aqua blue trend line.

At 2,190 primary wave C would reach 1.618 the length of primary wave A. When intermediate wave (4) is complete I would recalculate this target at intermediate degree. I have found Fibonacci ratios between actionary waves (1, 3 and 5) of impulses are more reliable than between A and C waves within zigzags for the S&P500.

If intermediate wave (5) lasts about five to six months it may end about October this year.