Upwards movement continued. There was no breach of the small channel on the hourly chart, and so no confirmation of a trend change.
Summary: It is likely that upwards movement will continue a little further to 1,968 or 2,003.
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Bearish Wave Count
The weekly charts show how to draw the double aqua blue trend lines. The lower trend line began back in 2011 has repeatedly been tested and is reasonably shallow which is highly technically significant. It has now been breached by more than 3% of market value indicating a trend change.
Because there is such a close Fibonacci ratio between intermediate waves (3) and (1) and intermediate wave (3) lasted 455 days, I am confident this labeling is correct. Also, intermediate wave (3) has the strongest upwards momentum within primary wave C. Therefore, the only piece of this wave count of which I am not confident is the structure within intermediate wave (5). Is it complete or not? This is why I have an alternate bearish wave count for you.
There is technical divergence between price and MACD at the weekly and daily chart levels. This indicates a trend change, but it does not indicate what degree the trend change should be.
For the first time in five years the lower edge of the maroon – – – channel about cycle wave b (or x) was breached. This is significant.
The bear wave count sees a huge super cycle wave (II) incomplete as either an expanded flat correction, a combination, or a double flat.
If cycle wave b or x is now over then the first downwards wave for intermediate wave (1) is now most likely unfolding as a leading diagonal.
To have full confidence in this bearish wave count, and to discard the bullish wave count, I want to see three things happen:
1. A clear five down on the daily chart, with completion of intermediate wave (1).
2. Confirmation from NASDAQ with a new swing low for that market below 3,414,11.
3. A new low below 1,370.58 (although using structure as a guide the bull wave count would probably be discarded before this point).
When we have those three things I will have full confidence in this wave count.
If minor wave 3 has begun (and this requires confirmation on the hourly chart) then at 1,640 it would reach 1.618 the length of minor wave 1.
This wave count differs from the alternate bear count below in the labeling of the subdivisions within intermediate wave (5). Here, there is no Fibonacci ratio between minor waves 3 and 1, and minor wave 5 is 0.89 points longer than 0.146 the length of minor wave 3. Minor wave 2 is a single zigzag lasting 14 days, and minor wave 4 is a double combination lasting 7 days.
Full disclosure: I consider the bear wave count to be most likely because of social mood. If the bull wave count is correct we have just completed a third wave at primary degree, and social mood should be overall positive (third wave) and unrealistically optimistic (within a fifth wave). For there to be rioting in the USA, mass social unrest continuing in Europe, war in the Middle East which is escalating, and the biggest epidemic ever of Ebola in Africa a third wave makes no sense. But a B wave makes complete sense. However, my caution comes from knowing that any analysis of social mood is extremely subjective. I would rather let the structure of the waves guide as to which wave count is correct.
Minor wave 2 remains within its channel and continues upwards. At 1,968 minuette wave (v) would reach equality in length with minuette wave (1). There is no Fibonacci ratio between minuette waves (i) and (iii) so I would expect to see a ratio between minuette wave (v) and either of (i) or (iii).
Draw a channel about minute wave c using Elliott’s second technique: draw the first trend line from the lows labeled minuette waves (ii) to (iv), then place a parallel copy on the high labeled minuette wave (iii). The lower edge of this channel is nicely showing where price is finding support. Only once this channel is clearly breached by downwards movement would I have any confidence that minor wave 2 is over.
If the next wave down subdivides as an impulse and shows a clear strong increase in momentum then it is most likely a third wave.
Minor wave 2 may not move beyond the start of minor wave 1 above 2,019.26.
Alternate Bearish Wave Count
I am confident that I have the labeling of intermediate waves (3) and (4) correct. Intermediate wave (3) lasted 455 days and is just 0.76 short of 2.618 the length of intermediate wave (1). Intermediate wave (3) has the strongest upwards momentum within primary wave C.
With this wave count minor wave 3 is 14.29 points longer than 1.618 the length of minor wave 1. Minor wave 2 is an expanded flat lasting 39 days and minor wave 4 is a zigzag lasting 18 days, and the proportions between minor waves 2 and 4 are better.
The problem within this wave count is at the end of minor wave 3: within it minute wave v looks like a three wave structure and not a five because minuette waves (ii) and (iv) are grossly disproportionate. There is another problem with this wave count: a clear breach of the lower edge of the maroon channel is most likely an indication that there has been a trend change prior, not that there is a trend change to come.
Because there is a Fibonacci ratio between minor waves 3 and 1 I would not expect to see a Fibonacci ratio for minor wave 5 to either of 3 or 1. If minor wave 5 only reached equality with minor wave 1 it would be truncated. Minor wave 5 is most likely to make a new high above minor wave 3 at 2,019.26, but it does not have to. It only needs to subdivide as a five wave structure.
It is at this point that this alternate wave count now diverges from the main bearish wave count. This alternate would expect to see maybe six more days of upwards movement to a slight new high.
Bullish Wave Count
This bullish wave count differs from the bearish wave count at the monthly chart level and at super cycle wave degree. To see the historic picture go here.
Primary wave 4 may end within the price territory of the fourth wave of one lesser degree. Intermediate wave (4) price territory is from 1,730 to 1,647.
Primary wave 2 was a 41% zigzag correction. I would expect primary wave 4 to show alternation in structure so most likely it will be a flat, combination or triangle. All of these structures may include a new price extreme beyond the start of intermediate wave (A), so they could see a new high.
Primary wave 2 lasted a Fibonacci 13 weeks. Zigzags tend to be more brief structures. I would expect primary wave 4 to last at least 13 weeks, and it may last up to a Fibonacci 21 weeks if it is a more time consuming structure like a combination or triangle. This would give it a 1.618 duration to primary wave 2.
It is too early to label primary wave 4 as over because it has lasted only 4 weeks and would be a zigzag so have no structural alternation with the zigzag of primary wave 2.
However, my degree of labeling for this downwards movement may be one degree too high. If we see a five down complete then I would move the degree of labeling for this bull wave count down one degree within primary wave 4, which could be only minor wave A of a zigzag for intermediate wave (A).
Because primary wave 4 is most likely to be a flat, triangle or combination, the first movement down is most likely to subdivide as a three wave structure.
If intermediate wave (A) is over then primary wave 4 may be a flat or triangle. Intermediate wave (B) may make a new high above the start of intermediate wave (A) at 2,019.26 as in an expanded flat or running triangle.
If primary wave 4 is a combination then the first structure in the double may be a completed zigzag for intermediate wave (W).
It is also possible to see upwards movement as an incomplete impulse. This may be just minor wave A within a bigger zigzag for intermediate wave (B) or (X).
Within minor wave A so far minute wave iii is now just 1.21 points longer than 2.618 the length of minute wave i.
Ratios within minute wave iii are: minuette wave (iii) is 2.21 points short of 2.618 the length of minuette wave (i), and minuette wave (v) is 0.85 points longer than 0.382 the length of minuette wave (i).
Ratios within minuette wave (iii) are: subminuette wave iii is 4.92 points longer than 1.618 the length of subminuette wave i, and subminuette wave v has no Fibonacci ratio to either of subminuette waves i or iii.
At 2,003 minute wave v would reach equality in length with minute wave i.
If minor wave A subdivides as a five wave structure then minor wave B may not move beyond its start below 1,820.66.
This analysis is published about 06:23 p.m. EST.