The S&P 500 has had a trend change at either minute, primary or cycle degree.
Summary: We should always assume the trend remains the same, until proven otherwise. The trend is your friend. At this stage I will assume that a small second wave correction is unfolding, and the target for it to end is at 2,015. Only if the lower aqua blue trend line is breached by a close of more than 3% of market value will I expect the trend change may have been at either primary degree (bull count) or cycle degree (bear count). A new low below 1,820.66 would provide price confirmation that the trend change is either at primary or cycle degree.
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Bull Wave Count
I will favour neither the bull or bear wave count. Both are viable and both expect this current upwards impulse may again be complete.
To see a weekly chart with subdivisions and how to draw trend lines and channels click here.
Upwards movement from the low at 666.79 subdivides as a complete 5-3-5. For the bull wave count this is seen as primary waves 1-2-3.
Within intermediate wave (5) minor wave 2 is an expanded flat and minor wave 4 is a zigzag. Minor wave 3 is 14.29 points longer than 1.618 the length of minor wave 1.
At intermediate degree there is also a very close relationship between intermediate waves (3) and (1): intermediate wave (3) is just 0.76 points less than 2.618 the length of intermediate wave (1).
The aqua blue trend lines are traditional technical analysis trend lines. These lines are long held, repeatedly tested, and shallow enough to be highly technically significant. When the lower of these double trend lines is breached by a close of 3% or more of market value that should indicate a trend change. It does not indicate what degree the trend change should be though.
There is still triple technical divergence between MACD and price at the weekly chart level.
I would expect the final top to form a slow curving structure, like a double head and shoulders or a rounding top. At the high volume should be low. Once the high is in place the new downwards trend may begin with slow movement, and deep second wave corrections. These would form two right hand shoulders, or the right hand side of a rounding top. When the neckline is formed, and eventually broken I would not expect to see an increase in volume, but I would expect to see an increase in momentum.
Because we should assume the trend remains the same until proven otherwise, while price remains above both aqua blue trend lines I will assume this downwards movement is a smaller correction within the upwards trend. I have moved the degree of labelling within minor wave 5 all down one degree. This downwards movement may be a small second wave correction. Minute wave ii may find strong support at the upper aqua blue trend line, or maybe the lower trend line. These trend lines may force this second wave correction to be more shallow than otherwise. Minute wave ii may not move beyond the start of minute wave i below 1,820.66.
At 2,191 primary wave 3 would reach 1.618 the length of primary wave 1.
Main Hourly Wave Count
Downwards movement so far subdivides 5-3. This may be the start of minute wave ii as a zigzag. At 2,015 minuette wave (c) would reach equality in length with minuette wave (a), and minute wave ii would reach the 0.236 Fibonacci ratio of minute wave i. Minute wave ii would end at the upper aqua blue trend line on the daily chart about this point.
Because minuette wave (a) subdivides as a five wave structure minuette wave (b) may not move beyond the start of minuette wave (a) above 2,079.47.
When minuette wave (c) downwards is complete then minute wave ii may be a completed zigzag. At that stage this main wave count would then expect upwards movement, while the alternate below would expect another wave down. The price point which will differentiate the two wave counts at that stage should be 2,034.17. At that stage movement above 2,034.17 would indicate that this main wave count would be correct and the alternate would be substantially reduced in probability.
Alternate Hourly Wave Count
To have confidence in a trend change at primary degree (or for the bear count at cycle degree) I now want to see the following things (probably in this order):
1. A clear five down on the daily chart.
2. A breach of the lower aqua blue trend line by a close of more than 3% of market value.
3. A new low below 1,820.66.
Following that it should be the structure which shows which wave count is correct: bull or bear.
Within the new downwards trend minuette wave (ii) may not move beyond the start of minuette wave (i) above 2,079.47.
At 1,987 minuette wave (iii) would reach 1.618 the length of minuette wave (i). Thereafter, minuette wave (iv) may not move into minuette wave (i) price territory above 2,034.17.
Bear Wave Count
This bear wave count differs from the bull wave count at the monthly chart level and at super cycle wave degree. To see the historic picture go here.
The subdivisions within primary waves A-B-C are seen in absolutely exactly the same way as primary waves 1-2-3 for the bull wave count.
At cycle degree wave b is over the maximum common length of 138% the length of cycle wave a, at 164% the length of cycle wave a. At 2,393 cycle wave b would be twice the length of cycle wave a and at that point this bear wave count should be discarded.
At this point in time it is again possible that the market has just turned and is beginning a big crash. This wave count would be confirmed if we see a clear breach of the lower maroon – – – channel on the weekly chart. If we see a full weekly candlestick below this trend line and not touching it then this bear wave count would be my main wave count. A new low below 1,370.58 would provide price confirmation of a market crash, but we should have confidence in this wave count well before that point by looking carefully at structure.
While we have no confirmation of this wave count we should assume the trend remains the same, upwards. This wave count requires confirmation before I have confidence in it.
This analysis is published about 05:44 p.m. EST.