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Downwards movement invalidated yesterday’s hourly Elliott wave count. The structure is incomplete though, and the target should still be met.

Summary: The mid term target is now widened to a zone at 2,132 – 2,138. This may be met now in another 4 or 12 trading days. I am expecting to see a green candlestick for tomorrow’s session.

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Bull Wave Count

S&P 500 daily 2014

I will favor neither the bull or bear wave count. Both are viable and both expect this current upwards impulse may again be close to 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 an incomplete 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. It looks like minute wave ii may have ended just short of the lower aqua blue trend line, which gives the wave count a typical look.

There is still triple technical divergence between MACD and price at the weekly chart level.

Minute wave i lasted seven weeks, 36 days, which is two days longer than a Fibonacci 34. Minute wave iii may be either 13 or 21 days in total if it is to be 0.382 or 0.618 the duration of minute wave i. This would see it continue for a further 4 or 12 trading days.

At 2,191 primary wave 3 would reach 1.618 the length of primary wave 1. This would expect that minor wave 5 is either an ending contracting diagonal (minute wave i would be seen as a zigzag, which is possible) or within minor wave 5 minute wave iii will be shorter than minute wave i, and minute wave v will be shorter still. Both these scenarios are possible. Or the target is wrong.

S&P 500 hourly 2014

Downwards movement which invalidated yesterday’s hourly wave count is most likely minuette wave (iv) continuing as an expanded flat correction. There is now better alternation between minuette waves (ii) and (iv), even though the proportions between them are very different. Minuette wave (ii) was a quick deep zigzag, and minuette wave (iv) is a shallow expanded flat.

Within minuette wave (iv) subminuette wave b is a 206% correction of subminuette wave a, and subminuette wave c is just 0.85 short of 2.618 the length of subminuette wave a. Subminuette wave c is a complete five wave impulse, and with a very close Fibonacci ratio to subminuette wave a it is most likely that this downwards movement is over here.

If it continues further (which should be very unlikely) minuette wave (iv) may not move into minuette wave (i) price territory below 2,012.47.

At 2,132 minute wave iii would reach 0.618 the length of minute wave i. Now within minute wave iii, at 2,138 minuette wave (v) would reach 0.618 the length of minuette wave (iii). Within minute wave iii there is already a reasonable Fibonacci ratio: minuette wave (iii) is 9.13 short of 2.618 the length of minuette wave (i). We may not see a Fibonacci ratio exhibited for minuette wave (v) and so I favour the lower end of this target zone.

Draw a channel about minute wave iii using Elliott’s second technique: draw the first trend line from the lows labelled minuette waves (ii) to (iv) then place a parallel copy on the high labelled minuette wave (iii). This channel may show were minuette wave (v) ends, along the lower edge.

I have adjusted the curved line. If minuette wave (iv) continues further it might find support along the orange trend line. Within it the final fifth wave down could move lower tomorrow.

S&P 500 5 minute 2014

Bear Wave Count

S&P 500 daily 2014

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.

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 06:50 p.m. EST.