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Downwards movement was not expected, but with no confirmation that the upwards trend had resumed it was allowed for.

Summary: A clear breach of the channel on the hourly chart is still required to confirm that the upwards trend has resumed. When we have this confirmation I will have confidence in the new target at 2,138.

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Bull Wave Count

S&P 500 daily 2015

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.

I have pulled the upper trend line down a little today to touch the low of minute wave a within minor wave 4. This may be a better position for recent movement.

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 last 21 or 34 days in total if it is to be 0.618 or even in duration to minute wave i. This would see it continue for a further 9 or 22 trading days.

Minute wave iii may show its subdivisions clearly on the daily chart. Recent downwards movement looks like a second wave correction which may not move beyond the start of minuette wave (i) below 1,972.56. Today, I am removing the target for minute wave iii. When minuette waves (i) through to (iv) within it are complete I will again calculate a target for it to end.

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.

Main Count Hourly Chart

S&P 500 hourly 2015

Minuette wave (ii) is now just below the 0.618 Fibonacci ratio of minuette wave (i). Within minuette wave (ii) zigzag there is no Fibonacci ratio between subminuette waves a and c.

Ratios within subminuette wave c are: micro wave 3 is 2.86 points longer than 2.618 the length of micro wave 1, and micro wave 5 has no Fibonacci ratio to either of micro waves 3 or 1.

I have drawn a parallel channel about subminuette wave c using Elliott’s second technique: draw the first trend line from the highs labelled micro waves 2 to 4, then place a parallel copy on the low labelled micro wave 3. When this channel is clearly breached by upwards movement that shall provide trend channel confirmation that subminuette wave c is over, and most likely minuette wave (ii) would be over. Only when we have this confirmation would I have confidence in the target.

At 2,138 minuette wave (iii) would reach equality in length with minuette wave (i).

While we have no confirmation that minuette wave (iii) has begun it is possible that minuette wave (ii) could continue lower. It may not move beyond the start of minuette wave (i) below 1,972.56.

S&P 500 5 minute 2014

Alternate Bull Wave Count

S&P 500 daily 2014

Alternatively, minor wave 5 may be an ending contracting diagonal. Within an ending diagonal all sub waves must be zigzags, and the fourth wave must overlap back into first wave price territory.

Within this diagonal minute wave ii is only .41 of minute wave i, and minute wave iv is now .63 of minute wave iii. Within diagonals the normal depth of second and fourth waves is between 0.66 to 0.81. Minute wave ii is very shallow, but now minute wave iv is deeper and closer to normal.

If minute wave iv moves any lower it may not move beyond the end of minute wave ii at 1,972.56.

This alternate may see a swift end to primary wave 3, which may not exhibit a Fibonacci ratio to primary wave 1. The final fifth wave of the diagonal would be very likely to end with a very small overshoot of the upper i-iii diagonal trend line.

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 165% 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 08:00 p.m. EST.