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Overall upwards movement was again expected.

Summary: Within minute wave v zigzag, the a wave is incomplete. A short term target for Monday is 2,130. Minuette wave (a) may find resistance at the upper i-iii trend line of the diagonal, and this may be where one to three days of downwards movement for minuette wave (b) begins. Overall the wave count sees the trend as up, and it’s looking for only one correction against the trend to show up on the daily chart.

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To see a weekly chart and how to draw trend lines go here.

Bull Wave Count

S&P 500 daily 2015

The bull wave count sees primary 1-2-3 within an impulse for a cycle degree wave V.

The bear wave count sees primary A-B-C zigzag for a cycle degree B wave.

The subdivisions for this upwards movement for both bull and bear wave counts are 5-3-5. The wave counts don’t diverge and won’t for months yet.

Minor wave 5 is an ending contracting diagonal, detailed on the daily chart below.

All this choppy overlapping movement with declining momentum fits for a diagonal. An ending diagonal requires all sub waves to be zigzags, and the fourth wave must overlap back into first wave price territory. Elliott wave convention is to always draw the trend lines about a diagonal to indicate the structure is a diagonal.

The diagonal for minor wave 5 would be contracting: minute wave iii is shorter than minute wave i.

The maximum length for minute wave iv is equality in length with minute wave ii at 2,013.27, because minute wave iv must be shorter than or equal to minute wave ii. The rule for the end of a fourth wave within a diagonal is it must overlap back into minute wave i price territory below 2,093.55.

Minute wave iv is extremely likely to be over at the lower aqua blue trend line. If minute wave v begins here then it too has a limit. It may not be longer than equality with minute wave iii at 2,212.95.

Within impulses, the S&P often exhibits a Fibonacci ratio between two of its three actionary waves and rarely between all three. Within primary wave 3, there is already a close Fibonacci ratio between intermediate waves (1) and (3), and within intermediate wave (5) there is already a reasonable Fibonacci ratio between minor waves 3 and 1. It is unlikely that either minor wave 5 or intermediate wave (5) will exhibit a Fibonacci ratio. This means a target for primary wave 3 calculated at intermediate or minor degree would not have a good probability.

The target at 2,190 from the weekly chart looks to be too high. I would not expect such a large overshoot of the diagonal trend line.

Actionary waves within diagonals don’t normally exhibit Fibonacci ratios to each other. So the target cannot be reliably calculated at minute degree.

Only when minuette waves (a) and (b) within minute wave v are complete can minuette wave degree be used to calculate a target.

A better way to see where minute wave v is likely to end is the i-iii trend line. It is very common for the fifth wave of a contracting diagonal to overshoot the i-iii trend line. Only when this line is overshot would I consider and end to primary wave 3.

S&P 500 hourly 2015

Minute wave v must subdivide as a zigzag, with subdivisions 5-3-5. So far the first five up for minuette wave (a) is incomplete.

At 2,130 micro wave 5 within subminuette wave iii would reach equality in length with micro wave 1. Micro wave 3 is 2.75 points longer than 1.618 the length of micro wave 1 so this target for micro wave 5 may not be very reliable.

Micro wave 5 may end midway within the narrow upwards sloping channel which is drawn here using Elliott’s technique. When this channel is clearly breached by downwards movement that shall be an indication that subminuette wave iv is underway. Subminuette wave iv may not move into subminuette wave i price territory below 2,083.04.

Minuette wave (a) may end when price finds resistance at the upper i-iii trend line of the diagonal. I would expect price to bounce off this trend line. Minuette wave (b) is very likely to show up on the daily chart as one to three red candlesticks or doji so that minute wave v has a clear obvious three wave look to it. This will give the wave count the “right look”.

Minuette wave (b) may not move beyond the start of minuette wave (a) below 2,067.93.

If minuette wave (b) is very deep it should find very strong support at the lower ii-iv pink trend line. Diagonals normally adhere very well to their trend lines, with the exception of the final fifth wave overshoot.

Bear Wave Count

S&P 500 daily bear 2015

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.

To see the difference at the monthly chart level between the bull and bear ideas look at the last historical analysis here.

At cycle degree wave b is over the maximum common length of 138% the length of cycle wave a, at 167% 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. Full and final confirmation that the market is crashing would only come with a new low below 1,370.58. However, structure and momentum should tell us long before that point which wave count is correct, bull or bear.

On Balance Volume should continue to find support at the trend lines drawn. When the longer held green trend line is broken by OBV a trend change would be supported.

This analysis is published about 08:33 p.m. EST.