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The wave count expected downwards movement.

Although a slight new low was made, the day completed a green candlestick.

Summary: We should always assume the trend remains the same until proven otherwise. I have a new wave count. The new wave count expects the ending diagonal structure is incomplete and the fourth wave is unfolding. A short term target for a little more downwards movement tomorrow for both wave counts is at 2,039 – 2,037.

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

Changes to last analysis are italicised.

Bull Wave Count

S&P 500 daily 2015
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The ending contracting diagonal may still be incomplete. Downwards movement this week may have been minute wave iv completing as a zigzag. The structure on the hourly chart for minuette wave (c) is incomplete. A little more downwards movement should unfold this week.

The diagonal is contracting. Minute wave iii is shorter than minute wave i. Minute wave iv may not be longer than equality in length with minute wave ii at 2,022.07.

At 2,037, minuettte wave (c) would reach 2.618 the length of minuette wave (a).

The bull market trend line still has not been breached by a close of 3% or more of market value since its inception in November 2011, but it is no longer exactly where price is finding support, and the strength of that line appears to be waning. If the trend line was breached at 2,188.86 (thereabouts) then a close of 3% would be needed at 2,055. It may be that price may close at or below 2,055 this week and we may yet see new highs.

I have a preference for this bull wave count because we should always assume the trend remains the same until proven otherwise. While there is no confirmation of a bear market, I will assume the S&P remains in a bull market.

S&P 500 hourly 2015
Click chart to enlarge.

Minute wave iv would be an incomplete zigzag.

At 2,037 minuette wave (c) would reach 2.618 the length of minuette wave (a). At 2,039 subminuette wave v would reach 2.618 the length of subminuette wave i. This gives a 2 point target zone for downwards movement to end this week, maybe tomorrow.

Micro wave 4 may not move into micro wave 1 price territory above 2,095.38.

Alternate Bull Wave Count

S&P 500 daily 2015
Click chart to enlarge.

It is possible that the S&P has seen a primary degree (or for the bear count below a Super Cycle degree) trend change.

This wave count absolutely requires confirmation at the daily chart level before any confidence may be had in a primary (or Super Cycle) degree trend change. Confirmation would come with:

1. A new low below 2,022.07 to invalidate the new main wave count.

2. A clear five down on the hourly chart.

3. A close of 3% or more of market value below the lower aqua blue trend line. If the line is now breached at 2,118, then a close at 2,055 or below is required to confirm a bear market.

4. A clear five down on the daily chart.

5. A new low below 1,820.66.

As each condition is met the probability of a substantial trend change would increase.

Primary wave 4 would most likely be a time consuming flat, triangle or combination in order to exhibit structural alternation with the zigzag of primary wave 2. Primary wave 2 lasted 12 weeks. Primary wave 4 is likely to be longer in duration because combinations and triangles particularly are more time consuming than zigzags which tend to be quick corrections. Primary wave 4 may be expected to last more than 12 weeks, and may end with a total Fibonacci 13 or more likely 21 weeks.

For this more bearish wave count to be taken seriously it requires at least a clear five down on the hourly chart.

At this stage, a trend change is looking somewhat likely so I’ll list points in its favour. However, these points indicate a trend change to come and not exactly when it will happen and so they support both the main and this alternate bull wave count:

1. ADX is above 15 and rising, and the -DX line is above the +DX line indicating a new downwards trend.

2. The long held bull market trend line, the strongest piece of technical analysis on ALL charts, has been breached.

3. There is quadruple negative divergence between price and MACD on the weekly chart.

4. There is double negative divergence between price and MACD on the daily chart.

5. There is persistent and strong negative divergence between price and RSI on the monthly chart. The last time this happened was October 2007 and we all know what happened after that…

6. A long held bull trend line on On Balance Volume going back to October 2014 has been breached and is no longer providing support.

7. Nasdaq is making new all time highs. Only DJT now is required to make a new all time high to confirm continuation of a bull market. Failure of DJT to confirm the bull market does not mean a bear market exists and just indicates caution.

Bear Wave Count

S&P 500 daily bear 2015
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The subdivisions within cycle waves a-b-c are seen in absolutely exactly the same way as primary waves 1-2-3 for the bull wave count.

In line with recent Grand Super Cycle wave analysis, I have moved the degree of labelling for the bear wave count all up one degree. It is possible that the recent high was the end of a Super Cycle wave (b) or (x) and that Grand Super Cycle wave II is unfolding as an expanded flat, double flat or a double combination.

This bear wave count expects a Super Cycle wave (c) to unfold downwards for a few years, and if it is a C wave it may be devastating. It may end well below 666.79.

However, if this wave down is a Super Cycle wave (y), then it may be a time consuming repeat of the last big flat correction with two market crashes within it, equivalent to the DotCom crash and the recent Global Financial Crisis, and it may take another 8-9 years to unfold sideways.

At Super Cycle degree, wave (b) is over the maximum common length of 138% the length of cycle wave a, at 170% the length of cycle wave a. At 2,393 Super Cycle wave (b) would be twice the length of Super Cycle wave (a) and at that point this bear wave count should be discarded.

Technical Analysis

S&P 500 daily 2015
Click chart to enlarge.

ADX is now above 15 and rising. This again may indicate the start of a new downwards trend.

On Balance Volume came down to find support at the green trend line. A small bounce up from there should happen on Tuesday’s data. This trend line may continue to provide support. A breach of that trend line by OBV would favour the bullish alternate wave count.

This fall in price is supported by volume; the four down days saw overall increasing volume and OBV moved lower. This supports the alternate bull wave count slightly.

This analysis is published about 09:06 p.m. EST.