Upwards movement continued, which was not expected for the main Elliott wave count.
However, price has remained below the invalidation point and below the upper trend line which should provide resistance.
Summary: The main wave count still expects a strong third wave down. The target is now at 1,932.
Changes to last analysis are bold.
To see a weekly chart and how to draw trend lines click here.
MAIN ELLIOTT WAVE COUNT
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 now has some confirmation at the daily chart level with a close more than 3% of market value below the long held bull market trend line.
Further confirmation would come with:
1. A new low below 2,022.07 to invalidate the alternate wave count.
2. A clear five down on the hourly chart.
3. A clear five down on the daily chart.
4. A new low below 1,820.66.
5. A break below the 50 day SMA on the weekly chart.
As each condition is met the probability of a substantial trend change would increase.
At this stage, a trend change is looking somewhat likely so I’ll list points in its favour:
1. ADX is above 20 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 now by a close more than 3% of market value.
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 (orange line added to OBV on the TA chart below). It may provide resistance.
7. DJT has recently failed to confirm the continuation of a bull market. This does not indicate a bear market, but does indicate caution.
Primary wave 4 would be likely to end within the price territory of the fourth wave of one lesser degree: intermediate wave (4) has its price territory from 1,730 to 1,647.
Primary wave 4 would be likely to exhibit alternation to primary wave 2. Primary wave 2 was a 0.41 zigzag correction lasting 12 weeks, one short of a Fibonacci 13. Primary wave 4 may be more shallow than the 0.382 Fibonacci ratio, and may be a flat, combination or triangle, which are more time consuming structures than zigzags so it should be longer in duration than primary wave 2. Primary wave 4 may last a Fibonacci 21 weeks in total, 1.618 the duration of primary wave 2.
While price has been moving higher for the last six days, price has not yet made a new high above minute wave ii. MACD so far agrees with price, so there is no bullish divergence.
Minuette wave (ii) has continued higher. Within this expanded flat, subminuette wave c is now 1.63 points short of 2.618 the length of subminuette wave a.
Minuette wave (ii) may not move beyond the start of minuette wave (i) above 2,129.87. If upwards movement continues any higher tomorrow, then for this wave count to remain valid there is almost no room left to move. This is a very deep second wave correction. If this wave count is to be invalidated, then it should be invalidated tomorrow and thereby the alternate would be confirmed.
The upper pink trend line is the same as the pink line drawn on the daily chart and the TA chart. It is replicated in the VIX chart. This trend line is providing resistance. As long as this trend line holds and the invalidation point is not breached this main wave count will be favoured.
At 1,932 minuette wave (iii) would reach 2.618 the length of minuette wave (i). Minuette wave (iii) should show a strong increase in downwards momentum.
Along the way down a new low below 2,022.07 would provide confirmation of the main wave count with invalidation of the alternate below.
ALTERNATE ELLIOTT WAVE COUNT
The ending contracting diagonal may still be incomplete. Ending diagonals require all sub waves to subdivide as zigzags, and the fourth wave should overlap first wave price territory. It is Elliott wave convention to always draw the diagonal trend lines to indicate a diagonal structure is expected.
The diagonal trend lines are no longer clearly contracting and minuette wave (c) within minute wave iv now looks like a three where it should be a five. This reduces the probability of this wave count.
If it moves any lower, then minute wave iv may not be longer than equality in length with minute wave ii at 2,022.07. If it is over here, then minute wave v up also has a limit and may not be longer than equality with minute wave iii at 2,197.84.
The best way to see where and when upwards movement may end is the upper diagonal i-iii trend line. It is very likely to be overshot. Upwards movement may find resistance at the long held bull market trend line.
Because the long held bull market trend line has now been breached by a close more than 3% of market value below it, this wave count is now an alternate and a bear market is indicated.
Minute wave v must subdivide as a zigzag, and within it, minuette waves (a) and (b) are most likely now complete. Within minuette wave (c), subminuette waves i, ii and now iii may be complete. Subminuette wave iv may not move into subminuette wave i price territory below 2,074.28.
Subminuette wave iv so far shows up on the daily chart as one small red candlestick. It was over yesterday.
At 2,164 subminuette wave v would reach equality in length with subminuette wave i.
BEAR ELLIOTT WAVE COUNT
The subdivisions within cycle waves a-b-c are seen in absolutely exactly the same way as primary waves 1-2-3 for the main 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.
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.
Within the new bear market, no second wave correction may move beyond the start of its first wave above 2,134.72.
ADX is below 30 and declining indicating the market is consolidating. No clear trend is at this time indicated.
While price has not yet made a new high beyond the prior swing high of 22nd June, On Balance Volume has also not managed to make a new high beyond its high about the same time. There is no positive bullish divergence.
Nasdaq has moved higher today, but has failed to make a new all time high, just. At this time, none of the indices of S&P500, DJIA, DJT or Nasdaq have confirmed a continuation of the bull market. This does not indicate a bear market, but only failure of confirmation of the bull market.
Volume for Thursday’s up day is slightly lower than the down day of Wednesday. Overall, during this upwards movement of the last eight days, there has been a decline in volume. Today’s volume is slightly lower than 9th July.
The shorter EMA remains below the longer EMA.
A note on Dow Theory: for the bear wave count I would wait for Dow Theory to confirm a huge market crash. For that to be confirmed the following new lows are needed:
At this time DJT is closest, but none of these indices have made new major swing lows yet.
While price is moving higher, volatility is declining. Volatility has not yet declined to the same low level seen as the last swing high in price for 22nd June.
While price is slightly trending lower with lower highs, VIX is slightly trending higher with higher lows. This negative divergence is bearish.
This analysis is published about 06:47 p.m. EST.