Upwards movement to 2,010 was expected by the first Elliott wave count to end a third wave. Price moved only very slightly higher, failing by a wide margin to reach the target, and ended lower for the day in a fourth wave correction for the main Elliott wave count.

Summary: A 5-3-5 upwards is now complete. A new high above 1,989.17 would indicate an impulse unfolding upwards and would favour the first bull wave count. A new low below 1,916.60 would see a zigzag upwards as complete and favour the bear wave count. Upwards movement may be over here with price finding resistance at the upper horizontal trend line. I am somewhat confident today in expecting at least some downwards movement tomorrow.

To see how each of the bull and bear wave counts fit within a larger time frame see the Grand Supercycle Analysis.

To see last analysis of weekly and monthly charts go here.

If I was asked to pick a winner (which I am reluctant to do) I would say the bear wave count has a higher probability. It is better supported by regular technical analysis at the monthly chart level, it fits the Grand Supercycle analysis better, and it has overall the “right look”.

Changes to last analysis are bold.

BULL ELLIOTT WAVE COUNT

DAILY CHART

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Cycle wave IV should exhibit alternation to cycle wave II. Cycle wave IV is most likely to be more shallow (to find support at the teal channel on the weekly and monthly charts) and a flat, combination or triangle.

Cycle wave II was a shallow 0.41 zigzag lasting three months. Cycle wave IV should exhibit alternation in structure and maybe also alternation in depth. Cycle wave IV may end when price comes to touch the lower edge of the teal channel which is drawn about super cycle wave V using Elliott’s technique.

Cycle wave IV is likely to end within the price range of the fourth wave of one lesser degree. Because of the good Fibonacci ratio for primary wave 3 and the perfect subdivisions within it, I am confident that primary wave 4 has its range from 1,730 to 1,647.

If a zigzag is complete at the last major low as labelled, then cycle wave IV may be unfolding as a flat, combination or triangle.

This idea would have earliest confirmation with a new high above 2,020.86. That would invalidate the first alternate.

If cycle wave IV is a flat correction, then within it primary wave B must subdivide as a corrective structure (a three or a triangle) and must end at least 90% the length of primary wave A at 2,108.44. Primary wave B of an expanded flat may make a new all time high above 2,134.72. There is no upper invalidation point for this idea.

If cycle wave IV is a combination, then it would be labelled primary waves W-X-Y. Primary wave X may be any corrective structure and it has no minimum requirement, unlike the B wave within a flat. X waves within combinations are most often deep corrections to achieve the purpose of a big sideways movement. X waves may move beyond the start of W waves. There is no upper invalidation point for this idea either.

If cycle wave IV is a triangle, then primary wave B upwards has no minimum requirement, must subdivide as a three wave structure (most likely a zigzag), and may also make a new all time high as in a running triangle. There is no upper invalidation point for this idea either.

Of all Elliott waves it is B waves which exhibit the greatest variety in structure and form. They are extremely difficult to analyse. Often, it is only when they are complete that their structure can be determined.

At this stage, primary wave B looks like it may be unfolding as a zigzag. This may change though.

HOURLY CHART

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Minor wave 3 did not reach the target at 2,010 and has ended with no Fibonacci ratio to minor wave 1. This means minor wave 5 should be more likely to exhibit a Fibonacci ratio to minor waves 1 or 3.

Minor wave 4 should exhibit alternation with minor wave 2. Minor wave 2 was a relatively deep 0.51 flat correction. Minor wave 4 would most likely be a zigzag or zigzag multiple, but it may also be a triangle to exhibit structural alternation. It would most likely be shallow, ending about either the 0.236 or 0.382 Fibonacci ratios of minor wave 3.

Minor wave 4 may not move into minor wave 1 price territory below 1,916.60.

Minor wave 4 may end if price comes to touch the lower edge of the blue channel which is drawn here using Elliott’s first technique.

When minor wave 4 is complete then a target may be calculated upwards for minor wave 5. It would most likely be about 44.69 points in length to reach equality in length with minor wave 1.

ALTERNATE BULL ELLIOTT WAVE COUNT

DAILY CHART

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This idea sees cycle wave IV as unfolding as a regular flat correction. The problem here is the length of primary wave C in relation to primary wave A. This would be a regular flat because primary wave B is only a 98% correction of primary wave A. Regular flats normally have C waves which are about even in length with their A waves so the whole structure moves sideways. The C wave does not normally end so far below the A wave.

Here primary wave C would be an incomplete impulse. The final fifth wave would be unfolding.

At 1,839 intermediate wave (5) would reach 2.618 the length of intermediate wave (1).

Minor wave 2 may not move beyond the start of minor wave 1 above 2,020.86.

SECOND ALTERNATE BULL ELLIOTT WAVE COUNT

DAILY CHART

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It is possible to see cycle wave IV a completed flat correction. This would provide some structural alternation with the zigzag of cycle wave II.

This is a regular flat but does not have a normal regular flat look. Primary wave C is too long in relation to primary wave A. Primary wave C would be 3.84 short of 4.236 the length of primary wave A.

This idea requires not only a new high but that the new high must come with a clear five upwards, not a three.

At 2,562 cycle wave V would reach equality in length with cycle wave I. Cycle wave I was just over one year in duration so cycle wave V should be expected to also reach equality in duration.

BEAR ELLIOTT WAVE COUNT

DAILY CHART

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This bear wave count has a better fit at Grand Super Cycle degree and is better supported by regular technical analysis at the monthly chart level. But it is a huge call to make, so I present it second, after a more bullish wave count, and until all other options have been eliminated.

There are two ideas presented in this chart: a huge flat correction or a double flat / double combination. The huge flat is more likely. They more commonly have deep B waves than combinations have deep X waves (in my experience).

A huge flat correction would be labelled super cycle (a)-(b)-(c). It now expects a huge super cycle wave (c) to move substantially below the end of (a) at 666.79. C waves can behave like third waves. This idea expects a devastating bear market, and a huge crash to be much bigger than the last two bear markets on this chart.

The second idea is a combination which would be labelled super cycle (w)-(x)-(y). The second structure for super cycle wave (y) would be a huge sideways repeat of super cycle wave (a) for a double flat, or a quicker zigzag for a double combination. It is also possible (least likely) that price could drift sideways in big movements for over 10 years for a huge triangle for super cycle wave (y).

I am now seeing a third wave complete at the last major low for intermediate wave (3). Intermediate wave (3) is 17.31 longer than 6.854 the length of intermediate wave (1).

Intermediate wave (5) is seen as complete and slightly truncated.

The channel is drawn about primary wave 1 using Elliott’s first technique, as shown, and it shows exactly where minor wave 4 ended. This suggests price may find resistance here, and a bounce down may happen.

Intermediate wave (2) was a very deep 0.95 expanded flat lasting 38 sessions. Intermediate wave (4) should exhibit alternation, is most likely to be more shallow, and be a quicker zigzag or zigzag multiple. It may not move into intermediate wave (1) price territory above 2,099.18.

If intermediate wave (4) is over as labelled, it would have lasted a Fibonacci five sessions and exhibit alternation as a shallow 0.46 zigzag.

HOURLY CHART

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Because the bear wave count diverges now from the bull and because I would favour it on the basis of regular technical analysis, I will produce an hourly chart for it from this point on.

Intermediate wave (4) subdivides so far as a completed single zigzag. There is not enough downwards movement after its end to confirm that it is over. There is no Fibonacci ratio between minor waves A and C.

The upwards sloping channel is a corrective channel drawn about this possible zigzag. A clear breach of the lower edge by downwards movement would be first indication of a trend change.

A new low below 1,916.60 would invalidate the idea that this upwards movement is an incomplete impulse and would confirm the upwards movement as a three and not a five. That would provide some confidence that price should continue lower.

Intermediate wave (5) may find support and may end when price comes to touch the lower edge of the black channel. At 1,830 intermediate wave (5) would reach 0.618 the length of intermediate wave (3). This target may be about 30 to 34 days away.

TECHNICAL ANALYSIS

DAILY CHART

Click chart to enlarge. Chart courtesy of StockCharts.com.

Daily: Upwards movement has come up to touch the upper horizontal trend line providing resistance, indicating it may end there. It has also come again to touch Kaufman’s Moving Average. It is highly likely that upwards movement is over for now.

The black ADX line remains flat indicating the market is not trending. Overall volume is declining while price moves sideways. During this sideways consolidation mostly contained within support and resistance lines it is a downwards day which shows clearly strongest volume. This indicates the breakout is most likely to be down.

Each time price falls volume rises, and each time price rises or drifts sideways volume has been declining. The volume profile is bearish. There is little ambiguity.

On Balance Volume has slightly overshot the green trend line and now returned below it. The strength of that line is now slightly greater. This is bearish.

RSI is neither overbought or oversold. There is room for the market to fall or rise.

A note on Dow Theory: for the bear wave count I would wait for Dow Theory to confirm a huge market crash. So far the industrials and the transportation indices have made new major swing lows, but the S&P500 and Nasdaq have not.

S&P500: 1,820.66
Nasdaq: 4,116.60
DJT: 7,700.49 – this price point was breached.
DJIA: 15,855.12 – this price point was breached.

This analysis is published about 09:17 p.m. EST.