Downwards movement was again expected.

Price has moved lower, but only sightly, and it looks unconvincing.

Summary: Upwards movement is still very likely to be over. A new low below 2,083.74 at this stage would provide more confidence that the trend has changed. A new high above 2,108.78 on Monday would indicate more upwards movement.

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”.

New updates to this analysis are in bold.

BULL ELLIOTT WAVE COUNT

DAILY CHART – COMBINATION OR FLAT

Click chart to enlarge.

Cycle wave IV should exhibit alternation to cycle wave II.

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 (see this channel on weekly and monthly charts).

Cycle wave IV is may 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.

Primary wave B or X upwards is a single zigzag. Upwards movement has reached above 2,108.44. Primary wave B has passed the minimum requirement for a flat correction of 90% the length of primary wave A, and so cycle wave IV may be unfolding as a flat correction.

Cycle wave IV may also still unfold as a combination: zigzag – X – flat. Both a flat or combination would provide alternation with the single zigzag of cycle wave II.

Primary wave B within a flat correction may make a new high above the start of primary wave A at 2,134.72 as in an expanded flat. There is no upper invalidation point for this wave count for that reason. Likewise, X waves within combinations may also move beyond the start of the first structure labelled primary wave W. There is no minimum or maximum length for an X wave within a combination.

At this stage, it is still possible that primary wave B or X could yet continue higher as a double zigzag. It does not look like intermediate wave (C) would continue. The possibility of more upwards movement must be accepted while there is not a clear five down on the hourly chart. So far downwards movement fits perfectly as a corrective structure and will not fit as a five. For this reason I am considering the alternate hourly wave count below.

A B wave within a flat correction may be a double zigzag. An X wave within a multiple may also be a double. X waves can be any corrective structure.

DAILY CHART – TRIANGLE

Click chart to enlarge.

Cycle wave IV may unfold as a shallow triangle. This would provide alternation with the 0.41 zigzag of cycle wave II.

Primary wave B may be unfolding as a zigzag.

Primary wave B may move beyond the start of primary wave A at 2,134.72 as in a running triangle. There is no upper invalidation point for this wave count for that reason.

Primary wave C of a barrier or contracting triangle may not move beyond the end of primary wave A at 1,871.91.

The whole structure moves sideways in an ever decreasing range. The purpose of triangles is to take up time and move price sideways.

The hourly charts below work in exactly the same way for both of these daily charts.

MAIN HOURLY CHART

Click chart to enlarge.

There may now be a series of three or two overlapping first and second waves down.

Minuette wave (ii) may be over as labelled, or it may be continuing sideways and higher as an expanded flat correction. If it continues, it may not move beyond the start of minuette wave (i) above 2,108.78.

A new low below 2,083.74 would add some confidence to this wave count at this stage.

A clear five wave structure to the downside would add a lot of confidence to this wave count at this stage. The possibility that downwards movement is corrective and the upwards trend is incomplete must be accepted while there is no clear five down.

ALTERNATE HOURLY CHART

Click chart to enlarge.

The zigzag labelled intermediate wave (W) may have been only the first zigzag within a double. The double may be joined by a completed “three”, a complete double zigzag in the opposite direction.

The multiple would be very unlikely to be a combination. Their X waves are normally much deeper as they have a sideways form. Double zigzags are different. They should have a clear slope against the trend one degree higher, so their X waves are normally relatively quick and shallow.

This means that intermediate wave (Y) should be a zigzag. Within intermediate wave (Y), minor wave B to unfold may not move beyond the start of minor wave A below 2,083.74.

Within multiples the sub waves of W, Y and Z (if there is one) may only themselves subdivide as simple A-B-C (or A-B-C-D-E in the case of triangles) corrective structures. This is because the maximum number of corrective structures within a multiple is three. To label W, Y and Z as multiples themselves violates the rule as it increases the maximum beyond three. However, X waves are not counted as a corrective structure within a multiple because they are joining structures. They may be any corrective structure.

Within double zigzags, the second zigzag does not normally exhibit a Fibonacci ratio to the first. The only way to calculate a target for a second zigzag to end within a double is to use the ratio of the A and C waves within it. This can only be done when A and B are complete and the beginning of C is known.

ALTERNATE BULL ELLIOTT WAVE COUNT

DAILY CHART

Click chart to enlarge.

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. While it is possible to also see cycle wave IV as a complete zigzag (the subdivisions for that idea would be labelled the same as the bear wave count below, daily chart) that would not provide structural alternation with the zigzag of cycle wave II, and so I am not considering it.

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. Cycle degree waves should be expected to last about one to several years, so this expectation is reasonable. It would be extremely unlikely for this idea that cycle wave V was close to completion, because it has not lasted nearly long enough for a cycle degree wave.

I added a bear market trend line drawn using the approach outlined by Magee in “Technical Analysis of Stock Trends”. When this lilac line is clearly breached by upwards movement that shall confirm a trend change from bear to bull. The breach must be by a close of 3% or more of market value. If it comes with a clear five up, then this wave count would be further confirmed.

While price remains below the bear market trend line, we should assume the trend remains the same: downwards.

Minor wave 3 should be complete. Minor wave 4 may not move into minor wave 1 price territory below 2,020.13.

BEAR ELLIOTT WAVE COUNT

DAILY CHART

Click chart to enlarge.

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 the monthly bear 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).

The bear wave count sees a leading diagonal for a primary degree first wave unfolding. Within leading diagonals, the first, third and fifth waves are most commonly zigzags but sometimes may appear to be impulses. Here intermediate wave (1) is seen as a complete zigzag.

Intermediate wave (2) may not move beyond the start of intermediate wave (1) above 2,134.72.

Intermediate wave (3) should unfold downwards when intermediate wave (2) is complete. It must move beyond the end of intermediate wave (1) and it would most likely be a zigzag.

HOURLY CHART

Click chart to enlarge.

The zigzag upwards for intermediate wave (2) is seen in exactly the same way as the zigzag upwards for primary wave B or X for the first two wave counts. The degree of labelling for this idea is one degree lower.

Intermediate wave (3) is most likely to be a zigzag, if this is a third wave within a leading diagonal. It must move beyond the end of intermediate wave (1) at 1,871.91. It is likely to move reasonably below that point.

Actionary waves within diagonals do not normally exhibit Fibonacci ratios to each other. The best target calculation method for intermediate wave (3) would be to use the ratios of minor waves A and C within it. That can only be done when minor waves A and B are complete, so that the length of minor wave A is known and the start of minor wave C is known.

TECHNICAL ANALYSIS

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

Daily: Volume is not supporting this downwards movement which is a cause for concern. Volume is not necessary for price to fall, but when price falls on light or declining volume less confidence can be had in a downwards trend.

Friday’s green candlestick ends on a slight increase in volume. The slight rise in price for Friday was supported by volume. Again this gives cause for concern and is another reason why the alternate wave count is published.

Overall, volume declined as price moved higher and Average True Range declined while price moved higher. This is more indicative of a correction and not a trend. The upwards wave looks weak.

There is a bearish engulfing candlestick pattern at the last high. The real body of the red daily candlestick of 4th November fully engulfs the prior day of 3rd November candlestick’s real body. At the end of an upwards trend, this is a bearish reversal signal. The pattern is also seen at the high on the hourly chart. This supports the wave count which expects a high is in place.

The black ADX line is still above 20 and rising indicating an upwards trend is in place.

The shorter Exponential Moving Average at 9 days is reasonably well showing where price is finding support.

On Balance Volume is a leading indicator. A longer held trend line on OBV has just been breached to the downside. This green trend line is long held, repeatedly tested, very shallow and it is highly technically significant. The breach of that line is a reasonably strong bearish signal.

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.

To the upside, for Dow Theory, I am watching each index carefully. If any make new all time highs, that will be noted. If they all make new all time highs, then a continuation of a bull market would be confirmed. So far none have made new all time highs.

This analysis is published about 03:19 a.m. EST.