More upwards movement was expected.
Summary: The trend is still down, but a bear market rally continues and is not done yet. It may end on Monday or Thursday next week. A new high above 2,116 is expected in the next few days now. If price moves above 2,122, then the target for upwards movement to end is 2,132. Thereafter, the downwards trend should resume in force. This bear market rally is extremely unlikely to make a new all time high. It is expected to stop before 2,134.72.
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 click 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 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 is an incomplete zigzag unfolding upwards. If cycle wave IV is an expanded flat correction, then primary wave B may make a new high above the start of primary wave A at 2,134.72. If cycle wave IV is a combination, then primary wave X may make a new high above the start of primary wave W. There is no upper invalidation point for these reasons.
Primary wave A or W lasted three months. When it arrives primary wave Y or C may be expected to also last about three months.
Intermediate waves (A) and (B) together lasted a Fibonacci 34 days within primary wave B or X. Intermediate wave (C) may complete in a total Fibonacci five days, which would see it continue now for a further one day. If it does not manage that, then a further three days would see it total a Fibonacci eight.
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 make a new high above 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.
The whole structure moves sideways in an ever decreasing range. The purpose of triangles is to take up time and move price sideways. A possible time expectation for this idea may be a total Fibonacci eight or thirteen months, with thirteen more likely. So far cycle wave IV has lasted six months.
HOURLY CHART
Click chart to enlarge.
There are at least two different ways to label this upwards movement, so this hourly wave count and that for the bear below will be used to illustrate two different ideas. Both ideas work in the same way for both the bull and bear wave counts.
Intermediate wave (C) must subdivide as a five wave structure. It is not subdividing as a diagonal at this stage, so it is the more common impulse.
Minor wave 3 may have ended at the high for Thursday within the impulse. If this is correct, then minor wave 3 is shorter than minor wave 1 by 6.46 points. Because a core Elliott wave rule states that within an impulse a third wave may never be the shortest, this limits the fifth wave to no longer than equality in length with the third at 2,122.
On the daily chart, this wave count looks better than the second idea published with the bear hourly. Both minor waves 2 and 4 show on the daily chart as small red candlesticks and that gives this impulse the right look.
The triangle for minor wave 4 completed and was followed by upwards movement. The following correction would be minute wave ii. Minor wave 5 may be extending (except it should not; it should be shorter than minor wave 3).
Because minor wave 5 should not be extending, because it may not be longer than minor wave 3, this first idea of how to label this upwards impulse now looks like it has a lower probability than the second idea.
This wave count would expect most likely one more day of upwards movement to just above 2,116.48 but not above 2,122.
The channel is drawn here using Elliott’s first technique: draw the first trend line from the ends of minor waves 1 to 3, then place a parallel copy on the end of minor wave 4. Minor wave 5 may end when price finds resistance at the upper edge of the channel.
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.
Intermediate wave (1) is a complete five wave impulse and intermediate wave (2) is a complete three wave zigzag. Subdivisions at the hourly chart level would be the same for this wave count as for the other two wave counts; A-B-C of a zigzag subdivides 5-3-5, exactly the same as 1-2-3 of an impulse.
For this wave count, when the next five up is complete that would be intermediate wave (3). Within intermediate wave (3), no second wave correction may move beyond the start of its first wave below 2,019.39.
This wave count does not have support from regular technical analysis and it has a big problem of structure for Elliott wave analysis. I do not have confidence in this wave count. It is presented as a “what if?” to consider all possibilities.
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) is an incomplete zigzag within the leading diagonal. It may not move beyond the start of intermediate wave (1) above 2,134.72. This wave count expects minor wave C to end midway within its channel, above the end of minor wave A at 2,116.48 but not above 2,134.72.
HOURLY CHART
Click chart to enlarge.
This hourly wave count shows another way to look at recent upwards movement. I have checked both ideas on the five minute chart and both work. To envisage this idea for the bull wave count everything would be moved up one degree.
Minute wave iii may now be complete, showing its subdivisions clearly. At this stage, this second idea now has a more typical look. I judge it to have a higher probability.
Ratios within minute wave iii are: minuette wave (ii) is 0.28 short of 1.618 the length of minuette wave (i), and minuette wave (v) has no adequate Fibonacci ratio to minuette wave (i) or (iii).
Minute wave iii would be longer than minute wave i, but there is no Fibonacci ratio between the two waves. This makes it more likely that minute wave v shall exhibit a Fibonacci ratio to either of minute waves i or iii. The most common ratio for a fifth wave is equality in length with the first wave. Minute wave v would reach equality in length with minute wave i at 2,132. This target expects to see a nail biting end to this bear market rally, falling just short of the all time high.
The target is calculated based upon the most common ratio for a fifth wave. If the target is not met, then it is also possible that minute wave v may exhibit the next most common ratio, 0.618 the length of minute wave i at 2,114. This would see minor wave C fail to move beyond the end of minor wave A, so it would be slightly truncated. This is possible, but it has a lower probability.
The most important material difference between this very bearish wave count and the first bull wave count is the invalidation point at 2,134.72. Any breach of this invalidation point by any amount on any time frame fully invalidates the bear wave count.
TECHNICAL ANALYSIS
Click chart to enlarge. Chart courtesy of StockCharts.com.
Daily: Volume is declining as price moves higher. This rise in price is suspicious; price is not pushed up by more buyers.
ADX is still declining indicating the market is not trending. Today ATR somewhat agrees as it too is beginning to turn down.
Upwards movement may continue until Stochastics reaches overbought. Two more horizontal lines for resistance are drawn. If price reaches either of these lines while Stochastics reaches overbought, then upwards movement may be expected to end there.
On Balance Volume is a reasonably reliable leading indicator. The breach of the green trend line by OBV was a very bearish signal. If OBV comes up far enough to touch that trend line, it may assist to indicate when and where upwards movement in price may come to end.
Overall, the regular technical analysis picture indicates that this upwards movement is more likely a bear market rally than the resumption of a bull market. Volume on downwards days is mostly stronger than upwards days and overall volume is declining while price moves higher. OBV is very bearish and much of this upwards movement came with a decline in ATR.
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 5:27 p.m. EST.
The scenario for the hourly bear is looking more likely today.
Minute iv is continuing. It may find support at the Elliott channel, but fourth waves don’t always do that. If it breaches the channel then the channel will have to be redrawn using Elliotts second technique when this fourth wave is done. It’s right at the lower edge now.
Overall still expecting more upwards movement. Three more days after today. Tuesday, Wednesday and Thursday.
Next week down.
If minor C lasts a Fibonacci eight days that is.
US markets aren’t open Thursday.
Oh sorry, I know Thanksgiving closes the markets for one day, I thought it was Friday.
So upwards for Tuesday, Wednesday and Friday.
We don’t have Thanksgiving here in NZ.
I did have an American Thanksgiving once, in California. It was great!
Lara,
Thursday US Equities are closed for Thanksgiving. Only 3 hours on Friday. So – probably high on Friday ?
Yes. Maybe the final high Friday.
If it can’t manage that then Monday next week.
Give or take one day either side of the expectation of a Fibonacci eight days would see it close enough.
So maybe a break of the channel, then the last small wave up to tag the backside of the channel line….
Yep, yep, yep…
Entirely possible. The S&P likes to form rounding tops, and when it does that it just won’t work with Elliott channels.
It does make trend change confirmation very difficult though.
Well I’m 50% positioned for the coming drop with some Jan in the money puts. If we drop now, cool. If we go up another 1-2%, I’ll probably add to 75% position. I’m looking for the QQQ gaps at 102 and 104 to fill.
That should be gaps at 104 and about 100.5 (not 102, was going off of recollection).
Battle of the Aglos ?
ES Hourly: As of 3PM Euro time…………Wedge broke but thin dashed lines giving support
ES as of 3:15 Euro time Price between channel top resistance & fibo support
Position of shorter term indicators
Position of the longer term indicators : Weekly MACD of interest will it hit resistance at 0 ,the middle line
Caged in by S/R Lines everywhere
John,
Make no mistake – Dip buyers will show guaranteed just like the sun shows up in the morning 🙂
(A) from 1871.91 to 2116.48 was 244 points.
Anybody considers possible the risk of (C) = (A) from 2019 (bottom of (B)) giving a target of 2263, having in consideration year end bonuses for Wall Street are in the line ???
For the first wave count it’s possible. New all time highs can be part of an expanded flat or combination.
But a new all time high invalidates the bear wave count. And that is favoured simply because there is so much regular technical analysis to support it. It also fits the Grand SuperCycle analysis better.
Lara,
From a fib retrace perspective, Question – the first sharp reversal down you are looking for on the SPX: Can it surpass the 38.2% fib and land oh say between the 50.0%-61.2% and bounce? If so that should park the S&P around 1970 before a bounce up to year end closing the year at target 2000 SPX for 2015…
GOLDMAN SACHS IS ALWAYS RIGHT WITH MY EXPERIENCE BUT A FEW TIMES:
Kostin now sees the S&P 500 ending the year at 2,000 – SEPT 29, 2015
http://www.businessinsider.com/goldman-sachs-cuts-sp-500-outlooks-2015-9
If the next wave down is a third wave I wouldn’t expect it to stop much on the way down at all.
It could be another free fall like that last wave down to the last low.
Or… sometimes the S&P’s third waves show their subdivisions nice and clear on the daily chart and when they do that they can be time consuming.
I’d be using prior horizontal support lines to show where the fall down may be interrupted rather than Fibonacci ratios though.
Thanks Lara.
But I just read your new post and it seems that we are heading higher. There Doji’s and a slow tight range day. Low volume this week with no traders around should be a boring week. Unless we get a 1% down day tomorrow. Tons of Stocktwits trader looking for 2055. Let us wait and see…
vernecarty,
You ever trade the QQQs options call or puts?
Thanks,
Options2014
I have traded both QQQ and the inverse QID. The inverse funds are mostly a bit of a fraud unless you know how to trade them. They are what is referred to as a “wasting asset” and really only should be day traded for short quick gains. You can also do well against the market makers by selling credit spreads on the these ETFs. It sure looks like QQQ is approaching a double top (or maybe a second wave?).
O.k, Well i have done both long and short qqq’s quite tricky. Yes, indeed. The target is the 61.2 fib retrace once we head down then bounce to close year end.
NO JINX!
All,
I think i found it (minor math update)– that is it – the final price target is 2113.29 maybe. If the equation is right below and this sure is playing out like 2014 for this price structure.
My final guess is at this point we are only +.75% from the highs off of Friday. That is also in the confines of the elliot wave theory that price should not exceed the all time highs of 2134.72. Which further confirms Lara’s final target of at least near 2116.48 but not really past 2122 realistically.
So without further ado….
The equation is below – Round Numbers:
(Fridays high * .75/100) + Fridays high = FINAL TARGET
example of 2014:
(2077.85 * .75/100) + 2077.85 = 2093.43
example for 2015 projections:
(2097.06 *.75/100) + 2097.06 = 2113.29
NO JINX.
Have a great weekend all.
Later,
Options2014
All,
I think i found it – that is it – the final price target is 2113.29 maybe. If the equation is right below and this sure is playing out like 2014 for this price structure.
My final guess is at this point we are only +.75% from the highs off of Friday. That is also in the confines of the elliot wave theory that price should not exceed the all time highs of 2134.72. Which further confirms Lara’s final target of at least near 2116.48 but not really past 2122 realistically.
So without further ado….
The equation is below – Round Numbers:
Fridays high * .75% = FINAL TARGET
example of 2014:
(2077.85 * .75%) + 2077.85 = 2093.43
example for 2015 projections:
(2097.06 *.75%) + 2097.06 = 2113.29
NO JINX.
Have a great weekend all.
Later,
Options2014
Hi Lara:
I noticed the first hourly chart for today’s analysis is the same as yesterday’s and does not reflect today’s movement out of the triangle. Did I miss something?
Theres a minute wave i and ii up out of the triangle.
The triangle was minor 4.
The charts are a little different. But the labelling did not change.
so sorry! found the problem
I had not updated all of the code.
All,
Actually, Looks like this is a great puzzle to SOLVE. I was just browsing the weekly charts from 2014 and just look at the weekly candles – maybe +1.4% from here might do the trick just on 2116 SPX.
John,
We got to give the GREEN LIGHT for this BIG SHORT 2.0 . Let us communicate on that when it happens to get a general consensus on it!
Hi
All,
Possible road map worth critically thinking about. We just didn’t come this far on the maniac bull market run up so far to stop shy of the highs and then turn around…. Euphoria is an amazing dominating force in markets….
Hi OPT, yeah..You are not alone……….some people are saying we are in Primary wave 5 and have targets in the 2160s!
Others into Cycles say we have a cluster of cycle bottoms due in Feb/March time frame BUT shorter term, we have started the ‘ten week cycle’ up……….!!
John,
Yeah, I had 2170-2180 but even that is a far stretch to me now. I was trained by some classical chartist so I have somewhat drawn trend lines a bit different.
Also, looking for a blow off a top is something I am keen on but not sure if the BULLS can do it as that would be a REPEAT of YEAR 2000 and that would be just awesome but probably not going to happen…
John,
Please expand – ‘ten week cycle’ up? When is that 10 weeks up?
Hi
All,
Continued.
Chart gazing:
SPX Hourly MACD & full Stochastic look like they have topped out and are heading down. Price has hit a S/R line that has been that is currently acting as resistance. implications are bearish on the HR time frame
SPX weekly : Price has also hit a bottom channel line .
Stochastic is trying to turn down. I have no opinion at this point
John,
Cool charts, but the show isn’t over yet imo. I can almost give the highest probability outcome that we correct about -1% on the S&P from here and then resume the uptrend to its end – my final target range is 2122-2132….
Thanks,
Options2014
Options2014–when the SPX final does turn down, where is the bottom? How will the move down play out?
Davey,
I am looking for SPX 1750-1700 for a first bottom.
Thanks,
Options2014
Davey,
For further clarification on 2016 decline SPX targets – it would be great to see SPX 1576(The October 2008 ALL TIME HIGHS) as the second target. I have some ideas but lets break 1871-1820 first…. Till then this is all wishful thinking and fantasy bear market land…
Later,
Options2014
Options2014–thanks, maybe a better way to ask my question is are you seeing Lara’s Bull or Bear scenario?
Something happened last time – they can grind the MACD sideways believe me – traded that – it is painful to short here…
Another take on the HR chart is this wedge : In the last HR it failed then popped up into the wedge again………We will see Monday
I had so many rising wedges. Unfortunately the VIX is heading lower and the SPX MACD is heading up on the DAILY so this pattern isn’t to reliable….
We had 2 rising wedges on the DAILY 2015 both of which DID NOT play out this year.
hi
All
My final thoughts into the weekend for the trading week next week.
My thesis at this point is…
Early next week ->
A. We could get a pull back to 2070-2066.(Grind it sideways and lower a few points a day takes up the most time)
B. BUY THE DIP comes in by the 25th.
C. We close the week ending 27th at 2115.
Perfect setup as next week is only 4 trading days and it leaves suspense in the crowd hanging(BOTH BULLS AND BEARS)…
The first week of December SPX 2132 or why not just grind it higher into FOMC December 15th and SPX 2132 achieved.
Have a great weekend all.
Thanks,
Options2014
Hi
All
I did more research – seasonally the week of thanksgiving is bullish and so it seems that we could drag this out to next Friday the 27th as Thursday is no trading….
Lara
So I’m trying to understand when do you think the spx turns around ?
2120
Or
2132
?
At least above 2,116.48.
If price breaks above 2,122 then the target is 2,132.
Thanks. Lara!
Is it at all possible that the 4th wave has not completed yet on the hourly chart SPX?
My idea is the 4th wave would stop at 2070-2067 as it can not drop below the 1st wave up.
Check out chart attached:
Thanks,
Options2014
Definitely.
For the second hourly chart presented under the bear wave count that fourth wave is indeed continuing.
They usually find support at the Elliott channel, but not always.
thanks Lara.
hi
I vote 2132 SPX – This market is on fire and after all the price action I have seen so far. That seems to satisfy the greedy bulls to squeeze every penny from this market – before the rug gets pulled….
Thanks.
Options2014