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Downwards movement was not expected and invalidated the hourly Elliott wave counts.

Summary: The trend is still down, but a bear market rally continues and is not done yet. It may end tomorrow. A new high above 2,116 is expected. The new target for this upwards movement to end is 2,124. 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.



S&P 500 daily 2015
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. So far intermediate wave (C) has lasted thirteen days. If it ends tomorrow, it may be considered to be close enough to a Fibonacci thirteen.

The S&P is not very reliable in terms of Fibonacci numbers for the duration of its waves. The expectation for this movement to end tomorrow is a rough guide and may not be met. The high should still be a matter of only a few days away though.


S&P 500 daily 2015
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.


S&P 500 hourly 2015
Click chart to enlarge.

With downwards movement today moving below the invalidation points on yesterday’s hourly wave counts, I have tried to see if this could be part of minor wave 5 still, but it will not fit.

This downwards movement must be part of minor wave 4 which means it must be over at Wednesday’s low or very close indeed. It should find support at the lower edge of the black channel copied over from the daily chart (they sit in slightly different places because the daily chart is on a semi-log scale and the hourly chart is on an arithmetic scale).

The two hourly wave counts will look at minor wave 4 as one of two possible structures: either a flat or combination. This first chart looks at a less likely flat, the second chart a combination.

If minor wave 4 is a flat correction, then within it minute wave c would be extremely likely to end beyond the end of minute wave a to avoid a truncation and a very rare running flat. This means it should move slightly lower tomorrow to end at or below 2,070.29 but not below 2,066.69. This seems unlikely, which gives this first wave count a lower probability.

When minor wave 4 is complete, then intermediate wave (C) is still likely to end at least slightly above the end of intermediate wave (A) at 2,116.48 to avoid a truncation.

Minor wave 5 is most likely to be 47.30 points in length to reach equality in length with minor wave 1.

Minor wave 4 may not move into minor wave 1 price territory below 2,066.69. If this wave count (and the second hourly as well) are invalidated by downwards movement, then my analysis of intermediate waves (B) and (C) is wrong; this may have been a first and second wave correction within the start of the next wave down. A third wave down should then be expected to be underway.



S&P 500 daily 2015
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.



S&P 500 daily bear 2015
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.


S&P 500 daily bear 2015
Click chart to enlarge.

Of the two ideas presented today at the hourly chart level, I judge this second idea to have a higher probability.

Minute wave iv may now be a complete (and very time consuming) double combination: zigzag – X – expanded flat.

The second structure in the double may end here finding support at the lower edge of the channel copied over from the daily chart.

At 2,124 minute wave v would reach equality in length with minute wave i. If minute wave iv moves lower, then this target must also move correspondingly lower.

Minute wave iv may not move into minute wave i price territory below 2,066.69.

If this invalidation point is breached, then the bear market rally is very likely to be over and a third wave down should be expected to be underway.

A note about the expectation for a new high above 2,116.48 to end this rally. It is very likely but not necessary. If this very bearish wave count is correct, then the next wave down may be a very strong third wave. It may have the force to pull minor wave C down and force a truncation. The next wave down for this bear wave count is expected to be stronger than the downwards wave labelled minute wave iii within intermediate wave (1) on the daily chart. Nearing the end expect surprises to be to the downside.


S&P 500 daily 2015
Click chart to enlarge. Chart courtesy of

Daily: Slightly higher volume than the prior upwards day supports this fall in price. However, overall volume is still light and declining. This looks more like a correction, which supports the Elliott wave count, than a trend.

Today’s candlestick completes a nice bearish engulfing pattern. This is the strongest of all reversal patterns, and this is a big reason why I am warning that for the Elliott wave counts a new low now below 2,066.69 indicates the bear market rally is over.

Today there is still some divergence with the high yesterday and On Balance Volume. OBV has not managed to make a new high above the prior high of 20th November while price did make a new high. This indicates weakness in upwards movement of price. I have added a new short trend line to OBV. This is very shallow (almost horizontal) and repeatedly tested but not long held. It is reasonably technically significant. This short dark blue line may assist to show when upwards movement for price comes to an end. If OBV again touches that trend line, that may be when price ends the bear market rally.

ADX still indicates the market is not trending but consolidating. A range bound trading approach would expect some more upwards movement from here to not end until price finds resistance at one of the two upper horizontal trend lines and Stochastics is overbought at the same time.

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 12:06 a.m. EST on 3rd December, 2015.