A new low below 2,042.35 confirmed the scenario for the hourly bull Elliott wave count.
Summary: A third wave down is most likely in the early stages. The target is 1,994. The trend is down. Use resistance lines to show were corrections against the trend may end.
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
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.
The wave count is changed today to again see primary wave B or X as a zigzag completed earlier. Primary wave C should subdivide as a five and primary wave Y should begin with a zigzag downwards. This downwards movement is either intermediate waves (1)-(2)-(3) of an impulse for primary wave C or minor waves A-B-C of a zigzag for intermediate wave (A). Both these ideas need to see a five down complete towards the target, so at this stage there is no divergence in expectations regarding targets or direction.
Primary wave A or W lasted three months. Primary wave Y or C may be expected to also last about three months.
Within the new downwards wave of primary wave C or Y, a first and second wave, or A and B wave, is now complete. Intermediate wave (2) or minor wave B lasted a Fibonacci 13 days exactly. At 1,947 intermediate wave (3) or minor wave C would reach 1.618 the length of intermediate wave (1) or minor wave A. If price falls through this first target, or gets there and the structure is incomplete, then the next target would be at 1,850 where intermediate wave (3) or minor wave C would reach 2.618 the length of intermediate wave (1).
No second wave correction may move beyond the start above 2,104.27 within intermediate wave (3) or minor wave C.
Draw a trend line from the low of intermediate wave (1) or minor wave A to the next swing low. Copy this over to the hourly chart. It may show were price finds resistance tomorrow.
DAILY CHART – TRIANGLE
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 a complete zigzag. Primary wave C downwards may be underway and within it intermediate waves (A) and (B) are complete. No second wave correction may move beyond its start above 2,104.27 within intermediate wave (C).
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.
The two hourly wave counts will look at two different ways, and both work for bull and bear (the degree of labelling for this bull is one degree higher).
The first wave of minuette wave (i) may be an incomplete impulse downwards within minute wave iii. Within minuette wave (i), subminuette wave iv may not move into subminuette wave i price territory above 2,066.78. If price remains below this point and makes a new low tomorrow, then this first scenario will remain valid. At that stage, minuette wave (i) may complete.
Within minuette wave (i), subminuette wave iii is just 0.02 short of 1.618 the length of subminuette wave i. Subminuette wave v is most likely to be equal in length with subminuette wave i, so to be 27.06 points long. A target cannot be calculated for subminuette wave v to complete at this time, because it looks most likely that subminuette wave iv is incomplete and may continue sideways when markets open tomorrow.
When minuette wave (i) downwards could be a complete impulse, then the following correction for minuette wave (ii) may not move beyond the start of minuette wave (i) above 2,093.84.
ALTERNATE BULL ELLIOTT WAVE COUNT
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.
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.
I have added a black base channel about intermediate waves (1) and (2). Minor wave 2, one degree lower, has breached the base channel. Price remains below it so far. This further reduces the probability of this wave count. Base channels normally provide support or resistance for lower degree corrections, but not always. When a base channel is breached the probability of the wave count reduces but is not invalidated.
Today there is a new problem with this wave count. Minute wave c within minor wave 2 now looks like a three wave structure, but it should be a five. The probability of this wave count is exceptionally low.
BEAR ELLIOTT WAVE COUNT
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 downwards movement labelled intermediate wave (1) looks like a five. If minor wave 2 is seen as a double zigzag with a triangle for wave X within it, then the subdivisions all fit nicely.
Ratios within intermediate wave (1) are: minor wave 3 is 7.13 points short of 6.854 the length of minor wave 1, and minor wave 5 is just 2.81 points longer than 0.618 the length of minor wave 3. These excellent Fibonacci ratios add some support to this wave count.
Intermediate wave (2) was a very deep 0.93 zigzag (it will also subdivide as a double zigzag). Because intermediate wave (2) was so deep the best Fibonacci ratio to apply for the target of intermediate wave (3) is 2.618 which gives a target at 1,428.
Within intermediate wave (3), minor waves 1 and 2 are complete. The upwards movement for minor wave 2 does have a strong three wave look to it at the daily chart level. Minor wave 2 was another deep correction at 0.87 of minor wave 1. Targets for minor wave 3 are 1.618 and 2.618 the length of minor wave 1.
It is still possible (but still less likely) that primary wave 1 is unfolding as a leading diagonal. I will keep that chart up to date and will publish it if and when it begins to diverge from the idea presented here. For now I want to keep the number of charts published more manageable.
This second scenario works in the same way for the hourly bull wave count.
There may now be three (almost) complete overlapping first and second waves. Subminuette wave ii may continue higher tomorrow and may not move beyond the start of subminuette wave i above 2,080.33. In the short term when markets open tomorrow, if price moves above 2,066.78, then this would be the only hourly wave count.
The mid term target is the same for both wave counts. At 1,994 minute wave iii would reach 1.618 the length of minute wave i.
Along the way down upwards corrections may find resistance at the trend line drawn from the highs of minor wave 2 to minute wave ii.
I will not publish the alternate bear wave count today. The subdivisions for this downwards movement no longer fit.
Click chart to enlarge. Chart courtesy of StockCharts.com.
Daily: Price has fallen on rising volume three days in a row. There is support for this downwards movement.
ADX is now just above 15 and increasing. This indicates a new trend may be beginning. The -DX line is above the +DX line, so the trend would be down. ATR agrees as it too is increasing.
On Balance Volume has given another bearish signal today with the break below the cyan trend line.
RSI is neutral. There is plenty of room for this market to fall.
Stochastics is nearing oversold, but during a trending market oscillators may remain extreme for extended periods of 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.
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 09:38 p.m. EST.