Downwards movement is showing increased momentum as expected.
I have a new bullish Elliott wave count.
Summary: A third wave down is underway and the structure remains incomplete. I expect a further increase in downwards momentum. The target remains at 1,850.
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 1,850 intermediate wave (3) or minor wave C would reach 2.618 the length of intermediate wave (1). At this stage, this will be the sole target for this third (or C) wave to end as it fits better with more short term targets calculated at the hourly chart level.
No second wave correction may move beyond the start of its first wave above 2,093.84 within minor wave 3.
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.
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 hourly wave counts will again be different today. I will use them to show two different ways to label this unfolding impulse.
So far the structure cannot be seen as complete. It needs to keep moving lower, so that intermediate wave (3) is far enough below the end of intermediate wave (1) to allow room for upwards movement for the following correction of intermediate wave (4) to unfold and remain below intermediate wave (1) price territory.
Minor waves 1 and 2 are complete so far within intermediate wave (3). Minor wave 3 is incomplete.
Minute waves i and ii are complete within minor wave 3.
Within minute wave iii, only minuette wave (i) may be close to completion. When it is done the following correction for minuette wave (ii) may not move beyond the start of minuette wave (i) above 2,080.33.
Minuette wave (i) is unfolding as an impulse. Subminuette waves i through to iv may be complete within minuette wave (i). Subminuette wave iii was 3.52 points longer than 1.618 the length of subminuette wave i.
There is some alternation between subminuette waves ii and iv, but it is not perfect. Subminuette wave ii was a deep 0.71 double zigzag. Subminuette wave iv is a shallow 0.39 single zigzag so far.
The orange channel is drawn about the impulse of minuette wave (i) using Elliott’s technique. The first trend line is drawn from the ends of subminuette waves i to iii, then a parallel copy is placed on the end of subminuette wave ii. So far subminuette wave iv is contained within this channel. If it moves higher when markets open tomorrow, then it may find resistance at the upper edge of this channel.
At 1,978 subminuette wave v would reach equality in length with subminuette wave i.
Subminuette wave iv may not move into subminuette wave i price territory above 2,035.53.
BULLISH ALTERNATE WAVE COUNT
I can again see the possibility that cycle wave IV is over and upwards movement may be the start of cycle wave V.
If cycle wave IV is over, as labelled, then there is inadequate alternation between cycle waves II and IV. Cycle wave II was a shallow 0.41 zigzag. Here, cycle wave IV is a more shallow 0.25 zigzag. Both are the same structure.
If cycle wave V begins there, then primary wave 1 within it may be an incomplete impulse. At 2,557 cycle wave V would reach equality in length with cycle wave I. If it also is the same in duration as cycle wave I, then it may last a year.
Intermediate wave (2) was a deep 0.94 expanded flat within primary wave 1. Intermediate wave (4) would be an incomplete zigzag which would also be relatively deep when it is complete. Minor wave C must complete as a five wave impulse downwards. Intermediate wave (4) may not move into intermediate wave (1) price territory below 1,948.04.
This wave count does not have any support from regular technical analysis. I do not have any confidence in it. It is presented as a “what if?” only, to consider all possibilities.
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. If intermediate wave (3) ends below this target, then the degree of labelling within this downwards movement may be moved up one degree; this may be primary wave 3 now unfolding and in its early stages.
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. At 1,850 minor wave 3 would reach 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.
The cyan trend line has provided support and initiated a bounce as expected. When price breaks below that line, then I would expect downwards momentum to increase.
This is a different way to label this impulse unfolding downwards.
There may so far be a series of overlapping first and second waves.
Both ideas at the hourly chart level are equally valid. Both expect further downwards movement. The mid term target at 1,850 is also the same.
If upwards movement for Monday was a second wave and not a fourth wave, then it may not move above the start of the first wave at 2,067.65.
At 1,953 subminuette wave iii would reach 2.618 the length of subminuett wave i. If this target is wrong, it may not be low enough for this bear wave count. The next Fibonacci ratio in the sequence is 4.236 which gives a target at 1,882.
The orange channel is an acceleration channel about subminuette waves i and ii. The pink channel is the same about minute waves i and ii. Keep redrawing these channels as price keeps moving lower. Acceleration channels are drawn from the end of the first wave to the last low, then a parallel copy is placed on the end of the second wave.
Along the way down, upwards corrections may find resistance at the upper edge of each acceleration channel.
Click chart to enlarge. Chart courtesy of StockCharts.com.
An upwards day with some increase in volume is the most bullish signal from the S&P for some time. However, on its own it is not enough to change the outlook from bearish to bullish. Price found support at the next horizontal trend line about 1,990 today, and at the cyan trend line (copied from the Elliott wave daily charts). It would be reasonable to expect price to find resistance about the horizontal trend line at 2,020.
Price is closing again below the 200 day moving average. ADX indicates a strengthening downwards trend and ATR agrees. It would be wise and safest to accept that there is a downwards trend in place at this time.
On Balance Volume may now find resistance at both the gold and cyan trend lines. This may stop price from moving much higher, if any.
RSI is still not oversold. There is further room for this market to fall.
For the bear wave count I am waiting for Dow Theory to confirm a market crash. I am choosing to use the S&P500, Dow Industrials, Dow Transportations, Nasdaq and I’ll add the Russell 2000 index. Major swing lows are noted below. So far the Industrials, Transportations and Russell 2000 have made new major swing lows. None of these indices have made new highs.
At this stage if the S&P500 and Nasdaq also make new major swing lows then Dow Theory would confirm a major new bear market. At that stage my only wave count would be the bear wave count.
DJT: 7,700.49 – this price point was breached.
DJIA: 15,855.12 – this price point was breached.
Russell 2000: 1,343.51 – this price point was breached.
This analysis is published about 09:54 p.m. EST.