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Downwards movement continues as expected towards targets.

Summary: A downwards trend is still in place. The preferred bear wave count expects a big third wave is now close to the middle. The target for the next short term interruption to the trend is at 1,919. The invalidation point may now be moved down to 2,022.92; the upcoming fourth wave correction may not move into first wave price territory. The mid term target for this big third wave to end remains at 1,428.

To see how each of the bull and bear wave counts fit within a larger time frame see the Grand Supercycle Analysis.

To see detail of the bull market from 2009 to the all time high on weekly charts, click here.

Last published monthly charts can be seen 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.

This wave count is bullish at Super Cycle degree.

Cycle wave IV may not move into cycle wave I price territory below 1,370.58. If this bull wave count is invalidated by downwards movement, then the bear wave count shall be fully confirmed.

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 be a flat, combination or triangle. The two daily charts look at these three possibilities.

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 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 C or Y 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.

There may now be a complete downwards first wave leading expanding diagonal. It is my judgement that this idea at this stage has a lower probability than the other idea presented with the daily bear wave count; both ideas work in the same way for bull and bear wave counts.

If price moves above 1,979.05 in the next one or two days, then this idea will be used for both bull and bear wave counts. If a leading diagonal is complete, then it should be followed by a very deep second wave correction which may not move beyond the start of the first wave above 2,104.27.


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.

The triangle may be either a regular contracting or regular barrier triangle. An expanding triangle would also be technically possible, but as they are the rarest of all Elliott wave structures I would only chart and consider it if it shows itself to be true. Prior to that, the probability is too low for consideration.

Primary wave B would be a complete zigzag. The subdivisions all fit and now it has a clearer three wave look to it.

Primary wave C should unfold downwards as a single or double zigzag. So far it may be a single zigzag, with intermediate wave (C) unfolding as an ending expanding diagonal. At 1,947 intermediate wave (C) would reach 1.618 the length of intermediate wave (A).

Primary wave C may not move below the end of primary wave A at 1,867.01. This invalidation point is black and white for both a contracting and barrier triangle.

Primary wave C may now be a complete zigzag. Primary wave D upwards should unfold as a single or double zigzag. For a contracting triangle, primary wave D may not move beyond the end of primary wave B above 2,116.48. For a barrier triangle, primary wave D should end about the same level as primary wave B at 2,116.48. The triangle would remain valid as long as the B-D trend line remains essentially flat. This invalidation point is not black and white. This is the only Elliot wave rule with any grey area.

Thereafter, primary wave E downwards may not move beyond the end of primary 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. Price exits the triangle in the same direction that it entered, in this case up. When the triangle is complete, then the bull market would be expected to resume. This triangle should take several months yet to complete.


S&P 500 hourly 2015
Click chart to enlarge.

This hourly chart follows on directly from the labelling of the main daily chart.

The zigzag for minute wave v may now be seen as complete, although it does not have a very clear three wave look on the daily chart. I would have expected the B wave within it to be more time consuming.

Minuette wave (c) has no Fibonacci ratio to minuette wave (a) and is shorter by 8.77 points.

Ratios within minuette wave (c) are: subminuette wave iii is 3.89 points longer than 1.618 the length of subminuette wave i, and subminuette wave v is 1.15 points longer than 0.382 the length of subminuette wave i.

If price continues lower when markets open tomorrow, then the ratio between subminuette waves v and i will be lost. Subminuette wave v would reach equality with subminuette wave i at 1,918.

At this stage, there is no confirmation of a trend change. Earliest indication that this idea may be correct would come with a breach of the parallel channel about the zigzag of minute wave v. This wave count requires a new high above 1,979.05. At that stage, the idea of a series of overlapping first and second waves would be invalidated. The idea presented with the bear hourly wave count should be favoured while price remains below 1,979.05.


This wave count is now invalidated by price. More confidence may now be had that the S&P500 is in a bear market at least short / mid term.



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

This bear wave count fits better than the bull with the even larger picture, super cycle analysis found here. It is also well supported by regular technical analysis at the monthly chart level.

Importantly, there is no lower invalidation point for this wave count. That means there is no lower limit to this bear market.

The downwards movement labelled intermediate wave (1) looks like a five. If minor wave 2 is seen as a double flat 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 2.82 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. 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. If price falls through this first target, then the next Fibonacci ratio in the sequence is 4.236 which would be reached at 1,693. If minor wave 3 is very extended, then the degree of labelling for all downwards movement from the all time high will be moved up one degree.

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.

A line from the ends of intermediate wave (2) to minor wave 2 is drawn. This line may show where any further upwards movement finds resistance.

For the bear wave count today I am discarding the alternate idea published yesterday because it no longer has the right look.

Because downwards movement over the last two days is strong and supported well by volume, it looks most likely that a third wave down is unfolding. The target for minuette wave (iii) remains at 1,919 where it would reach 1.618 the length of minuette wave (i). If price reaches this first target and just keeps on falling, or if it gets there and the structure for minuette wave (iii) is incomplete, then the next target is the next Fibonacci ratio in the sequence. At 1,818 minuette wave (iii) would reach 2.618 the length of minuette wave (i). This lower target would necessitate a recalculation of targets at higher degrees also.

Because minuette wave (ii) was a deep correction of minuette wave (i), it would be expected that the correction of minuette wave (iv), when it arrives, should be shallow against minuette wave (iii). Minuette wave (iv) may not move into minuette wave (i) price territory above 2,022.92.


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

The orange channel drawn about this third wave is a base channel drawn about subminuette waves i and ii. Subminuette wave iii should break below the lower edge, and once below that trend line it should find resistance there. At this stage, the lower edge of the base channel is providing support. Because price has not yet broken below the base channel, and because so far subminuette wave iii has not passed equality in length with subminuette wave i, it is my judgement that the middle of this third wave is still not over.

Along the way down, upwards corrections should find resistance at the upper edge of the base channel. If that trend line does not provide resistance, then that shall be first warning that price may bounce a lot higher as per the scenario presented with the daily bull and hourly bull wave counts above.

The cyan lines are copied over from the daily chart. The lower cyan line was about where price found some support before breaking through. It may now be about where some resistance should be seen for any upwards corrections.

There are now seven first and second wave corrections within this wave count. The middle of the third wave is very close and may pass tomorrow. Thereafter, a series of small brief shallow fourth wave corrections should unfold along the way down. They should all be over quickly and should not show up on the daily chart as any green candlesticks or doji.

When micro wave 4 arrives, then it may not move into micro wave 1 price territory above 1,979.05.

This wave count expects further downwards movement and may also expect some further increase in downwards momentum. MACD does show some increase in downwards momentum, but it is still not as strong as the middle of a third wave should be.

Warning: If targets are wrong, they will be too high. Extra targets provided should be used, if price keeps falling through the first targets.



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

Again, price falls on an increase in volume. The volume profile supports the bear wave count consistently.

The next line to offer support is about 1,870. Classic technical analysis would most likely expect a bounce about there.

ADX is increasing as is ATR. Both are in agreement that the market is trending, which is now very clear by price action.

ADX is still below 20. This trend is still young.

RSI is still not oversold. If the market is trending, RSI can remain extreme for a while at the daily chart level. But any divergence once it reaches oversold should be taken as a strong indication of an end (short or mid term) to downwards movement. During the strong fall in August 2015, on this chart RSI reached oversold on 21st August, yet price fell a further 100 points to the low on 24th August. At the low on 24th August, there was no divergence between price and RSI, so it is not always seen. RSI is often an advance warning of an end to the trend (short to mid term) and divergence between price and RSI is an even stronger warning.

At today’s close, there is no warning from RSI that downwards movement should end here or soon.

Stochastics is oversold, but this oscillator may remain extreme for reasonable periods of time in a trending market. At this stage, it shows no divergence with price.


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 Transportation, Nasdaq and I’ll add the Russell 2000 index. Major swing lows are noted below. So far the Industrials, Transportation 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.

S&P500: 1,821.61
Nasdaq: 4,117.84
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 10:02 p.m. EST.