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The first target for a short term interruption to the trend at 1,919 was met on Friday.

Summary: This is not the end of the third wave yet although the short term target at 1,919 was met. The lower second target at 1,818 will be used. Downwards movement should continue and should show an increase in momentum next week. Use the hourly bear wave count while price remains below the upper edge of the channel on the hourly charts. If price breaks above that trend line, then use the hourly bull wave count.

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 again 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 1,986.02 early next week, 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) an ending expanding diagonal.

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 moved lower and again may be seen as complete.

Within the leading diagonal, minute wave iii was just 0.39 points longer than 1.618 the length of minute wave i and minute wave v would now be just 0.36 points longer than minute wave iii.

If price breaks above the green channel which contains this zigzag on Monday, then this wave count should immediately be taken very seriously. That may be the earliest indication that upwards movement will continue for several days, maybe about two weeks, for a very deep second wave correction.

Minor wave 2 should be deeper than the 0.618 Fibonacci ratio of minor wave 1. It may not move beyond the start of minor wave 1 above 2,104.27.

If price continues to fall on Monday and Tuesday, this idea will be discarded.



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.

At 1,850 minor wave 3 would reach 2.618 the length of minor wave 1. This first target is removed now because it does not fit with the new target for minuette wave (iii). 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.

Because downwards movement over the last seven days is strong and supported by volume, it looks most likely that a third wave down is unfolding. Price has reached the first target and the structure for minuette wave (iii) is incomplete, so 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).

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 1,993.26.


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

I have worked with different ways to label this unfolding impulse and it is my judgement that this labelling has the best most typical look. It is not the only way to see this impulse so far though; the labelling may change as more structure unfolds.

What is clear is momentum is only slightly increasing so far within subminuette wave iii, which has yet to breach the base channel. Third waves most commonly breach base channels drawn about the first and second wave of the same degree. I would expect the base channel to be breached because this is the middle of a big third wave at intermediate degree.

At their ends, subminuette wave iii and minuette wave (iii) should show a clear and strong increase in downwards momentum beyond their respective first waves. So far momentum is only slightly increasing, so I would expect a further increase, if this wave count is correct.

Along the way down the upper edge of the base channel should provide resistance. This trend line is the line which differentiates this idea and the idea presented for the first hourly chart. If this line holds, then this bear hourly wave count should be preferred.

Micro wave 1 is moved a little higher in this new labelling. Micro wave 4 may not move into micro wave 1 price territory above 1,986.02, but it should not get anywhere near that point. The upper edge of the base channel should provide strong resistance.

Subminuette wave ii shows on the daily chart as a small green candlestick. Subminuette wave iv may also show on the daily chart (but it does not have to). The next very short lived interruption to the trend that may be large enough to possibly show up on the daily chart may be subminuette wave iv.

Subminuette wave iii would reach 1.618 the length of subminuette wave i at 1,818.

Again, if targets are wrong, they may not be low enough. Expect surprises to be to the downside for this wave count.



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

From the last swing high of 29th December, the fall in price is supported by volume. The volume profile is consistently bearish.

Thursday’s strong red candlestick with only a small lower shadow is very bearish. Friday’s red candlestick with a long upper wick is also very bearish; the bulls tried to push price higher during the session but were overwhelmed by the bears who managed to push price lower to close near the day’s lows.

Price sliced easily through the lower sloping cyan trend line. This line may offer some resistance to any larger upwards corrections.

Both ADX an ATR are clear. There is a trend and it is down.

Along the way down upwards corrections may find resistance at the 9 day EMA.

On Balance Volume is consistently bearish. The next possible line of support for OBV is the new green line which is some distance away.

RSI should be watched closely to indicate when this downwards move may be interrupted by a correction. It is just beginning to reach oversold at the end of the week. During the last big fall in August 2015, RSI reached oversold on the 21st of August, yet price continued to fall a little more than a further 100 points to reach the low on the following session of 24th August. This time I would take RSI beginning to reach into oversold as a small warning and watch it carefully, but price could yet fall a lot further. Any divergence between price and RSI would be a strong signal that the fall should temporarily cease. There is no divergence at the end of this week.

Stochastics is oversold but this oscillator may remain extreme for long periods of time in a trending market. Stochastics shows no divergence, so is not indicating a possible interruption to the trend at this time.

This classic technical analysis strongly supports the bear Elliott wave count.


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.

The lows below are from October 2014. These lows were the last secondary correction within the primary trend which was the bull market from 2009.

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 @ 01:13 a.m. EST on 9th January, 2016.