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On the preferred hourly chart, upwards movement has breached the base channel but remains below the invalidation point.

Summary: The trend is still down. Upwards movements are corrections against the trend. While price remains below 1,949.95 the preferred idea will see a huge third wave unfolding downwards, still to see an increase in momentum to a target at 1,655 in the mid term. A break above 1,949.95 would expect a Dead Cat Bounce is underway to last 5 or 8 days total and reach up to about 1,993.26. This has a slightly increased probability today, but it is still lower than the idea of a big third wave down. Look out for surprises in this market to be to the downside!

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 1,693 intermediate wave (3) would reach 4.236 the length of intermediate wave (1).

The middle may have passed a few days ago within intermediate wave (3), but this has a lower probability than the scenario presented with the bear wave count. This idea is presented to consider all possibilities.

It is possible that minute wave iii is a complete five wave impulse. This has a low probability and should only be used if it is confirmed with a new high above 1,949.45. There would be no Fibonacci ratio between minute waves i and iii.

Minute wave iv may not move into minute wave i price territory above 1,993.26.

Price is finding support about the lower cyan trend line which is drawn from the October 2014 lows to the August 2015 lows.


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. All the subwaves must subdivide as zigzags within an ending diagonal. This fifth wave does not look like a zigzag but instead subdivides as and looks like an impulse.

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.

Minute wave iii may be over as an impulse. Minute wave iii does show an increase in momentum beyond that seen for minute wave i on the daily chart.

On the hourly chart, there are a few problems with this wave count which reduce its probability:

1. There is no alternation in either structure or depth between minuette waves (ii) and (iv), both are shallow zigzags.

2. Minuette wave (iii) shows only a slight increase in momentum on the hourly chart beyond that seen for minuette wave (i).

3. Minuette wave (iii) did not breach a base channel drawn about minuette waves (i) and (ii) (no longer shown for reasons of clarity in the chart).

4. There are no Fibonacci ratios between minuette waves (i), (iii) and (v).

5. There is no Fibonacci ratio between minute waves i and iii.

It is technically possible that this idea is correct. Alternation is a guideline, not a rule, and momentum is a guide and not a rule. This idea is presented to consider all possibilities, so that we are prepared for the unexpected.

This idea requires a new high above 1,949.45 for confirmation.

If that happens, then the upwards movement may be minute wave iv. It should last about two to three weeks. It should exhibit alternation with minute wave ii. It should be shallow, so most likely ending about the 0.382 Fibonacci ratio at 1,958. It would most likely a flat, combination or triangle.

If it is an expanded flat or running triangle, then it may include a new price extreme beyond its start. There is no lower invalidation point for this reason for this wave count.

So far, if this upwards move is a longer lasting correction for minute wave iv, then the first wave within it may be a complete three. That would indicate that minute wave iv may be a flat, triangle or combination. These are the most likely structures for a fourth wave. All may include a new low below the start of minuette wave (a) at 1,878.93.



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.

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.

The subdivisions on the hourly chart for both wave counts are the same, but here the degree of labelling within the impulse of micro wave 1 is moved down one degree.

Instead of the end subminuette wave iii this may be only another first and second wave complete.

Within micro wave 3, no second wave correction may move beyond the start of its first wave above 1,949.95.

At 1,655 minuette wave (iii) would reach 4.236 the length of minuette wave (i).

This wave count requires a further increase in downwards momentum.

The lower cyan line is copied over from the daily chart. Price is finding support and bouncing up from that line. This may be yet another second wave correction.

Upwards movement breached the base channel today, which was drawn on this hourly bear chart yesterday. The channel is removed as it may not be working, but the breach must be taken as the earliest warning that this wave count may be wrong and the scenario on the first hourly chart may be right.

Sometimes lower degree second wave corrections do breach base channels drawn about first and second waves one or more degrees higher. This happens sometimes, but not very often. Base channels should be used as a guide. They do not invalidate a wave count when they are breached; they are a warning.

If the base channel is not working here, then the channel should be redrawn. This best fit channel today is drawn from the start of minuette wave (iii) to sit along the early corrections within subminuette wave i at the beginning of this movement. A parallel copy is placed lower down to contain all the movement. If price gets that high, it may find resistance at the upper edge of that channel. The invalidation point will not be moved.

Third waves show their subdivisions clearly on the daily chart when they are very long extensions. The middle of a big third wave showed its corrections at micro degree in the prior bull market. When waves extend in price they necessarily also extend in time and the lower degree waves become more time consuming. I have no problem with submicro wave (2) showing on this daily chart. I would expect to see a great many subdivisions on the daily chart if intermediate wave (3) is a big extended wave.

This wave count expects price is not yet near the strongest part of this third wave down. It expects a huge downwards movement over the next couple of weeks. These waves are not exhibiting Fibonacci durations, so an expectation of when it may end would be a vague guess only. I am not prepared to do that. The trend is down. Expect surprises to the downside.



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

Note: This section of the analysis is updated 11:59 p.m. EST.

An upwards day comes with slightly higher volume. The weak bullish warnings from divergence on On Balance Volume and Stochastics has seen price bounce up from about the lower cyan trend line (on Elliott wave daily charts, not this chart). The strong volume for today indicates it is entirely possible that price may yet continue higher.

On Balance Volume is touching the lower cyan trend line. It normally works well with trend lines, so some resistance may be very likely here. The cyan line on OBV is today slightly adjusted to touch as many points as possible.

ADX and ATR agree that there is still a trend and it is down.

RSI has returned from oversold but is not yet neutral. There is some bearish divergence between price and RSI from today’s high and the high three days ago. Price has made a lower high, but RSI has made a higher high. This indicates some weakness in today’s upwards movement. It is a weak signal though.

I have added another purple horizontal line which may provide resistance, if this bounce continues higher. It is about 1,950 – 1,952.


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 @ 04:43 p.m. EST.