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Sideways movement fits both Elliott wave hourly wave counts and does not provide clarity.

The upper price point to differentiate the two ideas may be moved lower.

Summary: The trend is down. The only question still today is: are we going to see a deeper bounce here or will the middle of a big third wave turn up very soon? A new high now above 1,901.44 would indicate a bounce is underway which may end about 1,948 – 1,953, or may just meander sideways for a few days. A new low below 1,857.83 at this stage would be very bearish. If that happens, look out for surprises to the downside, not just in price but market behaviour overall.

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, or combination.

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.

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 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 1,901.44. 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. It may end when price finds resistance at the upper cyan line.

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 hourly 2015
Click chart to enlarge.

This hourly chart follows on directly from the labelling of the 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) did not breach a base channel drawn about minuette waves (i) and (ii) (no longer shown for reasons of clarity in the chart).

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

4. 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 1,901.44 for confirmation.

Minute wave iv may be unfolding as an expanded flat correction, which are very common structures. I have checked the subdivisions of minuette wave (b) on the five and one minute chart and this movement is ambiguous. It may subdivide as either a three wave zigzag or a five wave impulse. This wave count sees it as a zigzag. The next hourly chart sees it as an impulse. Both possibilities must be considered.

Minuette wave (b) is a 1.38 length of minuette wave (a), at the maximum normal range of a B wave within a flat correction. At 1,948 minuette wave (c) would reach 1.618 the length of minuette wave (a). That price point is reasonably close to the 0.382 Fibonacci ratio of minute wave iii at 1,953 giving a 5 point target zone.

If minute wave iv is a shallow flat, then it would exhibit perfect alternation with the deep zigzag of minute wave ii.

Minute wave iv may also unfold as a triangle or combination. I am labelling it as a flat because that is the most likely structure, but a triangle or combination would also be shallow and also provide perfect alternation with minute wave ii.

If this wave count is correct, then as minute wave iv continues the labelling within it may change. It is impossible to tell which of several structural possibilities minute wave iv may complete as, so it is impossible to tell with accuracy the pathway that price may take for this correction. The only thing which is clear is that it would still be incomplete.

Minute wave ii lasted 10 days. At this stage of a big third wave, I would expect minute iv to possibly be more brief. A Fibonacci five or eight days in total may be expected; so far it would have lasted two days.

The target also coincides nicely with the upper cyan line copied over from the daily chart. Price should find strong resistance there.

No second wave correction may move beyond its start below 1,857.83 within minuette wave (c).



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.

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.

Intermediate wave (3) still has to show an increase in downwards momentum. Momentum for intermediate wave (3) is increasing, but it should be stronger than momentum within intermediate wave (1) (the August 2014 low, now off to the left of this chart).


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.

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

This wave count still requires a further increase in downwards momentum.

The lower cyan line is copied over from the daily chart. This line may provide resistance now that price has breached it.

The best fit channel so far is working well. Downwards movement for Friday found support there. Upwards corrections may find resistance at the upper edge (if the cyan line is breached).

Labelling shows an expectation of the best fit channel to be breached. This may happen, but it does not have to. In the first instance, look for price to find support at the lower line. If that line is breached, then look for corrections to then find resistance. This is a best fit channel, not a base channel, so it should not be expected to behave as a base channel behaves.

Another first and second wave may be complete. There would now be a series of eight first and second waves up to intermediate degree. This wave count expects to see explosive downwards movement beginning this week and into next week.

When third waves extend they extend in both price and time. The movements within an extended third wave are stretched. Low degree corrections within them will show up at higher time frames. At the start of an extended third wave there is necessarily a series of first and second waves. This often convinces us that there is no third wave, that something else must be happening, and it does that right before the third wave takes off strongly. The number of first and second waves on this chart does not reduce the probability of this wave count at all.



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

Note: This analysis is updated at 7:12pm EST after StockCharts volume data is finalised.

Tuesdays session saw a red candlestick on decreased volume. A new low was not made and the candlestick has a small real body with about equal upper and lower shadows. Tuesdays session was a balance between bulls and bears, with the bears slightly winning. Because no new low was made and the session represents overall a small corrective movement the lack of volume is not concerning.

Overall the volume profile continues to be consistently bearish.

ADX and ATR are in agreement and indicate there is a trend. The trend is down. Expect corrections to find resistance at the 9 day EMA.

On Balance Volume has come up to touch the cyan line again. OBV works very well with trend lines. It would be reasonably likely that this line may help to stop the rise in price. This is a short term bearish signal.

In a trending market, particularly a big third wave, RSI may reach extreme oversold and stay there while price continues to fall. I will be looking for divergence between price and RSI to indicate a correction. There was slight divergence between price and RSI at Friday’s low at the end of last week. Today’s sideways move may have resolved that; slight divergence can be resolved quickly in a big bear market.

Stochastics may also remain extreme for reasonable periods of time. There is no divergence with Stochastics and price today.


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

The negative divergence (red lines) during the last rise in price to the last major high of 3rd November, 2015, was strong and a good bearish signal for the following fall in price. As price rose to 3rd November, it came on declining breadth.

There is now double positive divergence between price and the McClellan Oscillator. The new low on 15th January came on weaker breadth than the low three days earlier on the 13th (pink lines), and was also weaker than a prior swing low of 14th December (green lines). This may be a warning that the scenario in the first Elliott wave hourly chart may be correct, that price may be about to move higher for a bounce which may last another few days.


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 @ 05:31 p.m. EST.