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Price moved lower as the preferred hourly Elliott wave count expected.

Summary: The middle of a big third wave should be approaching. The wave count expects a further increase in momentum. This view has a higher probability than the alternate which expects a bounce here. A new high above 1,901.44 would indicate a multi day bounce has arrived. It may find resistance at the cyan line on the daily chart and may not move above 1,993.26.

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).

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 broke through support at the cyan trend line which is drawn from the August lows to September lows. This cyan line may now provide resistance. It is copied over to hourly charts.


S&P 500 hourly 2015
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At this stage, the bull and bear wave counts are essentially the same at the hourly chart level. Commentary will be with the bear wave count.



S&P 500 daily bear 2015
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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) today shows a further increase in downwards momentum. It is now just slightly stronger than the end of intermediate wave (1) (the August 2015 low off to the left of this chart). A further increase should be expected. This supports the first hourly chart below.


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

So far all the corrections along the way down are zigzags. None of subminuette wave ii, micro wave 2, submicro wave (2), minuscule wave 2 or now nano wave ii can be seen as anything other than single or double zigzags. This supports this first hourly wave count; they all look like second wave corrections.

Nano wave ii may not move beyond the start of nano wave i above 1,901.44.

The violet channel is an acceleration channel about this middle of this third wave. Draw the first trend line from the end of micro wave 1 to the last low, then place a parallel copy on the high of micro wave 2. Upwards corrections should find resistance at the upper edge of this channel. This perfectly shows where Wednesday’s bounce ended.

If that trend line is breached, then the cyan line copied over from the daily chart should provide resistance.

The target for minuette wave (iii) remains the same. At 1,655 it would reach 4.236 the length of minuette wave (i).


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

What if the middle of the third wave is over?

Minuette wave (iii) would be 5.95 points longer than 2.618 the length of minuette wave (i).

Ratios within minuette wave (iii) are: subminuette wave iii is 15.45 points longer than 1.618 the length of subminuette wave (i) (this is just less than 10% the length of subminuette wave iii, so I consider it an acceptable ratio, just), and subminuette wave v is just 3.07 points short of equality in length with subminuette wave i.

There is inadequate alternation at all wave degrees for this wave count which substantially reduces its probability:

– Subminuette wave ii was a shallow 0.35 zigzag; subminuette wave iv is a more shallow 0.26 zigzag.

– Micro wave 2 was a shallow 0.27 zigzag; micro wave 4 was a still shallow 0.49 zigzag.

– Submicro wave (2) was a deep 0.61 zigzag; submicro wave (4) was a deep 0.64 zigzag.

Minuette wave (ii) lasted 10 days. When minuette wave (iv) turns up it should last a Fibonacci 5 or 8 days in total. It may not move into minuette wave (i) price territory above 1,993.26.

This wave count requires a new high above 1,901.44 for confirmation.

Within the early stage of minuette wave (iv), no second wave correction may move beyond its start below 1,812.29 tomorrow.

On balance this wave count is a possibility, but the probability is lower than the first hourly bear wave count. It is the complete lack of alternation in structure between three sets second and fourth waves which substantially reduce the probability of this wave count.



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

The strong hammer candlestick for today’s downwards session is concerning.

I have looked back at the last large bear market of 2007 – 2009 and bull market corrections from 2009 to 2014. During the bear market there were several hammer candlestick patterns which were followed by only one or two upwards days; they were resolved quickly and did not indicate a major trend change. Occasionally hammers show up and are followed by a downwards day. Examples are on 20th February, 2009, 3rd August, 2011, and 8th May, 2012. There may be others. I also noticed hammer candlestick patterns at the ends of intermediate degree waves. Sometimes this pattern does indicate a major trend change.

Hammer candlestick patterns are warnings; they are not definitive. They often work but not always. This pattern should be weight up with other technical evidence.

Today’s session again comes with stronger volume. The volume profile remains consistently bearish.

ADX and ATR remain in agreement. The market is definitely trending. Expect corrections to find resistance at the 9 day EMA.

On Balance Volume bounced off the blue line again. It has come to sit on a new green line. If it bounces up from here, then the blue line should provide resistance and help to hold down price.

There is weak slight bullish divergence between today’s low in price and RSI which failed to make a corresponding new low. This supports the idea of a small bounce about here.

There is clearer divergence between price and Stochastics today which supports the idea of a small bounce about here.


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

Short term VIX divergence is often a reliable indicator of corrections. There is no divergence between price and VIX today. This supports the main hourly Elliott wave count.


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

There is no divergence between price and the AD line. The fall in price is supported by breadth. This supports the main Elliott wave hourly 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 @ 09:47 p.m. EST.