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Price remains below the invalidation point on the preferred hourly chart, so that Elliott wave count still has a higher probability.

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, which may not move above 1,993.26. Price is finding resistance right at the cyan trend line at the end of Thursday’s session.

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. When and if these two ideas diverge, I will separate them out into two separate charts. For now I will keep the number of charts to a minimum.

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 is now providing resistance for a throwback. This line is copied carefully 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 slightly stronger than the strongest part of intermediate wave (1) (its third wave is the August low, now off to the left of this chart; intermediate wave (1) ended with a slightly truncated fifth wave). 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 acceleration channel about micro wave 3 is not working to show where price is finding resistance. Sometimes channels just don’t work well for the S&P. Because it was not working, I will redraw the channel as a best fit.

The cyan line is working well to show where price found resistance for Thursday’s high. That line should continue to hold, if this wave count is correct.

Upwards movement for nano wave ii subdivides perfectly as yet another zigzag and looks like a typically corrective structure. There are now nine first and second waves complete for this wave count. This wave count expects to see explosive downwards movement. A new low below 1,812.29 would increase the probability of this wave count but will not now provide full confidence.


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. At this stage, I would expect minuette wave (iv) to be more brief than minuette wave (ii) unless it turns out to be a time consuming and shallow triangle.

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

Minuette wave (ii) was a deep zigzag. Minuette wave (iv) should be expected to be a shallow combination, flat or triangle. A flat would be most likely. It should exhibit alternation with minuette wave (ii).

The most likely target for minuette wave (iv) would be the 0.382 Fibonacci ratio of minuette wave (iii) at 1,915.

At this stage, within minuette wave (iv), the first wave up for subminuette wave a may be complete. Because this subdivides as a three wave structure, it means subminuette wave b may make a new low below subminuette wave a at 1,812.29 as in an expanded flat, running triangle or an X wave within a combination.

This wave count would now expect to see a three wave structure downwards. There is no lower invalidation point at this stage.

The main wave count expects to see a five wave structure downwards. It is only structure (is it a three or a five?) and momentum which differentiate these two wave counts today.

If tomorrow moves price lower on light volume with weak momentum and it subdivides as a three, this wave count should be taken very seriously. However, if tomorrow moves price lower on increased volume with strong momentum, then this wave count may be discarded.



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

A small green candlestick comes again with lighter volume. The volume profile remains consistently bearish. Price was not supported by volume.

The bulls put up a good fight today, but it is unconvincing. They moved price higher but could not keep price at the day’s highs. The bears managed to push price back down to leave a long upper wick on the daily candlestick, with a small real body. This candlestick is not convincingly bullish. But then, it is only one candlestick.

The green candlestick for Thursday may have resolved the hammer candlestick for Wednesday. Plenty of examples of a hammer in a downtrend followed by only one or two weak upwards days can be found.

ADX and ATR still agree. There is a trend. The trend is down. Expect upwards corrections along the way to find resistance at the 9 day EMA.

On Balance Volume has turned upwards. Any further rise in price may be contained by OBV, if it comes to touch the cyan trend line on OBV.

RSI and Stochastics can remain extreme for some time (particularly Stochastics) during a trending market. Divergence is what these two are most useful for at the daily chart level at this time. Today’s upwards day may have resolved RSI slight divergence, or it may need a few more days of an upwards correction to do that.


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.

These lows must be breached by a daily close below each point. So far the S&P has made a new low below 1,821.61, but it has not closed below 1,821.61.

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 @ 07:41 p.m. EST.