Select Page

Upwards movement was allowed for as one possibility within this bounce.

Overall, this bounce is unfolding as expected.

Summary: The bounce looks like a second wave double zigzag which is almost complete. If it ends with one more upwards day on Monday, it would total a Fibonacci eight sessions. Expect price to find resistance and end at the cyan trend line on the daily chart. However, I am concerned that Friday’s strong upwards day was well supported by volume. That concern would be alleviated if another upwards day comes on light volume, but for the short term it strongly indicates that Monday should see higher prices.

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. It is now in its second month at this stage and may not be able to complete in just one more. It may be longer in duration, perhaps a Fibonacci five months. That would still give a combination the right look at higher time frames.

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).

This daily chart and the hourly chart below both label minor wave 3 as complete. It is also possible that the degree of labelling within minor wave 3 could be moved down one degree, because only minute wave i within it may be complete. The invalidation point reflects this. No second wave correction may move beyond its start above 2,081.56 within minor wave 3. If this bounce is minor wave 4, then it may not move into minor wave 1 price territory above 1,993.26.

Price broke through support at the cyan trend line which is drawn from the August lows to September lows. This line is no longer providing resistance. The next line to offer resistance may be the downwards sloping cyan line.


S&P 500 hourly 2015
Click chart to enlarge.

At this stage, the corrective structure which has the best fit is a double zigzag. This movement now has a clear three wave look to it on the daily chart.

If this is a fourth wave correction, then the least likely structure for it would be a zigzag or zigzag multiple. That would not provide adequate alternation with the second wave zigzag.

However, alternation is a guideline, not a rule, and it is not always seen.

The probability that a fourth wave is unfolding has reduced. The probability that this bounce is a second wave has increased.



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.

Downwards movement so far within January still looks like a third wave. This third wave for intermediate wave (3) still has a long way to go. It has to move far enough below the price territory of intermediate wave (1), which has its extreme at 1,867.01, to allow room for a following fourth wave correction to unfold which must remain below intermediate wave (1) price territory.

Intermediate wave (1) subdivides as a five wave structure with a slightly truncated fifth wave.

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.

If this correction exhibits a Fibonacci number, it would most likely complete in a Fibonacci eight or thirteen sessions total. So far it has lasted seven sessions.

I have just one structure today at the hourly chart level for this correction, but it may still be either a fourth wave or a second wave.


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

If this correction is a second wave, then it would most likely be a single or double zigzag. Because the first wave up subdivides best as a three, a zigzag, then minuette wave (ii) may be unfolding as a double zigzag.

Double zigzags normally have relatively shallow X waves that do not make new price extremes beyond the start of the first zigzag labelled here subminuette wave w.

Sideways movement ended and was followed by upwards movement; subminuette wave x was already complete as an expanded flat.

Within the second zigzag of subminuette wave y, the triangle may have been a barrier triangle for micro wave B.

Micro wave C may find resistance at the cyan trend line which is copied over today to the hourly chart. This is about 1,950, where price should also find resistance at a horizontal trend line. This target would expect to see no Fibonacci ratio between micro waves A and C.

Minuette wave (ii) may not move beyond the start of minuette wave (i) above 2,081.56.

No second wave correction may move beyond the start of its first wave below 1,891.28 within micro wave C. If this wave count unfolds as expected, then after some more upwards movement a subsequent low below 1,891.28 would confirm a trend change. At that stage, downwards movement could not be a second wave correction within the last impulse up, so the last wave up would have to be complete.

Draw a parallel channel about this correction as shown. When this orange channel is clearly breached by downwards movement, that shall provide trend channel confirmation of a trend change.



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

It is very concerning today that Friday’s strong upwards move in price comes with strong volume to support it. If this is a correction against a bear trend, then it should not be supported by volume. This is the most bullish indication from this market since the all time high back in May 2015. Friday’s volume was the highest volume for any upwards day since that date. The rise in price has been supported by volume for two days in a row.

The volume profile short term looks bullish.

On its own, this is not enough to indicate an end to this bear market, but it does give concern. That concern would be alleviated if Monday or Tuesday continue with upwards movement on lighter volume.

ADX does not indicate there is an upwards trend and it has not indicated a trend change. The -DX line remains above the +DX line.

ATR agrees; it too is flat which indicates no clear trend.

On Balance Volume has come up to touch its green trend line. If this line is clearly breached, that shall be further bullish indication.

RSI is neutral. There is plenty of room for this market to fall again, but there is also plenty of room for price to rise.

Stochastics is now reaching overbought. For a range bound market, this would indicate an end to upwards movement either here or very soon.


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 @ 03:37 a.m. EST on 30th January, 2016.