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A little upwards movement was expected to begin Friday’s session.

This did not happen.

Summary: Monday should see strong downwards movement. The target remains at 1,428 for the preferred bear wave count, or 1,693 for the less preferred bull wave count.

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 has come up to find resistance at the upper cyan trend line. This line goes back to 20th July, 2015, (its first anchor) and is reasonably shallow, has been repeatedly tested, and has reasonable technical significance. It should be expected to offer reasonable resistance. So far it does look like this has ended the correction.

Price has closed below the lower cyan line, but has still not broken out of the consolidation zone which has its lower edge above 1,872. A close below this point on a day with an increase in downwards volume would be a classic breakout and would provide a lot of confidence in the expectation of downwards movement.


S&P 500 hourly 2015
Click chart to enlarge.

At this stage, the corrective structure for minor wave 4 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 the correction was a fourth wave is reduced. The probability that this bounce is a second wave has increased.

Because both bull and bear wave counts see this structure in the same way on the hourly chart, further comment will be with the bear wave count.



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 (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.

The correction for minuette wave (ii) may be over totalling a Fibonacci eight sessions and finding resistance at the upper cyan trend line. A channel drawn about it (no longer shown on the daily chart but may be seen on the hourly chart below) was breached, and a throwback to that line is now also complete.

Intermediate wave (2) lasted 25 sessions (no Fibonacci number), minor wave 2 lasted 11 sessions (no Fibonacci number), minute wave ii lasted 10 sessions (no Fibonacci number) and now minuette wave (ii) may have lasted a Fibonacci 8 sessions. Each successive second wave correction of a lower degree has a shorter duration which gives the wave count the right look, so far. Subminuette wave ii may have lasted two sessions.

If subminuette wave ii continues any higher, it may not move above the start of subminuette wave i at 1,947.20.

The degree of labelling within minute wave iii may also be moved up one degree. This correction may be minute wave iv. I will wait to see how momentum behaves for the next wave down to make a final decision on which degree of labelling is correct. For now I will leave the labelling as the most likely for a second wave due to the duration and the structure of a double zigzag.

If the next wave down shows a strong increase in momentum, then it would be the middle of a big third wave.

If the next wave down shows weaker momentum than minuette wave (i), then it would be a fifth wave to end minor wave 3.


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

The channel about minuette wave (ii) is clearly breached and price turned up for a typical throwback.

Subminuette wave ii may have been a slightly unusual expanded flat correction. This resolves the problem of the upwards wave labeled micro wave C as a five wave structure yet price made a new low today below its start.

The expanded flat is unusual in that micro wave B is just over 2.4 times the length of micro wave A. The normal common length is up to 1.38 and the maximum convention is of 2 times. There is no Elliott wave rule which gives a maximum length for a B wave within a flat correction, a convention is not the same as a rule. I have seen a few expanded flats over the years with particularly long B waves. They are unusual but possible. The subdivisions all fit perfectly which is the most important point.

If subminuette wave ii is over at 1,927.35, then on the daily chart the proportions of these second waves are all forming nicely to give the wave count the right look.

Within subminuette wave iii, no second wave correction may move beyond the start of its first wave above 1,927.35.

At 1,511 minuette wave (iii) would reach 1.618 the length of minuette wave (i).

If this wave count is wrong in labelling subminuette wave ii as over, then any further upwards movement should find very strong resistance at the cyan line copied over from the daily chart. The strength of this line was reinforced with another test at the high of minuette wave (ii).



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

A reasonably strong downwards day comes with slightly lighter volume. The fall in price for Friday was not supported by volume. On its own this is not enough to doubt the Elliott wave count as overall the volume profile remains more bearish than bullish, but it is giving some mixed signals in the last seven sessions.

Price remains within a consolidation zone which has the upper limit about 1,950 and the lower limit about 1,870. As price moves sideways, overall volume is declining. There is some concern that the three strongest volume days within the consolidation are seen for upwards days, which strongly suggests an upwards breakout is more likely than downwards and is contrary to the Elliott wave counts.

A breakout of this consolidation is required for confidence in the next direction of price. A break above 1,950 or below 1,870 on a day with an increase in volume would be a classic breakout.

ADX is still flat indicating price is consolidating. ADX has not indicated a trend change, the -DX line remains above the +DX line.

ATR is also flat, agreeing with ADX that the market is consolidating.

Within this consolidating market, some more downwards movement would be expected to continue until price finds support and Stochastics reaches oversold at the same time. Stochastics is not yet oversold, so price may continue to one of the lower support lines which are about 1,857 and 1,848. However, a downwards day below 1,872 with a sharp volume increase would still indicate an end to the consolidation and a downwards breakout.


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.

I am aware that this approach is extremely conservative. Original Dow Theory has already confirmed a major trend change as both the industrials and transportation indexes have made new major lows.

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 @ 07:33 p.m. EST.