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Strong downwards movement was expected for Wednesday.

Price began by moving higher and then completed the session by moving lower and printing a red candlestick.

Summary: The trend is still down. A very strong third wave is most likely still building. Price should move lower tomorrow. Movement may be a fifth wave to end a small impulse or it may be the start of the middle of a big third wave. The mid term target for the preferred bear wave count is still 1,428.

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. The target for intermediate wave (3) again changed today. With minute wave iv within minor wave 5 moving higher, the one point target zone calculated yesterday is no longer accurate. At 1,800 minute wave v would reach 1.618 the length of minute wave i. This would still see minor wave 5 move below the end of minor wave 3 and avoid a truncation. This target makes sense for this bull wave count, but it does not for the bear.

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. Within minor wave 5, no second wave correction may move beyond its start above 1,947.2.

Price has now broken below the lower cyan line. It looks like a downwards breakout is underway; the next wave down is unfolding. The lower cyan trend line today has provided resistance for a throwback.


S&P 500 hourly 2015
Click chart to enlarge.

There are two ways to see the downwards movement from the high of minor wave 4. This may be an almost complete impulse as labelled here. It may also be two first and second waves as per the labelling on the hourly bear wave count today.

Both ideas work for this movement for both bull and bear wave counts.

Minute wave iv moved higher to start Wednesday’s session. The structure now subdivides neatly as a double zigzag. There is alternation between the deep 0.60 expanded flat of minute wave ii and the deep 0.54 double zigzag of minute wave iv; they are quite different structures even if they are of a similar depth.

Because minute wave iv breached the channel, which was drawn yesterday using Elliott’s first technique, the channel must be redrawn using the second technique. Draw the first trend line from the highs of minute waves ii to iv, then place a parallel copy on the low of minute wave iii. The lower edge of this channel may provide support and may be where minute wave v ends.

There is no Fibonacci ratio between minute waves i and iii. This makes it more likely that minute wave v would exhibit a Fibonacci ratio to either of minute waves i or iii. The most common is equality in length with the first wave, but in this case that would see minor wave 5 truncated. At 1,800 minute wave v would reach 1.618 the length of minute wave i.



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.

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), minuette wave (ii) lasted a Fibonacci 8 sessions, and subminuette wave ii lasted just two sessions. Each successive second wave correction of a lower degree has a shorter duration which gives the wave count the right look, so far.

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.

Subminuette waves i and ii may be complete within minuette wave (iii).

Subminuette wave ii was a deep 0.60 expanded flat lasting just 11 hours.

Micro wave 2 may have continued higher during Wednesday’s session. It now has lasted 12 hours, one more than subminuette wave ii one degree higher. The pattern of each successive second wave correction being quicker is no longer perfect, but the proportions are still very good and the wave count still has the right look at the daily chart level.

Micro wave 2 may not move beyond the start of micro wave 1 above 1,927.35. The orange channel is an adjusted base channel about subminuette waves i and ii. The upper edge should provide strong resistance for any more corrections. A lower degree second wave should not breach a base channel drawn about a first and second wave one or more degrees higher.

At 1,797 subminuette wave iii would reach 2.618 the length of subminuette wave i.

Subminuette wave i lasted one session and subminuette wave ii lasted two sessions. If subminuette wave iii is extended in price, it would also extend in time. A reasonable expectation would be for it to last a total Fibonacci 8 sessions. So far it has lasted 4.

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

Minuette wave (i) lasted 14 sessions, one more than a Fibonacci 13. Minuette wave (ii) lasted a Fibonacci 8 sessions. If minuette wave (iii) is extended in price, it would also be extended in time. A reasonable expectation would be for it to last a total Fibonacci 21 sessions, give or take one or two either side of this number. So far it has lasted 7 sessions.

These expectations regarding time are rough estimates only. The S&P sometimes exhibits waves which have Fibonacci numbers for how many days / sessions they last, but not always.


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

I will separate out this idea today because it is now beginning to have a better look.

Subminuette wave i may be incomplete and unfolding as a relatively short impulse. There is no Fibonacci ratio between micro waves 3 and 1 within subminuette wave i. At 1,800 micro wave 5 would reach 1.618 the length of micro wave 1. Micro wave 5 may end midway within the channel, or about the lower edge.

When micro wave 5 completes an impulse downwards, then a correction upwards should follow. The lower cyan line from the daily chart is copied over here today. Subminuette wave ii should find strong resistance at the cyan trend line, that may be where it ends.

Micro waves 2 and 4 are of a similar duration. This wave count has a better pattern in terms of duration of the corrections.

It is my judgement that this alternate and the main hourly wave counts (for the bear) have about an even probability.

The target for minuette wave (iii) is the same.



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

Today’s candlestick with a small red body completes a shooting star pattern. This comes after a small upwards trend which lasted only two days in total, but it was an upwards movement. This supports the Elliott wave count.

Volume for today’s downwards day is lighter though. The fall in price overall for the day was not supported by volume. However, the candlestick looks more corrective than impulsive, so lighter volume for today is not a serious concern. Overall, the volume profile remains mostly bearish. If today completes a small correction, then it would be expected to show lighter volume as a new high was made to end the correction.

Price may have found resistance at the red horizontal trend line about 1,875 and the 9 day EMA.

ADX is flat today indicating a possible short term correction. The trend, if it returns here, would still be down. ATR is still flat, so no trend is yet indicated. ADX and ATR are both lagging indicators as they are based upon 14 day averages.

On Balance Volume has broken below the cyan trend line. This line is not very long held, but it is reasonably shallow and has been repeatedly tested. This is a reasonable bearish indication today from OBV.

RSI is flat and not extreme. There is room for price to fall.

Stochastics is moving into oversold, but this indicator may remain extreme for periods of time during a trending market.

If the trend has not resumed as is indicated by ADX and ATR, then a range bound trading approach would now expect an upwards swing from here because price has found support and Stocastics is oversold. This approach is contrary to the Elliott wave analysis today.


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 my modified 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 @ 07:43 p.m. EST.