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Downwards movement was expected.

The short term target at 1,800 was not met, but price has moved lower.

Summary: In the short term, we may see a bounce here to again test the lower cyan trend line. A new high above 1,881.6 would confirm that a bounce is underway. It is still possible that the middle of a big third wave could turn up at any stage; expect surprises to be to the downside in this market. The trend is down.

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. This first daily chart looks at a flat correction.

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.

Within the new downwards wave of primary wave C, intermediate waves (1), (2) and now (3) may be complete. Intermediate wave (4) would probably find resistance at the lower cyan trend line. This would see it end within the price territory of the fourth wave of one lesser degree.

Intermediate wave (2) was a deep double zigzag. Intermediate wave (4) may exhibit alternation, so it may be shallow. It would most likely be a flat, combination or triangle.

The idea of a flat correction for cycle wave IV has the best look for the bull wave count. The structure would be nearly complete and at the monthly level cycle wave IV would be relatively in proportion to cycle wave II.


S&P 500 hourly 2015
Click chart to enlarge.

Intermediate wave (3) is likely now to be over for the bull wave count. If intermediate wave (4) has begun, then within it no second wave correction may move beyond the start of its first wave. A new wave at intermediate degree should begin with a clear five up at the hourly chart level.


S&P 500 daily 2015
Click chart to enlarge.

This idea is technically possible, but it does not have the right look. It is presented only to consider all possibilities.

If cycle wave IV is a combination, then the first structure may have been a flat correction. But within primary wave W, the type of flat is a regular flat because intermediate wave (B) is less than 105% of intermediate wave (A). Regular flats are sideways movements. Their C waves normally are about even in length with their A waves and normally end only a little beyond the end of the A wave. This possible regular flat has a C wave which ends well beyond the end of the A wave, which gives this possible flat correction a very atypical look.

If cycle wave IV is a combination, then the first structure must be seen as a flat, despite its problems. The second structure of primary wave Y can only be seen as a zigzag because it does not meet the rules for a flat correction.

If cycle wave IV is a combination, then it would be complete. The combination would be a flat – X – zigzag.

Within the new bull market of cycle wave V, no second wave correction may move beyond the start of its first wave below 1,810.10.

I do not have any confidence in this wave count. It should only be used if price confirms it by invalidating all other options above 2,053.21.



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. Each successive second wave correction of a lower degree has a shorter duration which gives the wave count the right look, so far.

Within minuette wave (iii), no second wave correction may move beyond the start of its first wave above 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.

I am swapping the hourly bear wave counts around today. Because there is divergence at the new low for Thursday with price and MACD, this wave count now has a better fit. It is likely now that subminuette wave i has ended at Thursday’s low as a complete five wave impulse.

If submineutte wave ii corrects up to the 0.618 Fibonacci ratio of submineutte wave i at 1,895, then it may find resistance at the lower cyan line which is copied over from the daily chart. Draw this line from the lows of October 2014 to August 2015.

Minuette wave (ii) lasted a Fibonacci eight days. Subminuette wave ii should be quicker. The expectation is of a Fibonacci three or five days, with five more likely.

The target for minuette wave (iii) remains the same. At 1,511 it would reach 1.618 the length of minuette wave (i).

In the short term, a new high above 1,881.6 would invalidate the alternate below and provide price confirmation that another Dead Cat Bounce is underway.


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

It is still possible that there is a series of first and second waves complete. This alternate has a lower probability, but it must be understood that it is possible. It expects to see very strong downwards movement imminently.

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

Within micro wave 3, submicro wave (2) may not move beyond the start of submicro wave (1) above 1,881.6.

If tomorrow sees a new low with strong downwards movement, then this wave count must be seriously considered.



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

Again, price moved lower on increased volume. The volume profile remains overall bearish.

The long lower shadow of Thursday’s candlestick indicates that the bears could not hold price close to the days lows; the bulls managed to rally. This is short term bullish.

ADX is still increasing and indicates there is a downwards trend in place. ATR disagrees as it is flat, which is more common for a consolidating market.

On Balance Volume has broken below the cyan line. This is a reasonable bearish indication. OBV tends to be a leading indicator and works well with trend lines. This break today means that the alternate idea for the bear wave count which expects very strong downwards movement as imminent must be seriously considered.

RSI shows no short term divergence with price (from day to day) nor does Stochastics. Neither indicate a trend change at this time. Stochastics moving into oversold is not an indication of a trend change; during a trending market this indicator may remain extreme for periods of time.


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 @ 12:51 a.m. EST on 12th February, 2016.