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It was expected that price may move a little lower for Friday.

This is what happened.

Summary: There will be two expectations for this bounce: either one more day up to find resistance at the upper cyan trend line, or three days up to about 1,987. When the bounce is done, then the downwards trend should resume, and it may show an increase in downwards momentum.

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) may now find resistance at the upper 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.

The first five up may now be complete. Minor wave B may correct to about 0.382 or 0.618 the length of minor wave A. It may not move below the start of minor wave A at 1,810.10.

It may be more shallow than the 0.382 ratio, if price finds support at the lower cyan trend line on the daily chart.


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 2,104.27.



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) and minor wave 2 lasted 11 sessions (no Fibonacci number). If current upwards movement is a correction for minute wave ii, then it is likely to be more brief than minor wave 2 one degree higher. A Fibonacci 8 sessions would be most likely. So far it has lasted 5.

It does not have to exhibit a Fibonacci duration (note that neither intermediate wave (2) or minor wave 2 did). On the way up, look first for price to find resistance at the upper cyan line. That line may hold and force this correction to be more shallow. If that line is breached (watch it on the hourly chart), then look for three days more upwards movement to the target.

Minute wave ii may not move beyond the start of minute wave i above 2,104.27.

The most likely structure for minute wave ii is a zigzag, and the most likely target for it is the 0.618 Fibonacci ratio of minute wave i at 1,987.


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

Minuette wave ii is most likely to subdivide as a zigzag and most likely to end about the 0.618 Fibonacci ratio of minute wave i at 1,987.

Within the zigzag, minuette wave (b) may now be complete. If it is, then within it subminuette wave c is 1.93 points short of 1.618 the length of subminuette wave a.

The green channel is drawn using Elliott’s technique for a correction. Draw the first trend line from the start of wave A to the end of wave B, then place a parallel copy on the end of wave A. If minuette wave (b) is complete, as labelled, then minuette wave (c) should find support at the lower edge of the channel. If the channel is breached before minuette wave (c) could be possibly complete, then the channel is wrong, minuette wave (b) is not over, and it would be continuing sideways or lower. If it does that, it should find strong support at the lower cyan trend line.

If this is correctly labelled, then minuette wave (c) may end mid way within the channel. First look for it to find resistance at the upper cyan trend line. If when price gets there it has made a new high above the end of minuette wave (a) at 1,930.68 and minuette wave (c) could be seen as a five wave structure, then it may possibly end there.

But if when price gets to the cyan trend line is has not made a new high above 1,930.68 and / or minuette wave (c) cannot be seen as a complete five, then expect the line to be breached and price to continue upwards to 1,987 ending on Wednesday.

When the bounce for minute wave ii is complete, then this wave count expects a third wave down at three degrees to unfold to new lows.


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

This was the main bear wave count up until two days ago. With three days of upwards movement, price is no longer behaving as expected for this wave count, so it has reduced in probability.

It is still technically possible, but less likely, that the middle of the third wave of intermediate wave (3) is imminent. Subminuette wave ii may not move beyond the start of subminuete wave i above 1,947.2.

Price absolutely must find resistance at the upper cyan line. This second wave correction should end here. It could do it with one last upwards day to make a slight new high above 1,930.68 and end at the upper cyan trend line. Please remain aware of the implications of this wave count which expects the S&P is on the verge of a huge fast downwards movement. This is possible. This is what a surprise to the downside may look like. A new low on strong movement would be very strong confirmation of this wave count.


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

I have previously noted this idea in the text and now it is time to chart it, so that the implications are clear.

Within the downwards impulse unfolding, it may be that intermediate waves (1) and (2) are complete and now minor waves 1, 2 and 3 may also be complete within intermediate wave (3).

This wave count expects minor wave 5 to be extended within intermediate wave (3). Minor wave 5 should also show a strong increase in momentum, so that at its end intermediate wave (3) has clearly stronger momentum than intermediate wave (1).

There is no difference to the target for intermediate wave (3). This wave count makes a difference to the invalidation point. Minor wave 4 may not move into minor wave 1 price territory above 2,019.39.

This wave count also has a lower probability than the main bear wave count. This wave count would be more typical of commodities than the S&P.

Minor wave 2 lasted 11 days. Minor wave 4 may last a Fibonacci 8 or 13 days, so that the proportion between these two corrections is similar and the wave count has the right look.

Minor wave 4 would most likely be shallow and would be very likely to find strong resistance at one of the cyan trend lines.



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

Three days of upwards movement on slightly increasing (but still relatively light) volume, followed by two small downwards days on declining volume, support the Elliott wave count that expects a bear market rally is unfolding and should yet move higher.

The next resistance line is about 1,950. Thereafter, 1,990 and 2,020. As price comes to the first line of resistance, if we see upwards movement on declining volume, that would strongly indicate the rally is weakening and should end.

ADX is declining. It indicates the market is not trending; it is consolidating. It has not indicated a trend change: the -DX line remains above the +DX line.

ATR is also declining, typical of a consolidating market. This supports the Elliott wave count. If this upwards movement was a new bull market, then ATR should not be declining.

On Balance Volume broke below its pink trend line. The lower dark blue line is new. It is reasonably shallow, long held and repeatedly tested but has been broken also twice. It offers some reasonable technical significance. It may hold up price; expecting upwards movement for Monday due to OBV finding support here seems reasonable.

RSI is neutral. There is again plenty of room for this market to fall.

Stochastics is nearing overbought. If this market is consolidating, then the upwards swing may reasonably be expected to end soon. If Stochastics begins to show divergence with price (upwards), then look out for an end to the bounce.

Overall, the volume profile is more bearish than bullish. Price remains below the 200 day moving average. There is a series of lower highs and lower lows. Original Dow Theory has indicated the market has made a major trend change from bull to bear. Overall, the bullish wave count has very little technical support while the bear wave counts have much.


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

I have found slight divergence between price and VIX from one day to the next a reasonably reliable indicator of an end to a movement.

To illustrate what I mean, I’ve added some red and green arrows on VIX (inverted). From a day to day basis, if price made a new high but VIX did not, this was a bearish signal. If price made a new low and VIX did not, that was a bullish signal.

Price made small new lows two days in a row, but VIX did not. This is a bullish signal. It supports the idea that the bear market rally is not over and that price should move up next week.


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 @ 11:27 p.m. EST.