The alternate Elliott wave count allowing for more upwards movement was confirmed with a new high.
Summary: The bounce is continuing higher as a double zigzag. The target for it to end is 2,004. If it ends tomorrow, it would total a Fibonacci 13 daily candlesticks. Confirmation the correction is over will first come with a clear breach of the channel containing it, and thereafter a new low below 1,931.88.
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.
BULL ELLIOTT WAVE COUNT
DAILY CHART – FLAT
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) is continuing higher and may not yet be complete. Both intermediate waves (2) and (4) subdivide as double zigzags, and both now are deep. There is no alternation between them which reduces the probability of the wave count.
When intermediate wave (4) may again be seen as complete, then a target may be calculated for intermediate wave (5) to end. It should move at least slightly below the end of intermediate wave (3) at 1,810.10 to avoid a truncation.
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.
Both hourly charts are again the same. Comment will be with the preferred bear wave count.
DAILY CHART – COMBINATION
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.
BEAR ELLIOTT WAVE COUNT
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 (not a Fibonacci number) and minor wave 2 lasted 11 sessions (not a Fibonacci number).
Minute wave ii has now lasted 12 sessions, one longer than minor wave 2. This still allows the wave count to have the right look even though it is not longer perfect. If it continues for one more day, it may end with a total Fibonacci 13 daily candlesticks.
Minute wave ii may not move beyond the start of minute wave i above 2,104.27.
A single zigzag was invalidated for this correction. Price continued higher as a double zigzag.
At 2,004 subminuette wave c within the second zigzag would reach equality in length with subminuette wave a.
Within subminuette wave c, no second wave correction may move beyond the start of its first wave below 1,931.88.
When the trend channel about this correction is clearly breached by at least one full hourly candlestick below and not touching the lower trend line, that shall indicate the correction may be over. A new low below 1,931.88 could not be a second wave correction within subminuette wave c, so at that stage subminuette wave c would have to be over. A new low below 1,931.88 would provide price confirmation of a trend change.
At that stage, the only way that the correction could continue would be a very rare triple zigzag. The rarity of triples (I have only ever seen three) means the probability of more upwards movement at that stage would be very low indeed.
It must be accepted that price may continue to rise while price remains within the channel.
ALTERNATE DAILY CHART
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. So far minor wave 4 has lasted 12 days and it may be incomplete.
Click chart to enlarge. Chart courtesy of StockCharts.com.
Volume data for today on StockCharts is suspicious. This volume is not the same as that given from NYSE, the home of this index. Therefore, I will go with source data from NYSE.
Price moved higher today on lighter volume (as per NYSE). The rise in price was not supported by volume, so is suspicious. The prior fall in price for two days in a row came with an increase in volume. The volume profile is bearish.
ADX is still clear and indicates this market is not trending; it is consolidating. ADX is a lagging indicator as it is based on a 14 day average. With 12 days of overall upwards movement now, if the market is in a new upwards trend, then ADX should have caught up. Today the +DX line crossed over the -DX line. If the black ADX line turns upwards, it shall then indicate a new upwards trend. That has not happened.
ATR is still overall in agreement. It is flat to declining overall. This indicates the market is consolidating.
On Balance Volume breached the pink trend line today. It may find strong resistance at the green line. This may assist to hold the bounce down tomorrow.
This bounce has returned RSI to above neutral allowing plenty of room for price to fall. There is no divergence with RSI and price.
There is slight divergence today with Stochastics and price, but I have learned to give this a light weighting as it is not very reliable. This is a very weak bearish signal.
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.
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 @ 10:27 p.m. EST.