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A new high early in the session above 2,032.59 indicated more upwards movement was expected.

Summary: This is still a bear market rally until proven otherwise. This rally is reasonably likely to end above 2,116.48, but it cannot make a new all time high. In the short term, the target for a multi day interruption to the trend (a fourth wave which may last about five sessions) may arrive about 2,082 – 2,086. Use the new cyan line for this upwards movement for support along the way up.

To see last published monthly charts click here.

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.

New updates to this analysis are in bold.



S&P 500 weekly bear 2016
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.

Primary wave 1 may be complete and may have lasted 19 weeks, two short of a Fibonacci 21. So far primary wave 2 is in its 23rd week. It looks unlikely to continue for another 11 weeks to total a Fibonacci 34, so it may end in about two to five weeks time. This would still give reasonable proportion between primary waves 1 and 2. Corrections (particularly more time consuming flat corrections) do have a tendency to be longer lasting than impulses.

Primary wave 2 may be unfolding as an expanded or running flat. Within primary wave 2, intermediate wave (A) was a deep zigzag (which will also subdivide as a double zigzag). Intermediate wave (B) fits perfectly as a zigzag and is a 1.21 length of intermediate wave (A). This is within the normal range for a B wave of a flat of 1 to 1.38.

Intermediate wave (C) is likely to make at least a slight new high above the end of intermediate wave (A) at 2,116.48 to avoid a truncation and a very rare running flat. However, price may find very strong resistance at the final bear market trend line. This line may hold price down and it may not be able to avoid a truncation. A rare running flat may occur before a very strong third wave down.

Primary wave 2 may not move beyond the start of primary wave 1 above 2,134.72.


S&P 500 daily bear 2016
Click chart to enlarge.

Intermediate wave (A) fits as a single or double zigzag.

Intermediate wave (B) fits perfectly as a zigzag. There is no Fibonacci ratio between minor waves A and C.

Intermediate wave (C) must subdivide as a five wave structure. It is not unfolding as an ending diagonal, so it must be unfolding as a more common impulse.

The short / mid term target for minor wave 3 is exactly the same as the short / mid term target for the bull wave count. A-B-C of a zigzag and 1-2-3 of an impulse both subdivide 5-3-5. The labelling within this upwards movement of each subdivision is the same for both wave counts.

When it arrives minor wave 4 downwards may not move into minor wave 1 price territory below 1,930.68.

Intermediate wave (C) does not have to move above the end of intermediate wave (A) at 2,116.48, but it is likely to do so to avoid a truncation. If it is truncated and primary wave 2 is a rare running flat, then the truncation is not likely to be very large. As soon as price is very close to 2,116.48 this wave count looks at the possibility of a trend change.

The next wave down for this wave count would be a strong third wave at primary wave degree.

With the short term labelling within intermediate wave (C) changed today to see minute wave v within minor 3 extending, the target for minor wave 5 can no longer be calculated. When minor wave 4 is complete, then a target will again be calculated. The expectation for now will be for price to move above 2,116.48 and to most likely end at either the cyan or lilac trend lines.

A bull market trend line for this rally is drawn across the first two small swing lows as per the approach outlined by Magee. This upwards sloping cyan line may provide support for corrections along the way up.

A target for minor wave 3 is added. At 2,086 minor wave 3 would reach 1.618 the length of minor wave 1. At 2,082 minute wave v would reach equality in length with minute wave iii. This gives a 4 point target zone calculated at two degrees, so it has a reasonable probability.


S&P 500 daily bear 2016
Click chart to enlarge.

Upwards movement now fits best as an extending fifth wave for minute wave v. Minor wave 3 is incomplete.

Momentum is still weaker than within minor wave 1 (off to the left of the chart now). This third wave is weaker than the first, so when the fifth wave arrives it should be weaker still.

The acceleration channel should be redrawn as price continues higher. Draw it from the end of minor wave 1 to the last high, then place a parallel copy on the low of minor wave 2. When minor wave 4 finally arrives, it should find support at the lower edge of this channel if it gets down that low.

Within the middle of this extended fifth wave, subminuette wave iv may not move into subminuette wave i price territory below 2,019.06.

Subminuette wave iii has passed 1.618 the length of subminuette wave i. The high for Thursday at 2,046.24 is almost exactly 2.618 the length of subminuette wave i (it is just 0.01 point short). Yet the structure of subminuette wave iii is incomplete. At 2,068 subminuette wave iii would reach 4.236 the length of subminuette wave i, which is the next Fibonacci ratio in the sequence. At 2,065 micro wave 5 would reach equality in length with micro wave 3. This gives a 3 point target zone for a very short term interruption to the upwards trend.

The cyan line is copied over from the daily chart. Look for larger corrections along the way up to find support at this line.



S&P 500 weekly 2016
Click chart to enlarge.

Cycle wave II was a shallow 0.41 zigzag lasting three months. Cycle wave IV may be a complete shallow 0.19 regular flat correction, exhibiting some alternation with cycle wave II.

At 2,500 cycle wave V would reach equality in length with cycle wave I.

Price remains below the final bear market trend line. This line is drawn from the all time high at 2,134.72 to the swing high labelled primary wave B at 2,116.48 on November 2015. This line is drawn using the approach outlined by Magee in the classic “Technical Analysis of Stock Trends”. To use it correctly we should assume that a bear market remains intact until this line is breached by a close of 3% or more of market value. In practice, that price point would be a new all time high which would invalidate any bear wave count.

This wave count requires price confirmation with a new all time high above 2,134.72.

While price has not made a new high, while it remains below the final bear market trend line and while technical indicators point to weakness in upwards movement, this very bullish wave count comes with a strong caveat. I do not have confidence in it.


S&P 500 daily 2016
Click chart to enlarge.

Upwards movement cannot now be a fourth wave correction for intermediate wave (4) as price is now back up in intermediate wave (1) territory above 2,019.39. This has provided some clarity.

For the bullish wave count, it means that primary wave C must be over as a complete five wave impulse.

Intermediate wave (2) is seen as an atypical double zigzag. It is atypical in that it moves sideways. Double zigzags should have a clear slope against the prior trend to have the right look. Within a double zigzag, the second zigzag exists to deepen the correction when the first zigzag does not move price deep enough. Not only does this second zigzag not deepen the correction, it fails to move at all beyond the end of the first zigzag. This structure technically meets rules, but it looks completely wrong. This gives the wave count a low probability.

If the bull market has resumed, it must begin with a five wave structure upwards at the daily and weekly chart level. So far that is incomplete.

At 2,088 minor wave 3 would reach 1.618 the length of minor wave 1. Within minor wave 3, at 2,086 minute wave v would reach 1.618 the length of minute wave iii. This gives a two point target zone calculated at two wave degrees which should have a reasonable probability.

Minor wave 4 may not move into minor wave 1 price territory below 1,930.68.



S&P 500 daily 2016
Click chart to enlarge. Chart courtesy of

Volume data on StockCharts is different to that given from NYSE, the home of this index. Comments on volume will be based on NYSE volume data when it differs from StockCharts.

Price has now moved higher on increasing volume for two days in a row. The rise in price is supported by volume now and is again no longer suspicious at least short term. However, overall volume so far during this move upwards from the low on 11th February is coming on a decline in volume.

Along the way up, price is finding support about the 9 day EMA, with some overshoots.

The gap at 2,043 to 2,038 was closed today. This was the only gap remaining open on the way up to the all time high at 2,134.

Horizontal trend lines have been adjusted after looking left. The next line to offer reasonable resistance may be about 2,070 and thereafter about 2,100.

ADX is increasing and the +DX line is above the -DX line. There is a trend: it is up.

ATR continues to disagree though. There is something wrong with this trend. Normally a trend should see increasing range and strength. This trend is weak; range is decreasing so far.

On Balance Volume found support at the pink line and moved higher from there, strengthening that line. The next line, the green line, to offer some resistance to OBV is very close now. However, this line is somewhat steep, not very long held and has only been tested three times, so it does not offer strong technical significance. It may provide some resistance. If OBV breaks above the green line, that would be a bullish signal but not a strong one.

RSI is not yet overbought. There is room for price to rise further. I would not expect this upwards trend to be complete until RSI is extreme and then shows some divergence with price.

Stochastics is overbought, but in a trending market this oscillator may remain extreme for reasonable periods of time. It is showing some divergence with price. This is a weak bearish signal which I have found to not be very reliable.


S&P 500 daily 2016
Click chart to enlarge. Chart courtesy of

The Advance Decline line shows no short term (day to day basis) divergence with price. With the AD line increasing, this indicates the number of advancing stocks exceeds the number of declining stocks. This indicates that there is breadth to this upwards movement.

Longer term, looking back over the last five months, there are two cases of hidden bearish divergence between price and the AD line.

From November 2015 to December 2015 the AD line made a new high while price failed to make a corresponding high. This indicated weakness in price and preceded new lows for price.

Now again from 29th December, 2015, to now the AD line is making new highs but price has so far failed to also make corresponding new highs. This again is an indication of weakness in price. Despite price rising with market breadth increasing, the breadth increase is not translating to substantial rises in price.

It remains to be seen if price can make new highs beyond the prior highs of 29th December, 2015. If price can manage to do that, then this hidden bearish divergence will no longer be correct, but the fact that it is so strong at this stage is significant.

The 200 day moving average for the AD line remains pointing down.


I am choosing to use the S&P500, Dow Industrials, Dow Transportation, Nasdaq and 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.

S&P500: 1,821.61
Nasdaq: 4,117.84
DJIA: 15,855.12 – close below on 25th August 2015.
DJT: 7,700.49 – close below on 24th August 2015.
Russell 2000: 1,343.51 – close below on 25th August 2015.

This analysis is published @ 11:39 p.m. EST.