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Upwards movement was expected and how the session began.

Thereafter, downwards movement remained above the invalidation point on the hourly chart.

Summary: This is still a bear market rally until proven otherwise. A final fifth wave up is required to complete the structure. The target is 2,124. The invalidation point for this rally is 2,134.72. A short term target for a small third wave up is at 2,119, which may take a few days to get there.

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
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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 has completed its 26th week. It looks unlikely to continue for another 8 weeks to total a Fibonacci 34, so it may end in about two to three 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.

If price moves above 2,116.48, then the new alternate bear wave count would be invalidated. At that stage, if there is no new alternate for the bear, then this would be the only bear wave count.

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 unfolding as an impulse.

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.

The blue channel is drawn about intermediate wave (C) using Elliott’s technique. Minute wave ii today overshot the channel and closed below the lower edge. This is only a small cause for concern for the wave count because the S&P does not always fit neatly within channels. Sometimes it breaches channels only to turn back and continue in the prior direction.

I have invested more time today to see if there could be another way to label the subdivisions within this impulse upward of intermediate wave (C) and meet all Elliott wave rules. I cannot see an alternate at this stage which can put the end of minor wave 3 anywhere else. My conclusion is minor wave 5 is most likely incomplete, or it is over at the last high and intermediate wave (C) is severely truncated by 41.41 points. This is possible, but the probability is extremely low.

At 2,124 minor wave 5 would reach 0.618 the length of minor wave 3. Intermediate wave (C) would avoid a truncation and the wave count would remain valid. Primary wave 2 would fulfill its purpose of convincing everyone that a new bull market is underway, and it would do that right before primary wave 3 surprises everyone.

Within minor wave 5, no second wave correction may move beyond the start of its first wave below 2,022.49.

Within the impulse of intermediate wave (C), minor wave 2 is an expanded flat and minor wave 4 is a zigzag. These two corrections look to be nicely in proportion.


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

At this stage, there looks to be a five up followed by a three down on the hourly chart. The mid term picture looks clear in terms of structure; the trend should still be up.

At 2,119 minute wave iii would reach 1.618 the length of minute wave i.

Along the way up, a new high above 2,066.79 would add confidence to this wave count. That is the high labelled minuette wave (b). A new high above the start of minuette wave (c) could not be a second wave correction within minuette wave (c), nor could it be a second wave correction within a new downwards trend. At that stage, the downwards wave labelled minute wave ii would be confirmed as complete and it would look strongly like a three wave movement.

A first and now second wave should now be complete within minute wave iii. The downwards movement for minuette wave (ii) so far looks like a three on the hourly chart. If it continues any lower, it may not move below the start of minuette wave (i) at 2,033.80.

If price moves below 2,033.80, then the invalidation point would move back down to the start of minute wave i at 2,022.49. It is still possible that minute wave ii could continue deeper as a double zigzag. However, the probability of this is very low. Although the probability is low, it does mean that only a new low below 2,022.49 would indicate a potential trend change.

If this wave count is invalidated at the hourly chart level, then the alternate bear wave count would be more likely.


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

Primary wave 1 may subdivide as one of two possible structures. The main bear count sees it as a complete impulse. This alternate sees it as an incomplete leading diagonal.

The diagonal must be expanding because intermediate wave (3) is longer than intermediate wave (1). Leading expanding diagonals are not common structures, so that reduces the probability of this wave count to an alternate.

Intermediate wave (4) must continue higher and may find resistance at the cyan bear market trend line. Intermediate wave (4) may not move above the end of intermediate wave (2) at 2,116.48.


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

Within a leading diagonal, subwaves 2 and 4 must subdivide as zigzags. Subwaves 1, 3 and 5 are most commonly zigzags but may also sometimes appear to be impulses.

Intermediate wave (3) down fits best as a zigzag.

In a diagonal the fourth wave must overlap first wave price territory. The rule for the end of a fourth wave is it may not move beyond the end of the second wave.

Expanding diagonals are not very common. Leading expanding diagonals are less common.

Intermediate wave (4) must be longer than intermediate wave (2), so it must end above 2,059.57. This minimum has been met. The trend lines diverge.

Intermediate wave (4) may be over. If it is over here, then intermediate wave (5) must move below the end of intermediate wave (3), so it may not be truncated. Because the diagonal is expanding intermediate wave (5) must be longer than equality in length with intermediate wave (3). It must end below 1,768.69.

The final fifth wave of minute wave v is seen as an ending contracting diagonal. It does not have a very typical look though. The trend lines converge, but only just. The final fifth wave of the diagonal has not overshot the (i)-(iii) trend line and falls slightly short. This reduces the probability of this part of the wave count.

Leading diagonals may not have truncated fifth waves. Intermediate wave (5) would most likely be a zigzag, must end below 1,810.10, and must be longer in length than intermediate wave (3) which was 306.38 points.



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.

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 2,143 minor wave 5 would reach equality in length with minor wave 1.

Within minor wave 5, no second wave correction may move beyond the start of its first wave below 2,022.49.



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 been trending upwards for 39 days. The 13 day moving average is mostly showing where downwards corrections are finding support, but with an overshoot this week this support may be breaking down. Price is finding resistance at the horizontal trend line about 2,075.

As price moves upwards, it comes overall with declining volume. The trend is weak. It is not supported by volume, so is unsustainable.

ADX is now declining, indicating the market is no longer trending. This happens about the time of a trend change. The +DX line is still above the -DX line, but only just. A trend change has not been indicated yet.

ATR consistently declined while price moved higher. Normally, during a trending market ATR increases. This trend is abnormal. With declining ATR, the trend looks weak.

ATR is now flattening off. It should be expected that ATR will again start to increase. If it can’t do it when price is moving upwards, it may again do it when the next downwards wave arrives.

On Balance Volume is now contained within two purple short term lines. A break out of this small zone, above or below, may precede price direction. For OBV to give a clear bearish signal it needs to break below the pink line which has strong technical significance.

RSI has not managed to reach overbought during this trend. I would have expected upwards movement to only end when RSI reached overbought and then exhibited divergence with price at the final high. This may yet happen. If it does, I would have some confidence in calling a trend change.

Stochastics did reach overbought and did exhibit divergence with price. This indicates weakness in price at the end of upwards movement.


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

Volatility declines as inverted VIX climbs. This is normal for an upwards trend.

What is not normal here is the divergence over a reasonable time period between price and inverted VIX. The decline in volatility is not translating to a corresponding increase in price. Price is weak. This divergence is bearish.


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

There is strong hidden bearish divergence between price and the Bullish Percent Index. The increase in the percentage of bullish traders is more substantial than the last high in price. As bullish percent increases, it is not translating to a corresponding rise in price. Price is weak.

This looks like an overabundance of optimism which is not supported by price.


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

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.

From November 2015 to now, the AD line is making new highs while price has so far failed to make a corresponding new high. This indicates weakness in price; the increase in market breadth is unable to be translated to increase in price.

It remains to be seen if price can make new highs beyond the prior highs of 3rd November, 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 AD line will be watched daily to see if this bearish divergence continues or disappears.

The 200 day moving average for the AD line is now increasing. This alone is not enough to indicate a new bull market. During November 2015 the 200 day MA for the AD line turned upwards and yet price still made subsequent new lows.


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 @ 12:30 a.m. EST on 10 April, 2016.