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So far it looks like the alternate hourly Elliott wave count may be right, but we still don’t have price confirmation.

Both hourly charts will expect the same movement next for the short term.

Summary: In the short term, a small fourth wave may move higher and must remain below 2,086.09. Thereafter, a fifth wave down may complete an impulse at 2,046. With a decisive breach of the support line at the hourly chart level at the end of today’s session, the balance of probability has shifted to seeing at least an intermediate degree trend change at the last high for the S&P.

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 is complete and lasted 19 weeks. Primary wave 2 is either over lasting 28 weeks, or it may continue for another one or two weeks.

The long upper shadow on last week’s green weekly candlestick is bearish. If tomorrow, the last session for this week, can manage to close below 2,078.83, then this weekly candlestick would complete a bearish engulfing candlestick pattern. This is the strongest reversal pattern.

Primary wave 2 may be complete as a rare running flat. Just prior to a strong primary degree third wave is the kind of situation in which a running flat may appear. 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.

It is still possible as this week draws to an end that primary wave 2 could yet continue higher. The probability has been reduced today but not eliminated. If it does, then intermediate wave (C) should end above 2,116.48 to avoid a truncation. Primary wave 2 would then be a very common expanded flat.

If price moves above 2,116.48, then the 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 may be a complete impulse.

If intermediate wave (C) is over, then the truncation is small at only 5.43 points. This may occur right before a very strong third wave pulls the end of intermediate wave (C) downwards. Confirmation is required with a new low below 2,039.74.

The next wave down for this wave count would be a strong third wave at primary wave degree. At 1,423 primary wave 3 would reach 2.618 the length of primary wave 1. This is the appropriate ratio for this target because primary wave 2 is very deep at 0.91 of primary wave 1.

Redraw the channel about the impulse of intermediate wave (C) using Elliott’s second technique: draw the first trend line from the ends of the second to fourth waves at minor degree, then place a parallel copy on the end of minor wave 3. Minor wave 5 may end midway within the channel. The channel is now breached decisively at the hourly chart level. At the daily chart level, today’s candlestick still has its upper wick just crossing above the lower trend line. One more downwards day fully below the trend line would provide better channel confirmation of a trend change. That may come tomorrow.

Because expanded flats do not fit nicely within trend channels, a channel about their C waves may be used to indicate when the expanded flat is over. After a breach of the lower edge of the channel, if price then exhibits a typical throwback to the trend line, then it may offer a perfect opportunity to join primary wave 3 down. At this stage, it looks like this may not happen, but if it does then take the opportunity to enter short on the throwback.

Within minor wave 5, no second wave correction may move beyond the start of its first wave below 2,039.74. A new low below 2,039.74 could not be a second wave correction within minor wave 5, so at that stage minor wave 5 would have to be over. This would confirm a trend change.

Primary wave 1 lasted 98 days (not a Fibonacci number). Primary wave 2 may have lasted 140 days.


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

Minute wave ii is now a complete double zigzag. Minute wave iii downwards looks like it has begun.

This is all within just minor wave 1. When minor wave 1 is a complete impulse, then minor wave 2 should move higher. It may come back up for a throwback of the support line although it may not be able to get that high.

Alternatively, the degree of labelling on the hourly chart may have to be moved up one degree when the impulse down is complete. It depends on how low it goes.

At 2,046 minute wave iii would reach 1.618 the length of minute wave i.

Within minute wave iii, minuette wave (ii) was a very deep 0.96 zigzag. Minuette wave (iii) has no Fibonacci ratio to minuette wave (i). Minuette wave (iv) should be expected to be a shallow sideways correction, most likely ending about the 0.382 Fibonacci ratio at 2,082. It may not move into minuette wave (i) price territory above 2,086.09.

Alternatively, the downwards wave to end Thursday’s session may also be another first wave. The degree of labelling of it may be moved down one, so it could be just subminuette wave i within minuette wave (iii). If that is the case, then the following correction for subminuette wave ii would most likely reach up to the 0.618 Fibonacci ratio at 2,089. It may not move beyond the start of subminuette wave i at 2,099.30.

If price moves above 2,086.09 during the next session, then it would not be a fourth wave correction and instead would be another second wave correction. That would favour this main wave count over the alternate below.


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

It is still possible that primary wave 2 may not be complete. Intermediate wave (C) may yet be able to move above 2,116.48 to avoid a truncation and a rare running flat.

The degree of labelling within minor wave 5 is moved down one degree. The upwards wave to the last high may be only minute wave i within minor wave 5.

Minute wave ii may not move beyond the start of minute wave i below 2,039.74.

Minute wave ii is seen here as a double combination, but it no longer looks right. The second structure in the double is technically an expanded flat, which is okay. But it is deepening the correction, giving the whole structure of minute wave ii a downwards slope where it should be just sideways.

The first structure in the double labelled minuette wave (w) is a zigzag. The double is joined by a three, a simple zigzag in the opposite direction labelled minuette wave (x).

The second structure is an expanded flat labelled minuette wave (y). Both of subminuette waves a and b subdivide as threes, as they must for a flat. Subminuette wave b is a 1.21 length of subminuette wave a. This is over the requirement of 1.05 for an expanded flat, and within normal range of 1 to 1.38 for a B wave within a flat.

Subminuette wave c has passed 1.618 the length of subminuette wave a. At 2,062 it would reach 2.618 the length of subminuette wave a.

Subminuette wave c must subdivide as a five wave structure. It is unfolding as an impulse. Within the impulse, micro wave 4 may not move into micro wave 1 price territory above 2,086.09.

If price moves above 2,086.09 short term, before any new low, then it could not be a fourth wave correction within the impulse. For this alternate, to see upwards movement then as another second wave correction would see subminuette wave c as too long in duration and requiring a much lower end. That would see minute wave ii with a very clear downwards slope. The probability of this wave count would substantially decrease with these problems of Elliott wave structure.

This wave count requires a new high above 2,111.05 for confirmation.


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) may continue higher now and may find resistance at the bear market trend line.


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.

Within diagonals the second and fourth waves are commonly between 0.66 to 0.81 the prior wave. Here, intermediate wave (2) is 0.93 of intermediate wave (1) and intermediate wave (4) is 0.98 of intermediate wave (3). This is possible, but the probability of this wave count is further reduced due to the depth of these waves.

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

Intermediate wave (5) must be longer than intermediate wave (3), so it must end below 1,804.67. Confirmation of the end of the upwards trend for intermediate wave (4) would still be required before confidence may be had in a trend change, in the same way as that for the main bear wave count.



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 still 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. That may today be complete. The possible trend change at intermediate degree still requires confirmation in the same way as the alternate hourly bear wave count outlines before any confidence may be had in it.

If intermediate wave (2) begins here, then a reasonable target for it to end would be the 0.618 Fibonacci ratio of intermediate wave (1) about 1,920. Intermediate wave (2) must subdivide as a corrective structure. It may not move beyond the start of intermediate wave (1) below 1,810.10.

In the long term, this wave count absolutely requires a new high above 2,134.72 for confirmation. This would be the only wave count in the unlikely event of a new all time high. All bear wave counts would be fully and finally invalidated.



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.

The line in the sand for a trend change is the upwards sloping purple support line. This is the same as the lower edge of the blue channel on the main daily Elliott wave count. A breach of this bull market trend line would indicate the trend (at least short to mid term) has changed from bull to bear. Now that price has broken below the support line, it should find resistance there. While today’s candlestick has a real body fully below the lower line, the upper wick is crossing above the line. One more downwards day would constitute a clearer breach. A breach is a full daily candlestick below the line and not touching it. Pobability of a trend change increases today.

An Evening Doji Star candlestick pattern is completed at the last high. This is a reversal pattern and offers some support for expecting a high is in place. The fact that this pattern has occurred at the round number of 2,100 is more significant. There is light volume on the first candle in the pattern and heavier volume on the third candle in the pattern. This increases the probability of a reversal.

Strong downwards movement at the end of today’s session away from the support line and away from the 2,100 resistance line indicates a trend change is most likely.

Volume today is slightly stronger than yesterday. There was support for downwards movement. Although the increase in only small, it does not have to be big for a bearish outlook to be favoured when price falls on increasing volume. The market can fall of its own weight; it does not require an increase in sellers for price to fall because an absence of buyers will achieve the same outcome.

On Balance Volume has still not given any bearish signal. It is finding support today at the weak yellow line. A break below this line would be a weak bearish signal. A move up from here by OBV would be a weak bullish signal. What would be a stronger signal would be a break below the purple or pink lines because they are longer held and more often tested, particularly the pink line. A break below either would be a strong bearish signal.

ADX is today declining, indicating the market is not yet trending (but this is a lagging indicator). If a downwards trend is developing, then first the +DX line must cross below the -DX line. That has not happened yet; ADX has not indicated a trend change.

ATR may beginning to turn up. After a long period of declining, ATR should be expected to again show an increase. It is important to note that ATR declined while price moved higher for over 40 days. This is not normal for a trending market. There was something wrong with that wave up. If it was a bear market rally and not a new bull market, then declining ATR makes more sense.

RSI has some slight divergence with price to the last high (green line). RSI has failed to make corresponding highs as price has made new highs. This indicates weakness in price.

MACD shows divergence with price (green line) back to 22nd March. With reasonably long held divergence, this indicates momentum up to the high is weak.


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 (green lines). The decline in volatility is not translating to a corresponding increase in price. Price is weak. This divergence is bearish.

Price made a new short term high, but VIX has failed to make a corresponding high (pink lines). This is regular bearish divergence. It indicates further weakness in the trend.

22nd April’s small green doji candlestick overall saw sideways movement in price, closing very slightly up for the day. Yet inverted VIX has made new highs above the prior high of 20th of April. Volatility declined for 22nd April, but this was not translated into a corresponding rise in price. Again, further indication of weakness in price is indicated. This is further hidden bearish divergence.


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

With this indicator measuring the percentage of bullish equities within the index, it is a measurement of breadth and not sentiment as the name suggests.

There is strong hidden bearish divergence between price and the Bullish Percent Index (orange lines). The increase in the percentage of bullish equities 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.

As price made a new short term high on 20th April, BP did not (pink lines). This is regular bearish divergence. It indicates underlying weakness to the upwards trend.


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.


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

This first COT chart shows commercials. Commercial traders are more often on the right side of the market. Currently, more commercials are short the S&P than long. This supports a bearish Elliott wave count, but it may also support the bullish Elliott wave count which would be expecting a big second wave correction to come soon. Either way points to a likely end to this upwards trend sooner rather than later. Unfortunately, it does not tell exactly when upwards movement must end.

*Note: these COT figures are for futures only markets. This is not the same as the cash market I am analysing, but it is closely related enough to be highly relevant.

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

Non commercials are more often on the wrong side of the market than the right side of the market. Currently, non commercials are predominantly long, and increasing. This supports the expectation of a trend change soon.


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.

To the upside, DJIA has made a new major swing high above its prior major high of 3rd November, 2015, at 17,977.85. But DJT has so far failed to confirm because it has not yet made a new major swing high above its prior swing high of 20th November, 2015, at 8,358.20. Dow Theory has therefore not yet confirmed a new bull market. Neither the S&P500, Russell 2000 nor Nasdaq have made new major swing highs.

This analysis is published @ 06:18 p.m. EST.