Select Page

The two daily Elliott wave counts today are judged to have about an even probability.

Assume the trend is the same, until proven otherwise.

Summary: In the short term, assume the trend remains up while price is above 2,136.32. There is some bullishness today from volume and On Balance Volume to support this view. The target is at 2,263. A new low below 2,136.32 would add some confidence to a trend change, and a new low below 2,109.08 would confirm it. Once a trend change is confirmed the target would be at 1,963.

Last monthly chart for the main wave count is here.

New updates to this analysis are in bold.


S&P 500 weekly 2016
Click chart to enlarge.

Cycle wave II was a shallow 0.41 zigzag lasting three months. Cycle wave IV is now seen as a more shallow 0.28 double combination lasting 14 months. With cycle wave IV nearly five times the duration of cycle wave II, it should be over there.

After some consideration I will place the final invalidation point for this bull wave count at 1,810.10. A new low below that point at this time would be a very strong indication of a trend change at Super Cycle degree, from bull to bear. This is because were cycle wave IV to continue further sideways it would be grossly disproportionate to cycle wave I and would end substantially outside of the wide teal channel copied over here from the monthly chart.

Cycle wave I lasted 28 months (not a Fibonacci number), cycle wave II lasted a Fibonacci 3 months, cycle wave III lasted 38 months (not a Fibonacci number), and cycle wave IV lasted 14 months (one more than a Fibonacci 13).

If the target for cycle wave V is for it to be equal in length with cycle wave I, then it may also be expected to be about equal in duration. So far cycle wave V is in its fifth month. After this month, a further 23 months to total 28 seems a reasonable expectation, or possibly a further 16 months to total a Fibonacci 21.

The daily charts today are swapped over, but it is my judgement that they have a close to even probability. For this reason, they are labelled wave counts I and II. Wave count I should be preferred while price remains above 2,109.08. If price moves below 2,109.08, then wave count II would be confirmed.


S&P 500 daily 2016
Click chart to enlarge.

It is possible that primary wave 2 is already complete as a shallow regular flat correction. Primary wave 3 may have begun.

At 2,292 primary wave 3 would reach equality in length with primary wave 1. This is the ratio used for the target in this instance because primary wave 2 was relatively shallow and it fits neatly with the high probability target of 2,500 for cycle wave V to end.

Primary wave 3 may only subdivide as an impulse. So far within it intermediate waves (1) and (2) may be complete.

Within intermediate wave (3), no second wave correction may move beyond its start below 2,074.02.

At 2,263 intermediate wave (3) would reach 1.618 the length of intermediate wave (1).

There is some support today for upwards movement from increased volume, and On Balance Volume. This wave count has a reasonable probability at this stage.


S&P 500 hourly 2016
Click chart to enlarge.

Intermediate wave (3) should still be incomplete for this wave count. It has not lasted long enough nor moved far enough above the end of intermediate wave (1).

At its end, intermediate wave (3) should be far enough above intermediate wave (1) to allow for subsequent room for downwards / sideways movement for intermediate wave (4) to unfold and remain above intermediate wave (1) price territory.

Within intermediate wave (3), minor wave 4 may not move into minor wave 1 price territory below 2,109.08.

Draw a small channel about the impulse unfolding upwards as shown. Minor wave 5 may end about the upper edge.

Tomorrow’s session may begin with a little downwards / sideways movement for minor wave 4. Because minor wave 2 does not show on the daily chart, minor wave 4 should not show on the daily chart if intermediate wave (3) is to have a typical look. If tomorrow prints a red candlestick, then this wave count would substantially reduce in probability and wave count II should then be preferred.


S&P 500 daily 2016
Click chart to enlarge.

This wave count still has a reasonable probability, very close to even with wave count I.

The common length for intermediate wave (B) is from 1 to 1.38 the length of intermediate wave (A), giving a range from 2,111.05 to 2,156.41.

The idea of a flat correction should be discarded when intermediate wave (B) exceeds twice the length of intermediate wave (A) above 2,230.42.

When intermediate wave (B) is complete, then a target may be calculated for intermediate wave (C) downwards. It would most likely end at least slightly below the end of intermediate wave (A) at 1,991.68 to avoid a truncation and a very rare running flat. It may end when price comes down to touch the lower edge of the channel copied over from the monthly chart.

Primary wave 2 may also be relabelled as a combination. The first structure in a double combination may be a complete regular flat labelled intermediate wave (W). The double would be joined by an almost complete zigzag in the opposite direction labelled intermediate wave (X). The second structure in the double may be a flat (for a double flat) or a zigzag to complete a double combination. It would be expected to end about the same level as the first structure in the double at 1,991.68, so that the whole structure moves sideways.

An expanded flat for primary wave 2 is more likely than a double combination because these are more common structures for second waves.


S&P 500 hourly 2016
Click chart to enlarge.

Within minor wave C, minute wave iii is 2.99 points short of 1.618 the length of minute wave i. Minute wave iv may not move into minute wave i price territory below 2,109.08.

Minor wave C continued higher, past the target calculated at 2,146. There is no Fibonacci ratio between minor waves A and C, and within minor wave C there is no Fibonacci ratio for minute wave v to either of minute waves i or iii. This is why the target calculated was inadequate.

Intermediate wave (B) is now 1.37 the length of intermediate wave (A), within normal range of 1 to 1.38. For this wave count, it would be most likely now that upwards movement would be over here so that intermediate wave (B) remains within normal range.

Draw a channel about the upwards movement. When price breaches the lower edge of this channel with clear downwards movement (not sideways), that shall be a very early indication that intermediate wave (B) or (X) may be over. Price confirmation would still be required.

Some confidence may come with a new low below 2,136.32. At that stage, downwards movement could not be a second wave correction within minute wave v, so minute wave v would have to be over if it is correctly labelled.

Earliest price confirmation would come with a new low below 2,109.08. At that stage, downwards movement could not be a fourth wave correction and so minor wave C would have to be over.

Final price confirmation would come with a new low below 2,074.02. At that stage, downwards movement could not be a second wave correction within minor wave C. At that stage, also the alternate below would be invalidated.

At 1,963 intermediate wave (C) would reach 1.618 the length of intermediate wave (A). This target assumes that primary wave 2 is an expanded flat. If it is a combination, then the target may not be met. Downwards movement could subdivide as a zigzag and end close to 1,991.68, so that a combination ends with an overall sideways movement.


S&P 500 monthly 2016
Click chart to enlarge.

It would still be possible that a Super Cycle trend change is close if Super Cycle wave (b) (or (x) ) is subdividing as a double zigzag.

However, the expected direction and structure is now the same short and mid term for this idea as it is for the main wave count.

Within the second zigzag of cycle wave y, primary wave C must complete as a five wave structure.

So far Super Cycle wave (b) is 1.72 the length of Super Cycle wave (a). This is comfortably longer than the normal range which is up to 1.38, but still within the allowable convention of up to 2 times the length of wave A.

Above 2,393.23 Super Cycle wave (b) would be more than twice the length of Super Cycle wave (a). Above this price point the convention states that the probability of a flat correction unfolding is too low for reasonable consideration. Above that point this bear wave count should be discarded. The same principle is applied to the idea of a double combination for Grand Super Cycle wave II.


S&P 500 weekly 2016
Click chart to enlarge.

A five wave structure upwards would still need to complete for primary wave C. So far upwards movement is a very strong three wave looking structure. Trying to see this as either a complete or almost complete five would be trying to fit in what one may want to see to the waves, ignoring what is actually there.

At 2,178 intermediate wave (3) would reach 0.618 the length of intermediate wave (1).

Thereafter, intermediate wave (4) may move sideways for a few weeks as a very shallow correction. Thereafter, intermediate wave (5) would most likely make a new high. At 2,194 primary wave C would reach 0.382 the length of primary wave A. This final target is close to the round number of 2,200 and so offers a reasonable probability.

If price reaches 2,200 or close to it, then this idea would again be assessed, and an attempt made to determine its probability. The situation between now and then though may change.

The important conclusion is more upwards movement is extremely likely, as a five up is needed to complete.

There is one other wave count which will be added to analysis tomorrow, but that too long term is bullish. It relies on the rarest of all Elliott wave structures, so it is not necessary to publish it immediately and should not be seriously considered.



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

Upwards movement today came with some support from volume. Volume for the day was higher than the prior two upwards days. This supports wave count I. However, volume is still lighter than the start of this upwards wave nine days ago. Overall, volume is still declining as price is rising.

At the daily chart level, On Balance Volume today has broken above the purple trend line. At the monthly chart level, OBV has given a bullish signal, and now also at the daily chart level. This bullishness should be taken seriously. It is possible that price could continue to rise for some time before a pullback. This supports wave count I.

ADX is now increasing indicating an upwards trend. ATR still disagrees. There is again something wrong with the trend. Normal trends come with increasing ATR, not declining. This adds some doubt to the bullishness from volume and OBV. This supports wave count I *edit: wave count II.

There is still divergence between price and RSI from the high back on 8th of June. On that date RSI was at 65.98. Price today has made higher highs, but RSI has failed to make corresponding new highs; it is lower at 63.81. This divergence is bearish. Normally, this would be a strong indicator of a trend change either now or very soon indeed, but at this stage no trend change has occurred. This divergence supports wave count II.

There was divergence with price and Stochastics in the past few days, but this has now disappeared. Divergence between price and Stochastics is unreliable. Stochastics is now overbought, but this oscillator may remain extreme for reasonable periods of time during a trending market.

MACD has breached the trend line which showed divergence with price. This is a small bullish signal. There is still double divergence between price and MACD from the highs of 20th of April to 8th of June to now, the 12th of July. This indicates the current upwards movement from price is lacking in momentum and is weak. This divergence supports wave count II.

On balance, with some support for upwards movement today from volume and a bullish indication from On Balance Volume, it is my judgement today that wave count I has slightly more support from classic technical analysis than wave count II. Wave count II is entirely possible still, but its support comes from divergence with indicators, not from volume. More weight should be given to volume than divergence because too often divergence can disappear.


VIX daily 2016
Click chart to enlarge. Chart courtesy of

VIX from StockCharts is inverted. As price moves higher, inverted VIX should also move higher indicating a decline in volatility which is normal as price moves higher. As price moves lower, inverted VIX should also move lower indicating an increase in volatility which is normal with falling price.

Along with multi month divergence between price and inverted VIX, there is also short term divergence (blue lines). This indicates weakness in price and supports wave count II.

However, there was a multi day instance of divergence between VIX and price some days ago on 1st of July and this divergence failed to be followed by strong downwards movement. It may be that at this time divergence between price and VIX is no longer reliable, or it may be that it is but the trend change to come is still some days away. It does not appear to be followed by a quick change.


Major lows within the prior bull market:

DJIA: 15,855.12 (15th October, 2014) – closed below on 25th August, 2015.

DJT: 7,700.49 (12th October, 2014) – closed below on 24th August, 2015.

S&P500: 1,821.61 (15th October, 2014) – has not closed below this point yet.

Nasdaq: 4,117.84 (15th October, 2014) – has not closed below this point yet.

Major highs within the new bear market:

DJIA: 17,977.85 (4th November, 2015) – closed above on 18th April, 2016.

DJT: 8,358.20 (20th November, 2015) – has not closed above this point yet.

S&P500: 2,116.48 (3rd Nobember, 2015) – has now closed above this point on 8th June, 2016.

Nasdaq: 5,176.77 (2nd December, 2015) – has not closed above this point yet.


DJIA 2016
Click chart to enlarge.

The industrials closed below the prior major low in the prior bull market on 25th August, 2015. With the transportations confirming a change from bull to bear on 24th of August, the day before, at that stage on the 25th of August original Dow Theory confirmed a change in market conditions from bull to bear.

Dow Theory tenet expects that the bear market is intact until both the industrials and transportation averages make new major highs within the new bear market.

For the industrials, the first important major high within the bear market may be considered to be the November 3rd high at 17,977.85.

At this stage, the industrials have closed above this major high on 18th of April 2016.


DJT 2016
Click chart to enlarge.

The last major low within the prior bull market is taken as 7,700.49 on 12th of October, 2014. The transportation average closed below this point on 24th of August, 2015. On the following day the industrial averages confirmed a new bear market.

The bear market for the transportations remains intact. The important point of confirmation for a change from bear to bull has not been met by this average. The first major high within the new bear market is taken as 8,358.2 (this is very conservative, it could theoretically be taken higher). The transportations have not closed above this point.

Original Dow Theory as applied with these price points sees the transportations not confirming. The bear market should be expected to remain intact while DJT is offering non confirmation.


S&P 500 2016
Click chart to enlarge.

The S&P500 has closed above the prior all time high strongly indicating a new bull market. The 200 day moving average is now increasing. The larger picture looks bullish.

The S&P500 needs to make a new low below 1,810.10 on a daily closing basis for it to indicate an end to this bull market and a possible return to a bear market.

However, the bull market remains suspicious while original Dow Theory has not confirmed a change from bear to bull.


Nasdaq 2016
Click chart to enlarge.

Nasdaq has not confirmed a change from bull to bear from the old bull market. But nor has it offered confirmation that the old bull market remains. It has not made a new high on a daily closing basis above the prior major swing high at 5,176.77.

Dow Theory Conclusion: Original Dow Theory still sees price in a bear market because the transportations have failed to confirm an end to that bear market. Modified Dow Theory (adding S&P and Nasdaq) has failed still to confirm an end to the old bull market, modified Dow Theory sees price still in a bull market.

This analysis is published @ 01:04 a.m. EST on 13th July, 2016.