Again, 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 remains within the channel on the hourly chart, and above 2,109.08. There is bullishness today from On Balance Volume to support this view. The target is at 2,263. A new low below 2,109.08 would confirm a trend change. 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.
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.
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.
DAILY CHART I
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 this stage, it looks like intermediate wave (3) may have seen minor waves 1 through to 4 complete. This labelling assumes an extended wave for minor wave 5 to reach the target. Alternatively, the degree of labelling within intermediate wave (3) may be changed. For this reason, the invalidation point must remain the same today.
At 2,263 intermediate wave (3) would reach 1.618 the length of intermediate wave (1).
A support line is added in cyan. So far price is finding support at this line. If a daily candlestick is printed below this line, then a deeper correction would be expected to have begun.
HOURLY CHART I
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.
It looks like minor wave 4 may have printed a small red daily candlestick today. With both minor waves 2 and 4 showing up on the daily chart, the wave count at that level has the right look so far. Yesterday’s analysis incorrectly noted minor wave 2 as not showing up on the daily chart, but it does. It was a small red doji.
So far there is no Fibonacci ratio between minor waves 1 and 3. Minor wave 3 was extended and longer than 1.618 of minor wave 1. A target for minor wave 5 using ratios between minor waves 1 and 3 does not yield a calculation close to 2,263. At this stage, the target will remain the same.
Draw a small channel about the impulse unfolding upwards as shown. Minor wave 5 may end about the upper edge.
Because the short term volume profile still looks bullish today and because On Balance Volume is still bullish, this first wave count is preferred.
DAILY CHART II
This wave count still has a reasonable probability.
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.
HOURLY CHART II
The upwards zigzag of intermediate wave (B) or (X) may again be over.
This wave count requires confirmation with a new low below 2,109.08. At that stage, confidence in a downwards wave may be had.
At 1,963 intermediate wave (C) would reach 1.618 the length of intermediate wave (A). This is the most common ratio for a C wave of an expanded flat, so it has a reasonable probability.
ALTERNATE WEEKLY CHART
It is possible that cycle wave IV is an incomplete expanding triangle.
This wave count sees cycle wave III over earlier. All subdivisions within the expanding triangle fit perfectly as zigzags.
However, this wave count relies on the rarest of all Elliott wave structures. In my several years of daily Elliott wave analysis on more than one market, I have only ever seen two movements which in hindsight were definitely expanding triangles, and neither were in the S&P500.
With the main wave count relying on a common double combination for cycle wave IV, followed by a common impulse up for cycle wave V, this alternate should not at this stage be seriously considered.
It should be charted and followed as a possibility, and used if price proves it is correct.
Unfortunately, what that means is a new low below 1,810.10 could still be part of a larger bull market. If price does make a new low below 1,810.10, then probability of this wave count vs any other wave count at that time would be determined based on structure and classic technical analysis.
Primary wave E would most likely fall short of the A-C trend line. If price moves substantially below this line, then this idea should be discarded long before the price point at 1,370.58 is breached.
BEAR WAVE COUNT – WEEKLY CHART
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
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.
Click chart to enlarge. Chart courtesy of StockCharts.com.
With Wednesday’s session printing a small red daily candlestick, which has lighter volume, the short term volume profile looks bullish.
The mid term volume profile is still bearish. Volume is still falling as price is rising overall.
However, On Balance Volume is bullish and supports the first wave count. OBV has broken above two important resistance lines recently, the first on a monthly chart and the next on this daily chart.
ADX is increasing and the +DX line is above the -DX line. But ADX is still low, not yet at 15. If it can reach 15, then an upwards trend would be indicated. ADX is very weak considering that price has been trending upwards for overall 11 days now.
ATR is still declining, indicating there is something wrong with this trend. Normally, in a trending market the range travelled each day increases for a healthy trend. Each day the bulls are weaker, able to push price up less and less. But still price keeps going up. The weakness seen does not mean price must turn here or that it must turn soon. It only means that eventually this upwards trend is likely to be more than fully retraced.
RSI exhibits still some divergence with price (yellow lines). This indicates some weakness in upwards movement, but at this time divergence is proving unreliable.
There is no divergence between price and Stochastics. Stochastics is extreme, but it can remain extreme for reasonable periods of time during a trending market. If Stochastics exhibits short term divergence after moving into over bought territory, then it would be indicating a correction to arrive. That is not the case yet.
MACD no longer exhibits double divergence, only single. The break by MACD above its trend line was a bullish signal. MACD is indicating there is some momentum to this upwards movement.
At this time, divergence does not look to be reliable. Although there is persistent weakness in upwards movement, there is some support now from volume and particularly On Balance Volume.
VOLATILITY – INVERTED VIX DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
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.
Divergence at the daily chart level between inverted VIX and price has now disappeared. Up until the last couple of weeks, this indicator was used successfully to anticipate trend changes but at this time is not working.
At this time, volatility is declining as price moves higher. This is normal for an upwards trend.
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.
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 @ 10:47 p.m. EST.