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The main Elliott wave count from yesterday’s analysis expected price to move higher.

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 2,108.71. Again, there is some slight bullishness from volume to suggest more upwards movement short term, and from On Balance Volume for the mid term. The target is at 2,263 but a reasonable pullback may not arrive until 2,292. A new low below 2,108.71 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.


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.

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 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.

When intermediate wave (3) is a complete impulse, then intermediate wave (4) may unfold for a short term pullback. The expectation would be for intermediate wave (4) to last only a few days; intermediate wave (2) may have been over in just two. Intermediate wave (4) may not move into intermediate wave (1) price territory below 2,108.71.

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.

A reasonable pullback may not be seen until primary wave 3 is over. When it is complete, then the following correction for primary wave 4 would be most likely a zigzag and must remain above primary wave 1 price territory at 2,111.05.


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 waves 1 through to 4 may all be complete. Minor wave 5 may be extending. Within minor wave 5, the correction of minute wave ii may not move beyond the start of minute wave i below 2,146.21.

If price moves below 2,146.21 in the next day or so, then downwards movement may be a deeper correction. For this first wave count the degree of labelling within intermediate wave (3) would all be moved down one degree. At this time, a deeper correction may be minor wave 2; only an impulse for minor wave 1 upwards may be complete as a long extended first wave.

The channel is redrawn as a best fit today, shown more clearly on the second hourly chart below. Upwards movement is weakening, sitting lower and lower within the channel.


S&P 500 daily 2016
Click chart to enlarge.

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. At today’s high intermediate wave (B) is now 1.48 the length of intermediate wave (A), longer than the common range but not yet at the maximum convention of 2.

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.

The upwards zigzag of intermediate wave (B) or (X) may again be over.

A new low below 2,146.21 would add some confidence to the idea that a pullback of a larger degree has begun. But there would still be multiple wave counts valid at that stage.

A new low below 2,108.71 would at this stage invalidate wave count I and provide some confirmation for wave count II.

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.


S&P 500 weekly 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

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.



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

In the short term, I would not expect to see a larger pullback in this upwards trend begin until a green daily candlestick is printed and comes on lighter volume than the day before and lighter volume than any prior downwards day. Confidence in a deeper pullback may be had if a red daily candlestick can be printed and comes on an increase in volume from a prior upwards day.

In short, the volume profile is still short term bullish. Today saw upwards movement with volume stronger than the prior downwards day. Overall, there was some support for upwards movement today.

The volume profile is however mid term bearish. As price is rising overall volume is still declining, illustrated by the downwards sloping trend line on volume.

ADX finally indicates there is an upwards trend in place. ATR still disagrees. Again, there is something wrong with this trend. Each day the distance managed upward in price by the bulls gets less and less. Bulls look exhausted. Yet price keeps rising.

On Balance Volume has no resistance and price has no resistance above. There is nothing to stop price rising with strength. On Balance Volume gave a bullish signal when it broke above the longer term trend line on the monthly chart, and more recently the break above the purple line on this daily chart. This supports the rise in price.

RSI still exhibits divergence with price indicating price is weak, but recently divergence is very unreliable. I will not give it much weight.

Stochastics no longer exhibits divergence with price. Price moved higher today and Stochastics also moved higher. There is no divergence to indicate a trend change here.

MACD is bullish with the break above its trend line. But MACD still exhibits longer term divergence with price back to the highs on 22nd of March. Normally, this would support wave count II over wave count I, but at this time divergence previously noted has just disappeared. It is not reliable.

Overall, because of the slight increase in volume and bullishness from On Balance Volume, it is again my judgement that wave count I has a higher probability than wave count II. Assume the trend remains the same, until price proves it does not. Assume price will keep rising until a red daily candlestick is printed that has stronger volume than a prior upwards day.

There is some concern today with extreme bullish sentiment as evidenced by CNN’s Fear & Greed Index at 90%, extreme bullishness. Again, this gives cause for concern over wave count I but this can move further into extreme as price continues up. This bullish sentiment does not say that price must turn here and now, only that the end is close.


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.

There is still strong multi month divergence with price and VIX. While price has moved to new all time highs, this has not come with a corresponding decline in volatility below the prior all time high at 2,134. This strong multi month divergence between price and VIX indicates that this rise in price is weak and is highly likely to be more than fully retraced. However, this does not tell us when and where price must turn; it is a warning only and can often be a rather early warning.

At this time, although divergence with price and VIX at the daily chart level has been recently proven to be unreliable (and so at this time will no longer be considered), I will continue to assume that divergence with price and VIX at the monthly chart level over longer time periods remains reliable until proven otherwise.

This supports the idea that price may be in a fifth wave up. Divergence between the end of a cycle degree wave III and a cycle degree wave V would be reasonable to see. Fifth waves are weaker than third waves. This strong divergence indicates that price targets may be too high and time expectations may be too long. However, it remains to be seen if this divergence will be reliable.


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 @ 08:56 p.m. EST.