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In the very short term, sideways movement was expected for one or two sessions before the upwards trend resumed, but this did not happen.

Price has moved higher.

Summary: The trend is up and there is some small support today from volume. The target for a third wave to end is at 2,292. Although there is persistent weakness in upwards movement and little support from volume, price still keeps slowly drifting higher and may continue to do so while there is very little selling pressure. There is no resistance to stop this upwards drift.

Trading advice: Always use a stop loss. Never invest more than 3-5% of equity on any one trade. If you ignore this advice, then you must take full responsibility for the results of your trades.

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 2,074.02. If price moves below 2,074.02, then wave count II would be confirmed.


S&P 500 daily 2016
Click chart to enlarge.

It is now most likely that primary wave 2 is already complete as a shallow regular flat correction. Primary wave 3 is most likely underway.

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.

When primary wave 3 is complete, then the following correction for primary wave 4 may not move back down into primary wave 1 price territory below 2,111.05.

An impulse upwards looks complete but volume still does not indicate a deeper correction about to begin here. It may be that only minor wave 1 is complete. A small brief correction for minor wave 2 may have completed yesterday and the strongest part of intermediate wave (3) up may have begun today. The alternate hourly wave count below moves the degree of labelling within minor wave 1 all up one degree; it may also be that intermediate wave (3) ended and intermediate wave (5) upwards may be underway today.

When intermediate wave (3) is a complete impulse, then intermediate wave (4) may unfold for another 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).


S&P 500 hourly 2016
Click chart to enlarge.

Because so far upwards movement within intermediate wave (3) has not passed equality in length with intermediate wave (1) (that price point would be at 2,191), it should be assumed that it is most likely that intermediate wave (3) is incomplete.

Within the impulse of intermediate wave (3), it may be now that minor wave 1 was complete as an impulse and minor wave 2 complete as a double combination. The double combination fits well on the five minute chart as a flat – X – zigzag which moves sideways and has a typical look for a combination.

Within minor wave 3, minute waves i and ii may have been complete during today’s session. If minute wave ii continues further, it may not move beyond the start of minute wave i below 2,159.01.

This wave count now has a series of three first and second waves complete. It expects some increase in upwards momentum and support from increased volume for upwards movement over the next few days.

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

Within the middle of intermediate wave (3), minor wave 3 would reach 0.618 the length of minor wave 1 at 2,218. This is the ratio used for the target in this instance because it fits with higher targets at higher degrees, and it makes a little more sense considering the weakness of upwards movement and the extreme bullish sentiment at this time. Minor wave 3 may not be able to be as long as minor wave 1; it may be shorter and it may be a little weaker. As long as it is not the shortest actionary wave within the impulse of intermediate wave (3), then the core rule will be met.

Draw a best fit channel about this upwards movement, shown here in cyan. Draw the first trend line from the end of intermediate wave (1) to the end of minor wave 1, then place a parallel copy on the end of intermediate wave (2). So far movement is contained within this channel. The lower edge may continue to provide support. The upper edge may provide resistance if price gets that high, which looks unlikely at this stage.


S&P 500 hourly 2016
Click chart to enlarge.

This alternate wave count simply moves the impulse that is labelled minor wave 1 (hourly chart I) up one degree. This impulse movement may have been intermediate wave (3).

If this wave count is correct, then intermediate wave (3) was shorter than intermediate wave (1). This limits the fifth wave to no longer than equality in length with the third at 2,253.97, so that the core rule is met, because a third wave may never be the shortest actionary wave within an impulse.

At 2,218 intermediate wave (5) would reach 0.618 the length of intermediate wave (3).

It is possible that intermediate wave (5) was over at the high for today, but because there is some support today from volume for this upwards day it looks unlikely that a primary degree trend change will occur here.

A clear breach of the lower edge of the trend channel about this upwards movement would be an early indication that this wave count may be correct. At that stage, it would increase in probability.

A new low below 2,159.01 would add some confidence from price that a reasonable trend change may have occurred.

Primary wave 4 should unfold as a large time consuming sideways movement. Primary wave 2 lasted 47 days, so primary wave 4 may be most likely to last about a Fibonacci 21 or 34 days.

Primary wave 2 was an expanded flat. To exhibit alternation primary wave 4 may be a zigzag, multiple zigzag, or a triangle. If it is a zigzag, it may be relatively quick. If it is a triangle, it may be much more time consuming.


S&P 500 daily 2016
Click chart to enlarge.

This wave count no longer has a reasonable probability. It has been difficult today to see how minor wave C could be a complete impulse on the hourly chart. At that level, this wave count today looks forced. With volume adding some support today to upwards movement, and volume one of the only indicators that is somewhat working at this time, that should be taken as a warning that this wave count is at this time less likely.

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 1.54 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.

I like to consider all possibilities (within reason), that is the correct way to do Elliott wave analysis, and indeed any technical analysis. I am aware that several members are still holding short positions opened below 2,134 against my clear and repeated advice to always use stops for all trades. I am concerned that in publishing this wave count some of those members may take it more seriously than they should, in the hope of a bigger pullback to offer a good exit from losing positions.

Hope is not an investment strategy.

My concern is that publishing this idea may prevent members from exiting losing positions, no matter what I say about probability and volume. However, the refusal of some members to manage risk should not mean that my analysis is less thorough than I would like it to be. That would be detrimental to all other members who are able to manage risk.


S&P 500 hourly 2016
Click chart to enlarge.

It is now difficult to see the upwards zigzag of intermediate wave (B) or (X) as over. This wave count at the hourly chart level today looks forced. This usually means that it is wrong and so the expected direction is wrong.

This wave count is published today to illustrate why it is my judgement that price will move up, not down. To see a wave count that has price moving down from here does not have the right look.

This wave count requires some confirmation from price with a new low below 2,111.05. At that point, it would be taken seriously.

At 1,982 intermediate wave (C) would reach 1.618 the length of intermediate wave (A).


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 weekly 2016
Click chart to enlarge. Chart courtesy of

At the end of last week, price has very clearly broken out of the prior consolidation upwards. This applies not only to the small consolidation on the weekly chart shown by yellow support and resistance lines, but also to the larger multi month consolidation that was shown in prior weekly charts and which had the upper resistance line at the prior all time high of 2,134.

Volume last week is higher than the week prior. There is some support from volume for the rise in price although the first upwards week still has strongest volume.

From the last swing low, there is now a bullish engulfing candlestick pattern followed by three advancing white soldiers pattern. Both patterns are bullish.


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

Overall, volume is falling as price rises. The volume profile mid term is still bearish.

In the short term, today’s upwards day comes with an increase in volume over the last three sessions. There is support today for the rise in price. This supports both the first two hourly Elliott wave counts but cannot tell us which one of those two is correct.

There may not be enough selling pressure for the second wave count, which expects a bigger drop. When price is falling it is not falling with strong volume (with the exception of Brexit). Some greater support from sellers may be required for a deeper pullback here. At this stage, no evidence of selling pressure is seen.

ADX is increasing and above 15 indicating a new upwards trend is in place. ATR is still very clearly declining. This is not normal for a trending market and indicates some weakness.

On Balance Volume today moved upwards with price. Two new very short term lines are added to OBV. A break below the short purple line would be bearish. A break above the short yellow line would be bullish. These lines offer weak signals only. But if a break by OBV precedes a breakout from price, then it should indicate the direction for a breakout by price.

The divergence previously noted between price and RSI has today disappeared. At this time, divergence is proving consistently unreliable: it turns up, deepens, then disappears as price keeps rising. RSI today indicates there is some strength to this upwards movement.

There is still negative bearish divergence between price and MACD. This new upwards trend is lacking in momentum.

There is again something wrong with this trend, so it should be expected eventually to be more than fully retraced. Each day the bulls are able to push price up by a smaller and smaller amount. This trend is tired and weak.

However, looking back at the larger picture price was able to rise in light and declining volume for many months up to the last all time high. Weakness indicates the movement is likely to be more than fully retraced, but weakness can persist for reasonable periods of time before the market changes from bull to bear. This persistent weakness indicates some caution, targets may be too high and optimistic.


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 @ 10:48 p.m. EST.