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Upwards movement is choppy and overlapping indicating a diagonal.

Summary: A consolidation may be completing for intermediate wave (2). Price should move overall upwards before turning and moving lower for a few days to end below 2,159.07.

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 15 months. With cycle wave IV five times the duration of cycle wave II, it should be over there.

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 15 months (two 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.

This first weekly wave count expects the more common structure of an impulse is unfolding for cycle wave V. Within cycle wave V, primary waves 1 and now 2 should be over. Within primary wave 3, no second wave correction may move beyond its start below 1,991.68.

There is one other possible structure for cycle wave V, and ending diagonal. This is covered in an alternate.


S&P 500 daily 2016
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It is most likely that primary wave 2 is already complete as a shallow regular flat correction. Primary wave 3 is most likely underway.

Sideways movement over the last twelve sessions is now too far outside of a channel containing prior upwards movement. This sideways movement looks like a separate wave and not a correction within prior upwards movement. For this reason today this wave count, which was an alternate up to last analysis, is now the main wave count.

Within primary wave 3, intermediate wave (1) is a complete impulse. Intermediate wave (2) is incomplete and so far looks like it is unfolding as a flat correction.

Intermediate wave (2) may not move beyond the start of intermediate wave (1) below 1,991.68.

Intermediate wave (2) is expected to be shallow and not a deep pullback when it is done.


S&P 500 hourly 2016
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Within intermediate wave (2), so far minor wave A down subdivides as a three. Minor wave B upwards looks still to be incomplete. It may be subdividing as a double combination: zigzag – X – flat.

With both waves A and B subdividing as threes, this indicates a possible flat for intermediate wave (2). Within a flat correction, the normal range for minor wave B is from 1 to 1.38 the length of minor wave A. This gives a normal range from 2,175.63 to 2,181.66.

Within the second structure of the combination for minor wave B, minuette wave (c) must subdivide as a five. This may be either an impulse or an ending diagonal. There is too much overlapping within this movement so far for an impulse. It looks like an ending diagonal.

The diagonal would be expanding because subminuette wave iii is longer than equality in length with subminuette wave i. Subminuette wave iv must be longer than equality in length with subminuette wave ii to meet the rules regarding wave lengths for expanding diagonals. It must reach below 2,166.04.

The normal range for subminuette wave iv within the diagonal is from 0.66 to 0.81 the length of subminuette wave iii. This gives a range from 2,166.04 to 2,163.26.

Subminuette wave iv may not move beyond the end of subminuette wave ii below 2,159.73.

When subminuette wave iv is complete, then subminuette wave v upwards should be longer than 18.56 points.

Within an ending diagonal, all the sub-waves must subdivide as zigzags and the fourth wave must overlap first wave price territory.



S&P 500 daily 2016
Click chart to enlarge.

Cycle wave V may be unfolding as an ending diagonal. The most common type of diagonal by a reasonable margin is a contracting diagonal. When primary waves 1 and 2 are complete, then primary wave 3 would most likely be shorter than primary wave 1. If primary wave 3 were to be longer than primary wave 1, then the less common variety of an expanding diagonal would be indicated.

Within an ending diagonal, all the sub-waves must subdivide as zigzags and the fourth wave must overlap back into first wave price territory. The whole structure is choppy and overlapping with a gentle slope. The classic pattern equivalent is a rising wedge.

The zigzag of primary wave 1 upwards may now be complete as per labelling for the alternate daily wave count above in terms of seeing the impulse of intermediate wave (C) complete.

A target range for primary wave 2 may be calculated. It would most likely be between 0.66 to 0.81 the length of primary wave 1. This gives a range from 1,934 to 1,880. It may find support at a lower parallel copy of the channel about Super Cycle wave (V) copied over from the monthly chart.

Primary wave 2 may not move beyond the start of primary wave 1 below 1,810.10.

Ending diagonals have corrective characteristics as they subdivide into a series of zigzags. Ending diagonals contain uncertainty; the trend is unclear as they unfold due to the deep corrections of their second and fourth waves. They are terminal and doomed to full retracement. This may explain some persistent weakness to this upwards trend at this time. The final target at 2,500 for the main wave count would be far too optimistic if this alternate is correct and the diagonal is contracting.

Third waves of even diagonals should still be supported by volume and should still exhibit stronger momentum than the first wave.

For this alternate wave count, a deep pullback could very soon be expected for primary wave 2 to last several weeks.



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

The week before last week completed a stalled candlestick pattern. This indicated a trend change from up to either down or sideways. Last week completed a small red doji, so the trend may have changed from up to sideways. It may still yet turn down.

The bearish implications of the stalled candlestick pattern may now be fulfilled, or more downwards / sideways movement may continue.

Last week’s red doji comes with an increase in volume. This short term volume profile is slightly bearish. Only slightly because the candlestick is a doji and not a regular candlestick with a red body.

On Balance Volume has come down to almost touch the upper purple line. It may find support here. If this line is breached, then some support may be expected at the next trend line.

RSI is not extreme and is flattening off. There is still room for price to rise.


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

Price remains constrained within a small consolidation, but On Balance Volume may be indicating a breakout direction. OBV broke out of its corresponding consolidation upwards. The direction for price this week now looks most likely to be upwards.

A small red candlestick comes with lighter volume today. There is less support for downwards movement from volume than there was for the two prior upwards days. The volume profile here looks bullish for the last three days’ price movement.

During this consolidation, it is still a downwards day which has strongest volume suggesting a downwards breakout is more likely. However, this trick has recently been proven to not work at the weekly chart level, so it is approached with some suspicion at this time. More weight will be given to On Balance Volume.

ADX is above 15 and increasing. The +DX line is above the -DX line. ADX is indicating an upwards trend is in place.

ATR still disagrees as it is declining. There is something wrong with this trend. It does not look to be normal and healthy.

RSI is not yet overbought. There is room for price to rise further.

Stochastics is declining as price is rising but divergence is not currently working, so at this time this shall be given no weight at all. It will not be useful to assist in showing where this trend may end.

MACD is declining and may be about to indicate a trend change from up to down, but this too may not be reliable at this time.

At this time, the most reliable classic analysis still seems to be volume, short and mid term.


VIX daily 2016
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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 @ 08:00 p.m. EST.