Select Page

Upwards movement was expected to a target at either 2,192 or 2,199.

The session began with a little upwards movement but only to 2,185.44 before turning down.

Summary: The trend remains the same, until proven otherwise. Assume the trend is up while price is above 2,147.58. The mid term targets are 2,332 or 2,445. If price makes a new low below 2,147.58, then probability will shift to a deep pullback beginning, target zone 1,938 to 1,881.

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 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 sixth month. After this month, a further 22 months to total 28 seems a reasonable expectation, or possibly a further 15 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, an ending diagonal. This is covered in an alternate.


S&P 500 daily 2016
Click chart to enlarge.

Primary wave 2 is complete as a shallow regular flat correction. Primary wave 3 is underway.

Within primary wave 3, intermediate wave (1) is a complete impulse. Intermediate wave (2) may now be a complete flat correction.

If the degree of labelling within intermediate wave (2) is moved down one degree (alternate labelling), then it is still possible that only minor wave A is complete as a flat correction. It is possible that intermediate wave (2) may complete further sideways as a longer lasting flat correction, or a double flat or double combination. All options would expect sideways movement though, not a deep pullback.

Within a possible continuation of intermediate wave (2), there is no upper invalidation point for the idea because there is no rule stating a limit for a B wave within a flat. There is a convention within Elliott wave that states once the possible B wave is longer than twice the length of the A wave the probability that a flat is unfolding is so low the idea should be discarded. Here that price point would be at 2,203.68.

Above 2,203.68 more confidence in this wave count and the targets may be had.

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


S&P 500 hourly 2016
Click chart to enlarge.

Minor wave 1 now fits as a complete impulse. With downwards movement for Monday’s session showing as a small red daily candlestick, it looks like minor wave 1 was over at Monday’s high, falling short of the first target by 6.56 points.

Ratios within minor wave 1 are: minute wave iii is 0.81 short of equality in length with minute wave i, and minute wave v has no Fibonacci ratio to either of minute waves i or iii.

On the five minute chart, minor wave 2 may have begun with a double zigzag downwards. This may be minute wave a as a three wave structure; minor wave 2 would be indicated as unfolding as a flat correction. Alternatively, minor wave 2 may be over as a very brief and very shallow double zigzag today. The wave count would have better proportion though if it were to continue further, so that is how it is labelled.

If minor wave 2 is a flat correction, then within it minute wave b should move higher to reach a minimum 0.9 length of minute wave a at 2,184.68. The normal range for minute wave b of a flat correction is from 1 to 1.38 the length of minute wave a, giving an expected range for upwards movement to end from 2,185.44 to 2,188.32.

Thereafter, minute wave c downwards should end below the end of minute wave a at 2,177.85 to avoid a truncation.

When minute wave b is a complete three wave structure, then the type of flat may be known and a target may be calculated for minute wave c down. That cannot be done yet. At this early stage, minor wave 2 may be expected to end about either the 0.236 Fibonacci ratio at 2,177 or the 0.382 Fibonacci ratio at 2,171.

Minor wave 2 may continue overall sideways for another two to four days. This would give a good proportion to the impulse of minor wave 1 it is correcting, which lasted four days.

At 2,332 intermediate wave (3) would reach equality in length with intermediate wave (1). This is a reasonable Fibonacci ratio to use for the target because intermediate wave (2) would be very shallow at only 0.15 of intermediate wave (1).

At 2,445 intermediate wave (3) would reach 1.618 the length of intermediate wave (1).

Intermediate wave (3) may only subdivide as an impulse. Minor wave 1 would still be incomplete within intermediate wave (3). Minor wave 2 may not move beyond the start of minor wave 1 below 2,147.58.



S&P 500 weekly 2016
Click chart to enlarge.

This alternate may again diverge from the main wave count, so it will again be published.

The other structural possibility for cycle wave V is an ending diagonal. Ending diagonals are more often contracting than expanding, so that is what this alternate will expect.

Ending diagonals require all sub-waves to subdivide as zigzags. Zigzags subdivide 5-3-5. Thus primary wave 1 may now be a complete (or almost complete) zigzag, labelled intermediate waves (A)-(B)-(C) which subdivides 5-3-5.

The normal depth for second and fourth waves of diagonals is from 0.66 to 0.81 the prior actionary wave. Primary wave 2 may end within this range, from 1,938 to 1,881.

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

When primary wave 2 is a complete zigzag, then another zigzag upwards for primary wave 3 must make a new high above the end of primary wave 1. It would most likely be shorter than primary wave 1 as diagonals are more commonly contracting. If primary wave 3 is longer than primary wave 1, then an expanding diagonal would be indicated.

The psychology of diagonals is quite different to impulses. Diagonals contain corrective characteristics and subdivide as a series of zigzags. When diagonals turn up in fifth wave positions, they take on some of the properties of the correction which inevitably follows them. The deterioration in fundamentals and underlying technicals is more extreme and more evident. There is some support for this idea at this time.

The final target of 2,500 would not be able to be reached by an ending contracting diagonal. The final target for this alternate would be calculated only when primary wave 4 is complete.

The classic pattern equivalent is a rising wedge.


S&P 500 daily 2016
Click chart to enlarge.

It is possible now that intermediate wave (C) is a complete five wave impulse. However, this wave count suffers from disproportion between minor waves 2 and 4 which gives this possible impulse an odd look.

Because this wave count expects to see a substantial trend change here from bull to bear for a multi week deep pullback, it absolutely requires some indication from price before confidence may be had in it. A new low below 2,147.58 this week would add confidence.



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

The bearish implications of the stalled candlestick pattern should now be fulfilled with two weeks of a small consolidation.

Last week ended with a new high at the close. The weekly candlestick is a hanging man, but due to the bullish implications of the long lower wick and the green real body this requires confirmation with a downwards week before the bearish implications can be considered seriously.

At this stage, any deeper pullback should find strong support at the lilac trend line. Support at this line should stop any pullback from being very deep.

Last week the bulls were dominant. They rallied to push price out of a consolidation and managed to hold price above prior resistance to close above on Friday. The long lower wick of this weekly candlestick is bullish.

The weekly candlestick comes with slightly lighter volume than last downwards week. The rise in price was not well supported by volume. But that has been a common pattern in recent months, so perhaps not too much bearishness should be read in to this here.

On Balance Volume is still bullish as it remains above the purple trend line.

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


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

A sideways consolidation has ended. Price has broken above resistance and closed above that point for Friday’s session. The horizontal line about 2,175 should now provide support.

Friday had some support for the rise in price from volume.

It now looks like Monday’s session has offered a typical back test to the prior support line about 2,175 with a small downwards day. With Monday’s session coming on lighter volume, the fall in price is not supported by volume and looks like a counter trend movement. This supports the main Elliott wave count over the alternate.

ADX turned upwards on Friday and is still upwards for Monday. The +DX line is above the -DX line. An upwards trend is again indicated.

ATR has not yet turned upwards. Some disagreement between these two trending indicators at the start of a trend is common. If ATR also turns upwards, then further confidence may be had in the main Elliott wave count. For now some caution is advised.

On Balance Volume is bullish above the grey line. There is no divergence with price and OBV.

RSI is not yet overbought. There is room for price to rise. There is divergence between price and RSI at the high of Friday and the high of 20th of July, indicating some weakness in price. But recently divergence between price and indicators has proven to be unreliable. It is treated with some suspicion here. It may disappear again.

Stochastics also shows strong divergence, but this is even less reliable than RSI and divergence, so it is given zero weight in this analysis. Stochastics is not extreme. There is plenty of room for price to rise.

Lowry Research shows this rise comes with increasing market breadth. There is not enough selling pressure for price to fall; the consolidation looks like a period of accumulation. With a breakout on slightly higher volume for Friday, this accumulation phase looks to be over and the sideways range was a pause in an upwards trend and not the start of a new downwards trend. With broad agreement between Lowry’s analysis and this analysis presented here, I have more confidence in the upwards trend continuing.


VIX daily 2016
Click chart to enlarge. Chart courtesy of

Volatility is declining as price is rising. This is normal for an upwards trend.

There is an example of multi day divergence with price and VIX (blue lines) which did lead to some downwards movement. The downwards movement that resulted from this divergence lasted only for two days, but it did make a new low.


AD Line daily 2016
Click chart to enlarge. Chart courtesy of

There is support from market breadth as price is rising. The AD line shows no divergence with price; it is making new highs with price.


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 @ 11:46 p.m. EST.