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Yesterday’s hourly Elliott wave count expected some upwards movement to end between 2,185.44 to 2,188.32, then downwards movement.

Price began the session with upwards movement and reached 1,287.66 before turning downwards exactly as expected.

Summary: The trend remains the same, until proven otherwise. Assume the trend is up while price is above 2,147.58. In the short term, tomorrow may see lower movement to 2,171 – 2,168 before the upwards trend resumes. 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.

At this stage, it looks most likely that intermediate wave (3) has begun. It should be expected to show the subdivisions of minor waves 2 and 4 clearly on the daily chart with one to a few red daily candlesticks or doji. With minor wave 2 now showing as one red candlestick and one doji, this wave count so far has a typical look.


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.

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.

Minor wave 2 so far fits best as an incomplete expanded flat correction. These are very common structures. So far minute wave a is a three, a double zigzag. Minute wave b may be a single zigzag although this upwards wave looks suspiciously like a five wave impulse on the five minute chart. If this wave count is wrong today, it may be in expecting more downwards movement to end minor wave 2. It is possible that minor wave 2 is already over. Look out for surprises to the upside with a third wave at three degrees up possibly starting.

At 2,168 minute wave c would reach 2.618 the length of minute wave a. This is close to the 0.382 Fibonacci ratio of minor wave 1 at 2,171 giving a 3 point target zone.

Within minute wave c, so far minuette waves (i) and now (ii) may be complete. In the short term, a new high above 2,187.66 could not be a continuation of minuette wave (ii), so short term the structure of minor wave 2 as labelled here would be invalidated above 2,187.66. At that stage, if that happens tomorrow, then expect minor wave 2 was over and upwards momentum should increase.

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. It looks like a three where it should look like a five. However, the S&P just does not always have waves which look right at all time frames.

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.

At this stage, there is not enough selling pressure to support this wave count. When the market has fallen recently, it has fallen of its own weight. For a deep pullback sellers would have to enter the market and be active enough to push price lower. That is not happening at this time.



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.

Monday and Tuesday have both completed red daily candlesticks on lighter and declining volume. The fall in price is not supported by volume, so it is suspicious. This supports the main Elliott wave count over the alternate. If a deep pullback was just beginning, then downwards volume should be stronger than this. The market is again falling of its own weight; there is little selling pressure.

ADX is increasing, indicating the market is trending upwards.

ATR continues to disagree though, as it has for the entire trend from the low of 27th June to the last high. There is still something wrong with this trend. It is not normal nor healthy so far. It looks like price is rising on weak buying power due to a lack of resistance, and when price falls it is not falling far or fast due to a lack of selling pressure. This pattern may yet continue through the next wave up.

On Balance Volume is bullish while it remains above both trend lines.

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

Stochastics is only now entering overbought, but this oscillator may remain extreme for reasonable periods of time during a trending market. When and if it shows divergence, it would be indicating some weakness in price. But at this time divergence is proving to be fairly unreliable, so it will be given little weight.

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
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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 now closed above this point on 1st August, 2016.

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 @ 11:16 p.m. EST.