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A little downwards movement to 2,171 – 2,168 was expected before the resumption of upwards movement. This is not what happened.

Price moved upwards for the session and did not first make a new low.

Summary: The trend remains the same, until proven otherwise. Assume the trend is up while price is above 2,172. 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 two red candlesticks and one doji, this wave count so far has a typical look.


S&P 500 hourly 2016
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Minor waves 1 and 2 now look very likely to be complete. Minor wave 3 may have begun on Thursday’s session.

At 2,233 minor wave 3 would reach 1.618 the length of minor wave 1.

Mid term targets for intermediate wave (3) remain the same. At 2,332 intermediate wave (3) would reach equality in length with intermediate wave (1). If price keeps rising through this first target, or if when it gets there the structure is incomplete, then the second target would be used. At 2,445 intermediate wave (3) would reach 1.618 the length of intermediate wave (1).

The cyan support line is drawn from the start of intermediate wave (1) to the end of intermediate wave (2). The lilac support line is drawn from the end of intermediate wave (2) to the end of minor wave 2. These lines may provide support if a deeper correction unfolds.

Minute wave i fits as a complete impulse on the five minute chart. Minute wave ii fits as another expanded flat correction. This wave count now expects to see an increase in upwards momentum over the next few days; upwards movement from price should be supported by volume.

If minute wave ii continues, it may not move beyond the start of minute wave i below 2,172.



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

Price has closed higher to complete a green daily candlestick on stronger volume than the last two downwards days. There was some support for the rise in price today. In the short term, the volume profile is bullish. So far during this upwards trend, which began back on 28th of June, each time price moved up with some increase in volume it was followed by a new high at least the day after. This pattern may reasonably be expected for tomorrow.

ADX has slightly increased today indicating the resumption of an upwards trend may be in its early stages. ATR today is mostly flat, not in agreement with ADX. However, so far this upwards trend is characterised by flat and declining ATR, so this pattern may continue. Price keeps moving upwards despite declining ATR. The trend is weak, but it is still a trend.

A close above 2,188 on a day with increased volume would add further confidence that price is breaking out upwards from the recent consolidation. A break below 2,148 would indicate a downwards breakout, preferably with support from volume for confidence.

During this consolidation, it is a downwards day of 27th of July that has strongest volume indicating a downwards breakout may be more likely than upwards. However, this trick with volume has recently proven to be unreliable for the S&P at the monthly time frame and may also prove unreliable here. It is a weak indication to take note of, but it will not be given too much weight.

During the longer term upwards trend from the low on 27th of June, price is finding support about the 13 day moving average and the mid line of the Bollinger Bands. With both of these aligned now, this may offer reasonable support.

Trend lines on On Balance Volume are again redrawn today. OBV is range bound. A break above the grey line would be bullish. A break below the yellow line would be bearish.

RSI is not extreme. There is room for price to rise or fall.

Stochastics is still just overbought. With ADX now indicating a trending market, Stochastics may not be of much use at this time. Normally, divergence between price and Stochastics during a trend would indicate weakness and the approaching end of the trend but recently divergence has been shown to be unreliable. There is divergence today between a new high from price but a lower high for Stoachastics. No weight will be given to this divergence, but it will be noted.

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 are a few instances of multi day divergence between price and inverted VIX noted here. Bearish divergence is blue. Bullish divergence is yellow. Each of these instances was followed by expected price movement if only for two days. Divergence with VIX and price is not always working, but it is still sometimes working. So it will be noted.

Price today has made a new high, but inverted VIX has failed to make a corresponding high. If this disappears tomorrow, then it will be ignored. But today it warns of a possible movement against the upwards trend tomorrow.


AD Line daily 2016
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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 @ 10:38 p.m. EST.