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Downwards movement invalidated the hourly Elliott wave count when price crossed the near by invalidation point.

The daily Elliott wave count remains valid.

Summary: A new high above 2,193.42 would indicate a third wave up is underway, target 2,230. A new alternate wave count has a good probability and expects a little more downwards movement. If price moves below 2,168.50, then expect more downwards movement to a target at 2,152 but not below 2,111.05.

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. If price makes a new high above 2,203.68, then that would provide enough confidence that intermediate wave (2) should be over to move the invalidation point on the weekly chart up to 2,147.58.

There is one other possible structure for cycle wave V, an ending diagonal. This alternate will still be charted and considered, but will not be published at this time. A new alternate that has a higher probability will be published today.


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.

Within intermediate wave (3), minor waves 1 and 2 should be complete. Within minor wave 3, if minute wave ii moves any lower, it may not now move below the start of minute wave i at 2,168.50.

Add a mid line to the base channel drawn about primary waves 1 and 2. Draw this channel from the start of primary wave 1 (seen on the weekly chart) to the end of primary wave 2, then place a parallel copy on the end of primary wave 1. The mid line may provide some support along the way up.

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, one doji and a green candlestick with a long lower wick, this wave count so far has a typical look.


S&P 500 hourly 2016
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Minute wave ii fits as an expanded flat that should now be complete. Within minute wave ii, minuette wave a is a three, minuette wave b is a three, and the triangle is subminuette wave b within minuette wave b. Minute wave b is a 1.63 length of minute wave a. This is longer than the common length of up to 1.38, but within allowable convention of up to 2.

There is no Fibonacci ratio between minute waves a and c.

Short and mid term targets remain the same for this wave count. At 2,230 minor wave 3 would reach 1.618 the length of minor wave 1.

At 2,332 intermediate wave (3) would reach equality in length with intermediate wave (1). If price gets to the first target and the structure is incomplete, or if price keeps rising through this first target, then the second target would be used. At 2,445 intermediate wave (3) would reach 1.618 the length of intermediate wave (1).

Minute wave ii may not move beyond the start of minute wave i below 2,168.50.

This main wave count expects to see an increase in upwards momentum, which should be supported by stronger volume.



S&P 500 weekly 2016
Click chart to enlarge.

This alternate is new. Thank you to our member Peter R. for pointing out this idea.

This alternate has a good probability. Overall, it has the right look and explains sideways movement for the last few weeks nicely. The probability is about even with the main wave count at this stage, in my judgment. If this alternate is correct, then it should be confirmed within the next day or so.

If the degree of labelling within primary wave 3 is simply moved up one degree, then it is possible that primary wave 3 is over. Primary wave 3 may have been 2.04 points short of 0.618 the length of primary wave 1. With primary wave 3 shorter than primary wave 3, the upcoming length of primary wave 5 is limited to no longer than equality with primary wave 3 at 183.95 points, so that the core rule stating a third wave may not be the shortest is met. Primary wave 5 should also be weaker than primary wave 3, so that primary wave 3 is not the weakest wave.

Current sideways movement may be primary wave 4. When primary wave 4 is complete, then a final target for primary wave 5 may be calculated. That cannot be done yet. The target for the main wave count at 2,500 would be far too high.

Primary wave 2 fits as an expanded flat. Primary wave 4 may be a double combination exhibiting some alternation in structure with primary wave 3.

Primary wave 4 may not move into primary wave 1 price territory below 2,111.05.


S&P 500 daily 2016
Click chart to enlarge.

Primary wave 2 was a shallow 0.40 expanded flat correction lasting 47 days. Primary wave 4 may be unfolding as a more shallow double combination that has so far lasted 25 days. The structure is incomplete.

Within primary wave 4, the first structure in the double is an expanded flat labelled intermediate wave (W). The double is joined by a three, a zigzag in the opposite direction, labelled intermediate wave (X). There is no maximum limit for X waves. They may make new price extremes beyond the start of wave W in the same way that B waves within flats may do.

The second structure in the double would be a zigzag labelled intermediate wave (Y).

A new low now below 2,168.50 should be taken as invalidation of the main wave count and confirmation of this alternate. At that stage, expect more downwards movement.

At 2,152 minor wave C would reach 1.618 the length of minor wave A.

Within minor wave C, no second wave correction may move beyond the start of its first wave above 2,193.42.


S&P 500 hourly 2016
Click chart to enlarge.

Intermediate wave (Y) fits best as a zigzag because minor wave A downwards fits best as a five and minor wave B ended below the start of minor wave A.

Minor wave C must subdivide as a five wave structure. So far minute waves i and ii may be complete. Minute wave iv may not move into minute wave i price territory above 2,180.60.

The final target at 2,152 would see intermediate wave (Y) end slightly above the end of intermediate wave (W) at 2,147.58. If the target at 2,152 is wrong, it may be a little too high. The whole structure of the combination should take up time and move price sideways.



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

Last week completes another doji candlestick, this time with a slightly wider range than the week before. Overall, this doji represents a balance between bulls and bears with the bears very slightly stronger to complete a red candlestick. A slight increase in volume is slightly bearish, but in this instance because the candelstick is a doji we should look inside at the daily volume bars for a clearer picture.

On Balance Volume remains bullish while it is above the longer purple trend line. A new trend line is added. A break above this shorter and steeper line would be another bullish signal.

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


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

Price has closed just below the short term light blue trend line. This line is no longer offering support.

Two downwards days in a row come with slightly increasing volume. In the short term, the volume profile is slightly bearish. This supports the alternate wave count over the main.

ADX today indicates a possible trend change from up to down, for the first time since 8th of July. At this stage, if the black ADX line turns upwards, then a downwards trend would be indicated. For now the ADX line is still declining, indicating the market is consolidating and not trending.

ATR remains overall flat in agreement with ADX that this market is consolidating.

Bollinger Bands are still tightly contracted, typical of a consolidating market.

RSI is approaching neutral. There is room for price to rise or fall. There is some bullish divergence today between the lows of price and RSI from 16th of August to 24th of August: RSI today made a lower low but price has made a higher low. This divergence is hidden bullish and indicates weakness in price. This favours the main Elliott wave count over the alternate.

Stochastics is returning to neutral from overbought. A range bound trading approach would expect to see a continuation of downwards movement from here until price finds support and Stochastics is oversold at the same time. Price may be expected to find support about 2,145. This approach fits with the alternate wave count.


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.

It appears so far that divergence between inverted VIX and price is again working to indicate short term movements spanning one or two days.

There is no divergence noted today between price and inverted VIX. VIX has made a new low below the prior low of 16th of August and price has also made a new low below its low of 16th of August.


AD Line daily 2016
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There is support from market breadth as price is rising.

From yesterday, there is a slightly longer term hidden bearish divergence between price and the AD line. The AD line made a new high above the prior high of 15th of August, but price made a slightly lower high. This indicates some weakness in price. So far this divergence has been followed by a day of downwards movement, so as a bearish indicator it was accurate. It may yet be followed by more downwards movement, or not. Unfortunately, this divergence makes no comment on by how much or for how long price may subsequently move.


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 November, 2015) – closed above this point on 8th June, 2016.

Nasdaq: 5,176.77 (2nd December, 2015) – 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 @ 08:33 p.m. EST.