The main Elliott wave count expected that Tuesday’s session would move price lower, and it has. But the target has not yet been reached.
This wave down may not exhibit a Fibonacci duration in terms of how many days it lasts. The target remains the same.
Summary: Still one more day of downwards movement to 2,137 is expected. Thereafter, price should turn up to make a new high above 2,179.58.
Last monthly chart for the main wave count is here.
New updates to this analysis are in bold.
MAIN WAVE COUNT
WEEKLY CHART
Click chart to enlarge.
Cycle wave V must subdivide as a five wave structure. I have two wave counts for upwards movement of cycle wave V. This main wave count is presented first only because we should assume the trend remains the same until proven otherwise. Assume that downwards movement is a correction within the upwards trend, until proven it is not.
Primary wave 3 is shorter than primary wave 1, but shows stronger momentum and volume as a third wave normally does. Because primary wave 3 is shorter than primary wave 1 this will limit primary wave 5 to no longer than equality in length with primary wave 3, so that the core Elliott wave rule stating a third wave may not be the shortest is met. Primary wave 5 has a limit at 2,302.47.
Primary wave 2 was a shallow 0.40 expanded flat correction. Primary wave 4 may be exhibiting alternation as a more shallow combination.
Primary wave 4 may not move into primary wave 1 price territory below 2,111.05.
It is also possible to move the degree of labelling within cycle wave V all down one degree. It may be only primary wave 1 unfolding. The invalidation point for this idea is at 1,810.10. That chart will not be published at this time in order to keep the number of charts manageable. The probability that this upwards impulse is only primary wave 1 is even with the probability that it is cycle wave V in its entirety.
When the five wave structure upwards labelled primary wave 5 is complete, then my main wave count will move the labelling within cycle wave V all down one degree and expect that only primary wave 1 may be complete. The labelling as it is here will become an alternate wave count. This is because we should always assume the trend remains the same until proven otherwise. We should always assume that a counter trend movement is a correction, until price tells us it’s not.
DAILY CHART
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Primary wave 4 may be now complete as a double combination.
It is possible now that primary wave 4 could continue further as a triple, but because triples are very rare the probability of this is very low. If it is over here, then the proportion with primary wave 2 looks right. Within primary wave 5, no second wave correction may move beyond the start of its first wave below 2,119.12.
Primary wave 1 lasted 47 days, primary wave 2 was even in duration at 47 days, primary wave 3 lasted 16 days, and primary wave 4 has lasted 37 days. The proportions between these waves are acceptable.
If primary wave 5 has begun here, then at 2,233 it would reach 0.618 the length of primary wave 1.
At this stage, an impulse for primary wave 5 looks unlikely with invalidation of that idea at the hourly chart level. An ending diagonal now looks more likely for primary wave 5. Ending diagonals are choppy overlapping structures. The classic technical analysis equivalent is a rising wedge. They are terminal structures, doomed to full retracement at their end.
If primary wave 5 comes up to touch the upper edge of the maroon channel, it may end there.
HOURLY CHART
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If primary wave 5 is subdividing as an ending diagonal, then all sub-waves must subdivide as zigzags. Intermediate wave (1) may be a completed zigzag.
Second and fourth waves within diagonals have a normal depth of from 0.66 to 0.81 the prior wave. This gives a target range for intermediate wave (2) from 2,140 to 2,131.
Intermediate wave (2) must subdivide as a zigzag. It may not move beyond the start of intermediate wave (1) below 2,119.12.
Intermediate wave (1) lasted a Fibonacci eight days.
Intermediate wave (2) has now lasted a Fibonacci eight days and the structure is not quite complete; it may not exhibit a Fibonacci duration. Minor wave A looks like a five, minor wave B looks like a three, now minor wave C downwards needs to complete as a five. Minor wave C is very likely to make at least a slight new low below the end of minor wave A at 2,141.55 to avoid a truncation. The target remains the same. At 2,137 minor wave C would reach equality in length with minor wave A, the most common ratio for wave C in relation to wave A.
This downwards movement may end during tomorrow’s session.
ALTERNATE WAVE COUNT
WEEKLY CHART
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What if an impulse upwards is complete? The implications are important. If this is possible, then primary wave 1 within cycle wave V may be complete.
With downwards movement from the high of primary wave 1 now clearly a three and not a five, the possibility that cycle wave V and Super Cycle wave (V) are over has substantially reduced. This possibility would be eliminated if price can make a new all time high above 2,193.81.
If an impulse upwards is complete, then a second wave correction may be unfolding for primary wave 2. Expectations on how deep primary wave 2 is likely to be are now adjusted. It may be expected now to more likely only reach the 0.382 Fibonacci ratio about 2,038.
At this stage, it looks like price has found strong support at the lilac trend line.
Primary wave 2 may not move beyond the start of primary wave 1 below 1,810.10.
DAILY CHART
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If an impulse upwards is complete, then how may it subdivide and are proportions good?
Intermediate wave (1) was an impulse lasting 47 days. Intermediate wave (2) was an expanded flat lasting 47 days. Intermediate wave (3) fits as an impulse lasting 16 days, and it is 2.04 points short of 0.618 the length of intermediate wave (1). So far this alternate wave count is identical to the main wave count (with the exception of the degree of labelling, but here it may also be moved up one degree).
Intermediate wave (4) may have been a running contracting triangle lasting 22 days and very shallow at only 0.0027 the depth of intermediate wave (3). At its end it effected only a 0.5 point retracement. There is perfect alternation between the deeper expanded flat of intermediate wave (2) and the very shallow triangle of intermediate wave (4). All subdivisions fit and the proportion is good.
Intermediate wave (5) would be very brief at only 18.29 points. Intermediate wave (5) is 1.43 points longer than 0.056 the length of intermediate wave (1).
At this stage, primary wave 2 now has a completed zigzag downwards that did not reach the 0.236 Fibonacci ratio. It is very unlikely for this wave count that primary wave 2 is over there; the correction is too brief and shallow. Upwards movement labelled intermediate wave (X) is so far less than 0.9 the length of the prior wave down labelled intermediate wave (W). The minimum for a flat correction has not been met. Primary wave 2 may continue lower as a double zigzag. A second zigzag in the double may be required to deepen the correction closer to the 0.382 Fibonacci ratio.
Intermediate wave (W) lasted a Fibonacci 13 sessions. Intermediate wave (X) has now lasted a Fibonacci eight sessions. If intermediate wave (Y) is equal in duration with intermediate wave (W), that would give the wave count a satisfying look.
Primary wave 2 may not move beyond the start of primary wave 1 below 1,810.10. A new low below this point would see the degree of labelling within cycle wave V moved up one degree. At that stage, a trend change at Super Cycle degree would be expected and a new bear market to span several years would be confirmed.
I will not publish an hourly chart for this alternate. The double zigzag of primary wave 2 is not looking right, so I do not have reasonable confidence in this wave count. Publication of an hourly chart for it would give it too much weight.
TECHNICAL ANALYSIS
WEEKLY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
The lilac trend line has strong technical significance. Price has broken through resistance, turned down to test support, and is now moving up and away from this line. It is reasonable to conclude that a new all time high is a likely consequence of this typical behaviour.
Last week closed green and has some support from volume. A further rise in price overall would be expected to follow.
On Balance Volume last week came up to touch the purple trend line. It may find some resistance there. A break above this line would be a weak bullish signal. There is divergence with the high last week and the prior high seven weeks ago: OBV has made a higher high but price has made a lower high. This divergence is bearish and indicates weakness in price. This old bull market continues to show internal weakness.
RSI is not extreme and exhibits no divergence at the weekly chart level to indicate weakness in price. There is room for price to rise further.
DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
Te fall in price today has some support from volume. More downwards movement may now be expected for at least one more day. This supports the Elliott wave count.
Price today overshot the lower edge of the triangle pattern. The lower edge may need to be redrawn. If price moves up tomorrow, then it should be. It may be a warning of more downwards movement ahead. Price may be expected to find support about 2,134 and thereafter at 2,120. This also fits with the Elliott wave count.
The short term Fibonacci 13 day moving average is still above the mid term Fibonacci 55 day moving average. The mid term average is still pointing up and is above the long term 200 day moving average. Assume the trend is the same until proven otherwise. Assume the larger trend is still upwards at this time.
Shorter term ADX indicates today there is a downwards trend. ADX is above 15 and has today slightly increased beyond yesterday. This, in conjunction with slightly higher volume today, indicates a little more downwards movement to support may yet continue.
ATR very slightly increased today but overall remains flat. It does not support ADX. Bollinger Bands are contracting further. If there is a downwards trend then, it should show an increase in volatility and not a decrease. This small downwards movement may more likely be a counter trend pullback. This is also the view of the Elliott wave count.
On Balance Volume has today broken below the short term yellow support line. This is a weak bearish signal; only weak because this line is too brief to have reasonable technical significance. There is no divergence today between price and OBV to indicate short term weakness.
RSI is still hovering about neutral. There is plenty of room for price to rise or fall.
Stochastics has still not reached overbought.
MACD still gives a buy signal with a cross of the short term average above the longer term average. If it crosses above zero, the signal would be stronger.
VOLATILITY – INVERTED VIX CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
There are a few instances of multi day divergence between price and inverted VIX noted here. Bearish divergence is blue. Bullish divergence is yellow. It appears so far that divergence between inverted VIX and price is again working to indicate short term movements spanning one or two days.
Two days of downwards movement may be enough to resolve the short term bearish divergence noted in last analysis for price and VIX (most recent blue lines). With the first downwards day particularly weak though, it is reasonable to allow for one more day here
BREADTH – AD LINE
Click chart to enlarge. Chart courtesy of StockCharts.com.
There is support from market breadth as price is rising.
Short term bullish and bearish divergence is again working between price and the AD line to show the direction for the following one or two days.
Two days of downwards movement may be enough to resolve the short term bearish divergence noted in last analysis for price and the AD line (most recent blue lines). With the first downwards day particularly weak though, it is reasonable to allow for one more day here.
DOW THEORY
Major lows within the old 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 bear market from November 2014:
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 @ 01:15 a.m. EST on 5th October, 2016.
It looks like a triangle is forming. And with a B wave in the picture, that’s probably what it is.
This wave count fits neatly. It would expect a short sharp thrust down after the triangle for minor C to move below the end of minor A at 2,141.55, to then be quickly reversed as intermediate (3) up begins.
But first, minute waves d and e of the triangle would need to complete.
Minute c may not move above the end of minute a at 2,175.30. Above that point it would be likely that intermediate (2) is over and intermediate (3) up should be underway.
Working on an alternate idea now too.
Looks like my current EW count is all screwed up…lol.
LOL
Not necessarily…
If you’d like to share you may have seen something I’ve missed.
Yep! The tug of war continues- up one day, down the next, rinse and repeat!
It would be really great if futures gave us a heads-up on the impending break from the triangle. I am having to set up contingency orders on all my trading positions as I cannot monitor the intra-day action as closely as I would normally. The proverbial calm before the storm I imagine….
Lara,
Is there any possibility that we are still in Primary 4, with all the sideways movement since mid-August constituting a triangle of some sort?
Thanks,
Peter
Technically possible yes, but it would be a triple. They’re so very rare, I’ve only ever seen about 2-3 in my several years.
It looks like we have another triangle. And it’s likely a B wave.
Actually, there’s another possibility. If the degree of labelling within primary 4 is moved down one degree that may only have been wave A of a larger flat correction.
The wave up I have labelled intermediate (1) would be wave B of a flat correction.
But now you see there is a problem with the idea. Wave C down should be a five, and with what looks like a triangle unfolding it can’t be a second wave correction (second waves can’t unfold as triangles) so that piece of movement doesn’t work.
The other problem there would be primary 2 was an expanded flat, if primary 4 is continuing as a flat as I just described it too would be an expanded flat. That’s the least likely structure for it to take, no alternation at all.
Dropping in for a peek…looks like hourly count for main wave invalidated with move above 2154.77. Triangle continues and move out of it will in all likelihood be quite violent. Which way??!!
IFF I remember my Elliotwave theory correctly, triangles tend to be in the 4th or b wave position. If so, this should continue up once complete. However, with that being said, this looks like only the d wave of the triangle here. Once complete, we should get a trade-able e wave down on the hourly. e waves have a tendency to be short, so keep that in mind if you plan on trying to trade it.
Hopefully Lara can give us her thoughts on it as my EW theory is a little rusty.
The current triangle was initiated on a downward move so the break from it would normally expected to be downward, continuing, and ultimately probably completing the move.
It is really starting to look to me like the banksters are loosing this tussle. They have been burning an awful lot of capital and going absolutely nowhere. There is something inexorable about the way the indices are drifting toward the all-important pivots and this is all occurring in the absence of strong selling pressure. If the bears choose to up the ante as we approach those pivots, the price action is suggesting that there is as equal a chance that we smash through them as bounce off them. The banksters are looking tired….
Morning!! Hope its a good trading day for all 🙂