Select Page

Yesterday’s main and alternate Elliott wave counts expected more downwards movement. This is what happened.

The target for the main Elliott wave count remains the same.

Summary: A green daily candlestick or a doji may unfold tomorrow as a fourth wave correction ends. Thereafter, more downwards movement would be expected. The target remains the same at 2,089.

Last monthly chart for the main wave count is here.

Last weekly chart is here.

New updates to this analysis are in bold.



S&P 500 daily 2016
Click chart to enlarge.

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.

Intermediate wave (W) lasted a Fibonacci 13 sessions. Intermediate wave (X) is a complete triangle. X waves may subdivide as any corrective structure (including multiples), and a triangle is possible here.

So far intermediate wave (Y) has lasted 18 sessions. If it exhibits a Fibonacci duration, then it may end in another two sessions to total a Fibonacci 21, or another 16 sessions to total a Fibonacci 34.

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. A new alternate wave count below outlines this possibility.


S&P 500 hourly 2016
Click chart to enlarge.

At 2,089 minor wave C would reach 1.618 the length of minor wave A. This would take intermediate wave (Y) somewhat below the end of intermediate wave (W), achieving its purpose of deepening the correction.

The strong downwards movement for Tuesday’s session fits as the middle of a third wave. Price may now move through a series of small fourth wave corrections and fifth waves down to complete the whole structure of minor wave C.

Micro wave 3 is just 0.83 points longer than 1.618 the length of micro wave 1.

Micro wave 4 may not move into micro wave 1 price territory above 2,119.36.

Downwards movement for Wednesday’s session fits as a 5-3-5. This may be two first and second waves within micro wave 5, or it may be a zigzag down within micro wave 4. For this reason the invalidation point is left at the low of micro wave 1. It is entirely possible that micro wave 4 may not be over and may move higher tomorrow to produce a green daily candlestick.

At the low for today, there is some weakness indicated by RSI moving into oversold and now showing divergence with price. This may be followed by a bounce tomorrow. If micro wave 4 moves up tomorrow to complete a flat correction, then submicro wave (C) would be very likely to make at least a slight new high above the end of submicro wave (A) at 2,108.73 to avoid a truncation. If micro wave 4 continues as a triangle or combination, then a new high above 2,108.73 may not happen.

Downwards movement should continue thereafter, so that the structure of minor wave C is a complete five wave impulse.



S&P 500 daily 2016
Click chart to enlarge.

At this stage, a deeper pullback has been indicated by price for the main wave count. What if this downwards movement is the start of something even bigger?

This wave count expects that a new bear market to span several years and take price substantially below 666.76 has begun. For such a huge call it absolutely requires price confirmation below 1,810.10.

If a new bear market has begun, then the degree of labelling within the last impulse upwards is simply moved up one degree.

Downwards movement from the all time high may be a series of overlapping first and second waves. What looks like an obvious triangle must be ignored for this wave count. This is problematic, and it reduces the probability of this wave count. But this is a viable wave count.

The dark blue channel is a base channel about minor waves 1 and 2. Minor wave 3 should have the power to break through the lower edge of the base channel. The middle of minor wave 3 would not yet have passed for this wave count because price remains within the base channel.

Within the middle of the third wave, micro wave 4 may not move into micro wave 1 price territory above 2,119.36.



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

The lilac trend line has strong technical significance. Price broke through resistance, turned down to test support for the first time, and then moved up and away from this line. It was reasonable to conclude that a new all time high is a likely consequence of this typical behaviour.

Now price has come back down for a third test of the lilac trend line. A break below this line is a highly significant bearish signal.

Last downwards week closes red and has support from volume. Increased volume last week is bearish.

At the weekly chart level, On Balance Volume may find support here at the horizontal yellow trend line, which may halt a further fall in price. This support line on OBV in conjunction with the lilac support line for price are strong indicators that downwards movement is very likely to be over.

RSI is still close to neutral. There is plenty of room for price to rise further.


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

Price has moved lower overall now for five days. Today saw a further increase in volume although the increase was small. With volume rising as price falls, the fall is supported by more active selling.

ADX indicates a downwards trend is in place. ATR may be beginning to agree as it may be showing some increase. Bollinger Bands are widening. With all three of these indicators mostly in agreement, it may be assumed that a downwards trend is currently in place.

On Balance Volume continues to be very bearish.

RSI is not yet extreme at the daily chart level. There is still a little room for price to fall before a bounce may be expected.

Stochastics is not yet extreme.

MACD indicates a downwards trend with momentum.


VIX daily 2016
Click chart to enlarge. Chart courtesy of

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.

No new divergence is noted today.


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

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.

No new short term divergence is noted today.


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 @ 11:39 p.m. EST.