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Yesterday’s analysis expected to see a green daily candlestick or doji for Thursday’s session.

This is not what happened, price has continued lower.

Summary: This trend may continue for a little longer and move a little lower. Some signs of weakness are now showing up, but not enough to call a low. Not yet. The target is now a simple Fibonacci retracement of the prior wave up at 2,038. Use the pink channel on the hourly chart. When and if price breaks above it with upwards (not sideways movement), then exit short positions.

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 19 sessions. If it exhibits a Fibonacci duration, then it may end in another two sessions to total a Fibonacci 21, or another 15 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.

The first target at 2,089 looks to be too high now, because it does not allow enough room for the structure of minor wave C to complete. The target will now be about 2,038, the 0.382 Fibonacci ratio of primary wave 1. This target would see primary wave 2 move out of the wide channel (maroon), which contains primary wave 1, and end with a small overshoot only of the even wider teal channel (copied over from the weekly and monthly charts), which contains the whole of Super Cycle wave (V).


S&P 500 hourly 2016
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Minor wave C is still an incomplete five wave impulse structure. It still needs two more small fourth wave corrections and two more fifth waves down to complete it.

Minuette wave (iv) and minute wave iv may find resistance at either the mid line or the upper edge of the pink channel.

Minuette wave (iv) may not move into minuette wave (i) price territory above 2,133.11. It should not get anywhere near this point though. It should first find strong resistance at the upper edge of the pink channel.

The pink channel is a best fit acceleration channel. When minute wave iii is complete, then the upper edge should show where minute wave iv should find resistance. When this channel is properly breached by upwards movement, then it would be indicating an end to this wave down.

Expect the trend to continue while price remains within the channel.



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

A slight decline in volume today gives a small cause for concern over the main wave count and the target. Volume remains fairly heavy though compared to prior movement.

ADX is still increasing, indicating a downwards trend is in place. It is approaching extreme at 35 though, so this trend may be ready either to end or for an interruption soon. Not quite yet though.

ATR is now flattening off. This too indicates some tiredness, along with the slight decline in volume. Bears are not able to push price down in increasing amounts, so their activity is waning slightly.

Bollinger Bands widened further. This market is still trending downwards.

RSI and Stochastics are now just beginning to move into oversold. Only when they are oversold and then exhibit divergence may an end to this wave down be expected. That is not the case yet.


VIX daily 2016
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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
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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.


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

The McClellan Oscillator is now extreme (below 60). On its own this is not an indicator of a low, but it is a warning that this market is oversold. The McClellan Oscillator today is at -73.44.

On the 21st August, 2015, the McClellan Oscillator reached a similar point of -71.56. Price found a low the next session, 104 points below the closing price of the 21st August. This very extreme reading for the 24th August would have been a strong indicator of a low in place.

On the 11th December, 2015, the McClellan Oscillator reached -80.82. It moved lower the next session to -92.65 and price moved 19 points lower. The extreme reading of 11th December might possibly have led to an expectation of a bigger bounce than the one that occurred, and might have misled analysis into missing the strong fall from 29th December to 20th of January.

The next most recent occasion where this oscillator was extreme was the 8th January, 2016. It reached -66.25 on that date. The low was not found for seven sessions though, on the 20th January 2016, almost 110 points below the closing price of the 8th January. At the low of the 11th February, there was strong bullish divergence with price making new lows and the oscillator making substantially higher lows. This may have been a strong warning of a major low in place.

As an indicator of a low this is not it. It is a warning of extreme levels. The next thing to look for would be some divergence with price and this oscillator at lows. Divergence is not always seen at lows, but when it is seen it should be taken seriously. Any reading over 100 should also be taken very seriously.

This indicator will be approached with caution. It is one more piece of evidence to take into account.

At this stage, the extreme reading gives a warning of an end close but not necessarily here. Market breadth declines as price falls supporting the fall in price.


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.

It is noted today that while the S&P500, DJI and Nasdaq are all falling, DJT is not. This is not part of Dow Theory, but divergent behaviour between DJT and the other indices is a cause for concern regarding this downwards trend for the S&P500.

This analysis is published @ 09:53 p.m. EST.