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More downwards movement was expected for Friday’s session.

Friday made a slightly lower low and a lower high.

Summary: Downwards movement is showing signs of weakness. With price and On Balance Volume at support, not much more downwards movement is expected. The target is now calculated at 2,076, which should be met on Monday.

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 20 sessions. If it exhibits a Fibonacci duration, then it may end in another one session to total a Fibonacci 21, or another 14 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 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
Click chart to enlarge.

The structure of minor wave C is today relabelled. With strong support, a good Fibonacci ratio, and some indication this market may be oversold at this point, it looks more likely downwards movement may end soon.

At 2,076 minute wave v would reach equality in length with minute wave i. Minute wave iii is just 2.60 points longer than 2.618 the length of minute wave i.

So far minor wave C all fits neatly within this best fit channel. If upwards movement breaches the upper edge of this channel on Monday or Tuesday, then the expectation would be that downwards movement is over.

Ratios within minute wave iii are: minuette wave (iii) has no Fibonacci ratio to minuette wave (i), and minuette wave (v) is 0.97 points short of 0.236 the length of minuette wave (iii).

Ratios within minuette wave (iii) are: subminuette wave iii has no Fibonacci ratio to subminuette wave i, and subminuette wave v is just 0.69 points longer than 0.236 the length of subminuette wave i.

Ratios within subminuette wave iii are: micro wave 3 is just 0.84 points longer than 1.618 the length of micro wave 1, and micro wave 5 has no adequate Fibonacci ratio to either of micro waves 3 or 1.

Minute wave v may end early on Monday if price comes again to touch the lower edge of the channel.

If price does turn, then expect some resistance again at the lilac trend line on the way up.

A new high above 2,114.72 would invalidate the alternate and provide confirmation of this main wave count at this stage.



S&P 500 daily 2016
Click chart to enlarge.

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.

Subminuette wave iv may not move into subminuette wave i price territory above 2,114.72.



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

A strong downwards week breaking and closing well below the lilac trend line is a strong bearish signal. After a trend line breach, it would be typical to see price turn upwards and test resistance at the line.

There is strong support for price here from the 40 week (200 day) moving average. There is strong support for On Balance Volume here by both yellow lines. This suggests price may bounce early next week.

How high the bounce goes is going to tell us which Elliott wave count is correct. From a classic technical analysis point of view a breach back above the lilac line would be very bullish. If that happens, then new all time highs may be expected. But if the lilac line remains intact and provides strong resistance, then the possibility of a bear market would increase.


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

Price has bounced up off support from the 200 day moving average. With price closing now four days in a row below the lower edge of the Bollinger Bands, some reaction here or very soon indeed should be expected.

ADX is now over 35 and so extreme. This trend may need some relief, either by ending or from a consolidation for several days.

ATR has flattened off now for three days in a row. This indicates that the bears may be tiring; that they are unable to push price a greater distance each day, which is what should be seen for a deeper decline.

Bollinger Bands continue to widen, so volatility is increasing.

There is still a downwards trend, but it is showing some signs of weakness now.

RSI is now oversold as is Stochastics. Neither exhibit divergence yet though. If divergence does develop, particularly with price and RSI, then a low is fairly likely to be in place.


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
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.

The AD line moved higher while price moved overall lower for Friday. This divergence is bullish.


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.

For the last two days, this oscillator has increased as price has declined. This divergence is bullish.


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 @ 02:02 a.m. EST on 5th November, 2016.