A new all time high indicates the S&P is still in a bull market. Dow Theory has confirmation.

Summary: A pullback is still expected here or very soon indeed. It should begin this week. The target is still about 2,120 and the lilac trend line.

Last monthly chart for the main wave count is here.

Last weekly chart is here.

New updates to this analysis are in bold.

MAIN WAVE COUNT

DAILY CHART

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Primary wave 2 now looks to be complete as a double zigzag. Within primary wave 2: intermediate wave (W) was a very shallow zigzag lasting a Fibonacci 13 sessions; intermediate wave (X) fits perfectly as a triangle lasting 20 sessions, just one short of a Fibonacci 21; and intermediate wave (Y) also lasting 20 sessions deepens the correction achieving the purpose of a second zigzag in a double.

Primary wave 2 looks like it has ended at support about the lower edge of the maroon channel about primary wave 1, and at the 200 day moving average.

With upwards movement slicing cleanly through the lilac trend line, this behaviour looks to be more typical of an upwards trend. At this stage, corrections within primary wave 3 may be expected to turn down to test support at this trend line.

At 2,500 cycle wave V would reach equality in length with cycle wave I.

At 2,467 primary wave 3 would reach equality in length with primary wave 1. This is the ratio used in this instance because it fits with the higher target at 2,500.

Intermediate wave (2) may not move beyond the start of intermediate wave (1) below 2,083.79.

Primary wave 3 may show some strength compared to primary wave 1, but it does not have to. This wave count sees price in a final fifth wave at cycle degree, within a larger fifth wave at Super Cycle degree. The upcoming trend change may be at Grand Super Cycle degree, a once in generations trend change. This final fifth wave should be expected to exhibit great internal weakness; this market may appear broken. That would be typical behaviour for a final fifth wave of this magnitude.

HOURLY CHART

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There is no Fibonacci ratio between minor waves 1 and 3. Minor wave 3 is slightly shorter than minor wave 1. Because a core Elliott wave rule states a third wave may not be the shortest, this limits minor wave 5 to no longer than equality in length with minor wave 3 at 2,213.03.

At 2,199 minute wave v would reach equality in length with minute wave i.

Minor wave 2 is a shallow 0.34 zigzag and minor wave 4 is a shallow 0.46 regular contracting triangle. This gives perfect alternation in structure and some alternation in depth.

Minor wave 5 is showing weakness. MACD has failed to make a new high while price has moved upwards. This wave lacks momentum.

Downwards movement for Friday broke below the lower edge of the best fit channel. The S&P can breach channels yet continue in the old direction, and that is what has happened for Monday. The channel breach may only be read as a warning of weakness.

Intermediate wave (2) may be expected to last about a Fibonacci 5, 8 or 13 days. It is most likely to be a single or double zigzag structure. It is most likely to correct to close to the 0.618 Fibonacci ratio of intermediate wave (1), which should be close to support about 2,120 and the lilac trend line.

TECHNICAL ANALYSIS

WEEKLY CHART

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A smaller range upwards week on lighter volume looks like bulls are tiring. Some downwards or sideways movement this week is a reasonable expectation.

There is no close by resistance line on On Balance Volume to stop a rise in price. There is no divergence between OBV and price to indicate weakness here.

RSI is not extreme. There is room for price to continue to rise.

DAILY CHART

Click chart to enlarge. Chart courtesy of StockCharts.com.

A reasonably strong upwards day importantly makes a new all time high for the S&P. It comes with a further decline in volume though, so this rise in price is suspicious. A correction should come sooner rather than later.

ADX is increasing, indicating an upwards trend. Bollinger Bands agree as they continue to widen.

ATR is still declining though. There is something wrong with this trend; it does not look normal and healthy.

MACD is still bullish.

There is some very slight divergence with Stochastics and price, and Stochastics is overbought. Today price made a new high above the prior high of the 17th of November, but Stochastics made a slightly lower high. This indicates bulls are exhausted and overextended here. It does not however indicate that price must turn here, only that we should look out for a change to either sideways or downwards here or very soon.

There is no divergence between price and RSI and RSI is not yet extreme. There is further room for price to rise.

On Balance Volume has broken slightly above the sloping purple line. This break is a small bullish signal, but the line is too steeply sloped to have strong technical significance. A smaller yellow line is drawn for close by resistance. A break above that too would be another small bullish signal.

It is clear that price is trending upwards, and it is also clear that bulls are tired. What is not clear is exactly when and where a pull back will begin, only that it should be sooner rather than later. The round number pivot of 2,200 should be expected to offer resistance.

VOLATILITY – INVERTED VIX CHART

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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. While this seems to be working more often than not, it is not always working. As with everything in technical analysis, there is nothing that is certain. This is an exercise in probability.

BREADTH – AD LINE

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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.

On Friday price moved overall higher with a higher high and a higher low than Thursday. The AD line however moved lower. This single day divergence is also bearish. It was not followed by a downwards day though, so it is considered to have failed.

There is still mid term bearish divergence between the highs of the 24th of October and today: price has made higher highs, but the AD line has still made lower highs. This is regular bearish divergence and indicates a lack of market breadth to this upwards movement.

BREADTH – MCCLELLAN OSCILLATOR

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On the 21st August, 2015, the McClellan Oscillator reached -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.

The most recent occasion of an extreme reading was -75.05 on the 2nd of November. The last low came two days later.

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.

There is now two days running of divergence between price and the McClellan Oscillator. The oscillator moved lower while price moved higher for Thursday and Friday. Market breadth declined although price moved higher. This divergence is bearish. This divergence today is considered to have failed as it was followed by a reasonably strong upwards day and not downwards.

The McClellan Oscillator is not extreme. There is still plenty of room for price to rise.

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) – closed above this point on the 9th of November, 2016.

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: The transportations indicate an end to the prior bear market. The transportation index confirms a bull market.

This analysis is published @ 10:34 p.m. EST.