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Upwards movement continued, fitting the alternate hourly Elliott wave count better than the main Elliott wave count. The target remains the same.

Summary: While upwards movement continues, the next target is at 2,227. A new low below 2,182.30 would indicate the expected pullback has finally arrived, and the target will be support 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.



S&P 500 daily 2016
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Cycle wave V must subdivide as a five wave structure. At 2,500 it would reach equality in length with cycle wave I. This is the most common Fibonacci ratio for a fifth wave for this market, so this target should have a reasonable probability.

Cycle wave V within Super Cycle wave (V) should exhibit internal weakness. At its end, it should exhibit strong multiple divergence at highs.

Within cycle wave V, primary waves 1 and 2 may be complete. Primary wave 3 may have begun. Primary wave 3 may only subdivide as an impulse. So far within it intermediate wave (1) may be either complete today or very close to it.

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

Intermediate wave (2) may find support close to the lilac trend line, which may also be close to the 0.618 Fibonacci ratio of intermediate wave (1).

At 2,473 primary wave 3 would reach equality in length with primary wave 1. This Fibonacci ratio is chosen for this target calculation because it fits with the higher target at 2,500.

The maroon channel is a best fit. The lower edge may provide support.


S&P 500 hourly 2016
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At 2,227 minor wave 3 would reach 1.618 the length of minor wave 1.

This wave count sees the middle of a third wave particularly weak; this is not common. The larger context of a fifth wave at cycle and Super Cycle degrees may see persistent unusual weakness though, so this wave count is possible.

Minute wave iv, when it arrives, may not move into minute wave i price territory below 2,182.30.

Along the way up, this wave count expects two relatively small fourth wave corrections: the first for minute wave iv and the next for minor wave 4. These may show up at the daily chart level as one or more red daily candlesticks or doji.

Price should now find support about the lower green trend line. It is possible that price could again breach support yet turn and continue upwards. If that happens, then another parallel line will be drawn.

The S&P often forms slow rounded tops. When it does this the many subdivisions make analysis difficult. Only when support is breached by movement that is clearly downwards and not sideways would it be an indication of a deeper pullback.



S&P 500 daily 2016
Click chart to enlarge.

There is a wave count that fits for the Dow Industrials that sees an imminent trend change. It relies upon an ending diagonal, but that idea will not fit well for the S&P.

What if an impulse upwards is now complete? The large corrections labelled primary waves 2 and 4 do look like they should be labelled at the same degree as each other, so that gives this wave count the right look.

Primary wave 4 ends within primary wave 2 price territory, but it does not overlap primary wave 1. Primary wave 1 has its high at 2,057 and primary wave 4 has its low at 2,083.79. The rule is met.

There is alternation between the double combination of primary wave 2 and the double zigzag of primary wave 4. Even though both are labelled as multiples W-X-Y, these are different structures belonging to different groups of corrective structures.

Primary wave 3 is shorter than primary wave 1. This limits primary wave 5 to no longer than equality with primary wave 3 at 2,285.53.

The equivalent wave count for DJIA expects an end now to upwards movement and the start of a large bear market. Only for that reason will this alternate for the S&P also expect a reversal here.

This wave count has good proportions. Primary wave 1 lasted a Fibonacci 34 days, primary wave 2 lasted 60 days, primary wave 3 lasted 40 days, and primary wave 4 lasted 52 days. Primary wave 5 may be more brief than primary wave 3. If it exhibits a Fibonacci duration, it may total a Fibonacci 34 days and that would see it end on the 22nd of December. If it is only a Fibonacci 21 days in duration, it may end more quickly on the 2nd of December.



DJIA daily 2016
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An ending contracting diagonal may be completing for the DJIA. This fits into the same picture as the alternate wave count for the S&P; both see a final fifth wave coming to an end very soon.

The 1-3 trend line is now overshot. Contracting diagonals normally end very quickly after this line is overshot, and it can be surprising how small the overshoot is. This wave count expects a very strong reversal on Monday or at the most sometime next week.

The diagonal is contracting, so the final fifth wave is limited to no longer than equality in length with primary wave 3 at 19,488.92.



S&P 500 monthly 2016
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There is strong divergence between the new all time highs for price and RSI. This regular bearish divergence indicates weakness in price.

Volume is still declining as price continues higher. The rise in price is not well supported by volume.


S&P 500 weekly 2016
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Another upwards week comes with an increase in range but a strong decline in volume. This is partly due to the Thanksgiving Day holiday making this week short of one day, so not too much will be read into it.

On Balance Volume is bullish.

There is some mid term divergence between price and RSI: price is making new all time highs, but RSI is not following. This indicates weakness in price. It is not a signal of a trend change, only indication of weakness.


S&P 500 daily 2016
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Very light volume for Friday’s session is probably at least partly due to the short trading day for NYSE due to Thanksgiving Day. Not too much will be read into it today.

Overall, volume is still declining as price rises, even without considering Friday’s light volume. The rise in price is not well supported by volume, so it is suspicious.

ATR continues to decline. This does not look like a normal healthy trend.

Bollinger Bands widened though. There is some strength to this trend.

ADX is not yet extreme. This trend may continue for a while yet.

On Balance Volume is bullish at the daily chart level. There is persistent mid and long term divergence between price and OBV, but this is not a signal that upwards movement must end here. It is just a warning of weakness.

RSI is only just for Friday entering overbought. It may remain there for a reasonable time during a trend. If it is extreme and then exhibits divergence while extreme, that shall be read as a warning of a trend change coming up very soon. That is not the case yet. This trend may continue.

MACD is bullish.

This analysis strongly supports the main Elliott wave count.


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. 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.

No new short term divergence is noted today between price and inverted VIX. There is longer term divergence, but this has proven more recently to be unreliable and will not be given any weight at this stage.


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.

There is longer term divergence between price and the AD line, but like inverted VIX this has proven reasonably recently to be unreliable. It will be given no weight here.

There is no short term divergence noted today between price and the AD line.


AD Line daily 2016
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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.

The McClellan Oscillator has just reached extreme at 60 and now exhibits divergence with price at Friday’s high. This does not mean price must turn here. The last time on this chart this oscillator reached 60 was on the 12th of July and price continued higher to the 15th of August before a reasonable correction began. It looks like this does not work well to indicate or warn of highs.


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 @ 09:00 p.m. EST.