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Upwards movement was expected for Wednesday’s session.

Although the candlestick closed red, it did make a higher high and a higher low from the prior day.

Summary: A small fourth wave correction may end tomorrow about 2,190. If price makes a new low below 2,182.30, then there will be an outside possibility of a large trend change. This is possible, but today has no confirmation at all.

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.

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 be over halfway through and is so far exhibiting weaker momentum than primary wave 1, which fits with the larger picture of expected weakness for this fifth wave at cycle degree. It is possible primary wave 3 may fall short of the target and not reach equality in length with primary wave 1.

Within primary wave 3, the upcoming correction for intermediate wave (4) should be relatively brief and shallow. Intermediate wave (1) was over very quickly within one day. Intermediate wave (4) may last a little longer, perhaps two or three days, and may not move into intermediate wave (1) price territory below 2,146.69.

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.

When primary wave 3 is complete, then the following correction for primary wave 4 may last about one to three months and should be a very shallow correction remaining above primary wave 1 price territory.

The maroon channel is redrawn as a base channel about primary waves 1 and 2. Draw the first trend line from the start of primary wave 1 at the low of 1,810.10 on the 11th of February, 2016, then place a parallel copy on the high of primary wave 1. Add a mid line, which has shown about where price has been finding support and resistance.


S&P 500 hourly 2016
Click chart to enlarge.

At 2,227 intermediate wave (3) would reach 1.618 the length of intermediate 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.

If minor wave 4 is unfolding as a flat correction, then within it minute wave b must retrace a minimum 0.9 length of minute wave a at 2,211.83. The normal range for minute wave b within a flat correction for minor wave 4 would be from 1 to 1.38 the length of minute wave a, giving a range from 2,213.35 to 2,219.13. Minute wave b is now complete and 1.05 the length of minute wave a. If minor wave 4 is a flat correction, then it would be an expanded flat. The most common ratio for minute wave c would be 1.618 the length of minute wave a at 2,190.

If minor wave 4 is unfolding as a combination, then it would be relabelled minute waves w-x-y. Minute wave x of a combination would now be complete. Minute wave y may unfold as either a flat or triangle.

If minor wave 4 is unfolding as a triangle, then there is no minimum nor maximum limit for minute wave b within it. With minute wave b now making a slight new high above the start of minute wave a, this may be a running contracting triangle. Minute wave c of a triangle may not move beyond the end of minute wave a below 2,198.15. A triangle would be invalid below this point.

At this stage, a triangle looks extremely unlikely though it is technically possible. The trend lines of a contracting triangle should converge. Here, the lower a-c trend line would be almost flat and that would look wrong.

Minor wave 4 may not move into minor wave 1 price territory below 2,182.30.

The channel is redrawn now using Elliott’s technique. Draw the first trend line from the ends of minor waves 1 to 3, then place a parallel copy on the end of minor wave 2. The lower edge of this channel may provide support if minor wave 4 moves lower.

It is likely that minor wave 4 will end within the price territory of the fourth wave of one lesser degree. Minute wave iv has its range from 2,204.80 to 2,194.51. The target would see it end below this range but not by too much.

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 complete 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.

Price more strongly today overshot the 1-3 trend line and quickly reversed. Both the S&P and DJIA today exhibit a volume spike. On Balance Volume indicates more downwards volume than upwards today, so there is strong support for downwards movement towards the end of the session for these markets. This now looks like the diagonal may be correct and may have ended today. What happens in the next few days will be indicative.

If this idea is correct, then the market may start to fall very hard indeed here. This is an outside possibility, but the possibility does illustrate a strong warning for any members holding long positions. It is essential that stops are used.

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 weekly 2016
Click chart to enlarge. Chart courtesy of

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
Click chart to enlarge. Chart courtesy of

Wednesday’s session has a higher high and a higher low than the day before, but closed red. Bulls began the session to make a new high, but the bears seized control and held it through the end of the session. On Balance Volume points lower; the balance of volume today was downwards. With a volume spike for the session, this downwards movement is relatively strong.

ADX is still increasing, indicating an upwards trend is in place, but it is coming closer to extreme at 35.

ATR has been declining while price has been trending higher. There is something wrong with this trend. While bulls are able to push price higher, the range they are able to manage is getting smaller and smaller. They are getting weaker and weaker.

Bollinger Bands are only just now beginning to contract after a long period of expansion while price trended higher. Some consolidation and low volatility should be expected about here.

MACD may be beginning to turn around after increasing.

RSI now exhibits divergence with price at today’s high. After being slightly overbought, this divergence indicates a trend change here to either a consolidation or a new downwards trend.

The picture today looks neutral to bearish.


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. 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.

Yesterday’s bullish divergence was followed by a new all time high, so this may now be resolved.


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.

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.

Short term bullish divergence has been followed by a new all time high from price. This divergence may now be resolved.

Price today moved overall higher with a higher high and a higher low, but the AD line sharply declined. Today, while price moved higher, there was a decline in market breadth. This single day divergence is bearish.


Click chart to enlarge. Chart courtesy of

The Unicorn has been making new 52 week lows.

UVXY made a slight new low then reversed and now shows some strength from volume. On Balance Volume indicates the balance of volume today was upwards.

It looks like at least a short term low may be in place now for UVXY.

There is double divergence at lows between price and RSI, with RSI moving from oversold back in September.

I will make no comment on ATR behaviour for this market as I do not know it well enough. I will only say that generally after a period of declining ATR, as UVXY has here, some increase should be expected.

If this market is turning, then the very bearish wave count for the S&P is just possible. Even if this is not considered to support the bearish wave count for the S&P, some upwards movement is a reasonable expectation here for UVXY.


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 @ 11:56 p.m. EST.