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Another very small range day moved price essentially sideways fitting the Elliott wave count for the short term.

Two hourly Elliott wave counts are provided to end the year, with the one daily Elliott wave count remaining the same.

Summary: A small pennant pattern may be completing and may end on the 30th of December. The breakout should be upwards and the target would be about 2,359 (measured rule) or 2,473 (Elliott wave).

Last monthly chart 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 are complete. Primary wave 3 may be over halfway through and is now exhibiting stronger momentum than primary wave 1. 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 correction for intermediate wave (4) looks like it is relatively brief and shallow. Intermediate wave (2) was over very quickly within one day. Intermediate wave (4) may last a little longer and may not move into intermediate wave (1) price territory below 2,146.69. If it continues for four more sessions, it may complete in a total Fibonacci thirteen sessions ending on Friday the 30th of December. When any and all wave counts that allow for intermediate wave (4) to continue have been invalidated, then the invalidation point may be moved up to the start of intermediate wave (5).

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.

There is already a Fibonacci ratio within primary wave 3. Intermediate wave (3) is 12.49 points short of 2.618 the length of intermediate wave (1). This is a reasonable difference, but as it is less than 10% the length of intermediate wave (3) I will consider it close enough to say there is a Fibonacci ratio here. This means that intermediate wave (5) should not be expected to exhibit a Fibonacci ratio to either of intermediate waves (1) or (3), as the S&P often exhibits Fibonacci ratios between two of its three actionary waves and rarely between all three.

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. Although primary wave 3 has now moved above the end of primary wave 1, it looks like primary wave 3 needs to move higher to allow enough room for primary wave 4 to unfold.

A best fit cyan trend channel is drawn about primary wave 3. Draw the first trend line from the high labelled minor wave 1 to the high labelled intermediate wave (3), then place a parallel copy on the low next to minor wave 4. The lower edge of this channel may provide support now.


S&P 500 hourly 2016
Click chart to enlarge.

The triangle may still be at least two days away from completion. Minor wave D would be likely to end at the B-D trend line, as it is drawn, and it may sit along the highs within minor wave C.

Minor wave D, for a contracting triangle, may not move beyond the end of minor wave B above 2,272.56.

Minor wave D, for a barrier triangle, should end about the same level as minor wave B; a triangle will remain valid as long as the B-D trend line remains essentially flat. In practice, this means that minor wave D may end slightly above 2,272.56. This is the only Elliott wave rule which is not black and white.

Minor wave E may not move beyond the end of minor wave C below 2,256.08.

When the triangle is complete, the breakout is expected to be upwards. Intermediate wave (5) is expected to be a long extension if the target at 2,473 is to be reached.

A new high above 2,306.62 would see the idea of a flat correction continuing discarded, so some confidence may then be had that intermediate wave (4) is over and intermediate wave (5) is underway.

This first hourly chart has a higher probability than the alternate below. I would judge this main hourly chart to have about a 70% probability.


S&P 500 hourly 2016
Click chart to enlarge.

What if a flat correction is still unfolding?

Within the flat correction, minor wave A subdivides as a three; multiples are classified as threes.

Within a flat correction, minor wave B must retrace a minimum 0.9 length of minor wave A at 2,274.62. The normal range for minor wave B within a flat correction is from 1 to 1.38 the length of minor wave A at 2,277.53 to 2,288.58.

Minor wave B may be unfolding as a zigzag. Within the zigzag, minute wave b may be an almost complete running contracting triangle. In the short term, this wave count expects the same movement next as the main wave count.

There is no Elliott wave rule stating a maximum length for B waves within flat corrections, but there is a convention within Elliott wave that states when the potential B wave is longer than twice the length of the A wave that the idea of a flat should be discarded based upon very low probability. This point would be above 2,306.62.



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

A small inside week moves price overall higher. Volume for this week is light indicating price was probably consolidating.

If price moves lower for a correction, it should find strong support at the purple trend line drawn across two prior all time highs.

On Balance Volume is still constrained. Watch this carefully over the next two weeks. If OBV breaks above the purple trend line, it would offer a bullish signal but not a strong one. The line is too short and infrequently tested to offer good technical significance.

RSI is not overbought. There is room still for price to rise.

ADX is rising and is below both the +DX and -DX lines. An upwards trend may be in its early stages. At this time frame, the trend is only beginning and is not at all extreme.


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

A pennant pattern is still unfolding. This one is supported by overall declining volume as price moves sideways. The target using the measured rule is about 2,359.

ADX is comfortably extreme above 35. It has reached above 40 and is now turning down. This would normally be an indication of an extreme trend coming to an end.

I have spent some time going back over the bull market on the daily chart to March 2009. During this time ADX has reached above 35 nine times:

– In May 2010 during a downwards wave.

– In January 2011 (just above 35). This was followed by a drop of 1.9% over two days.

– In August 2011 during a downwards wave.

– In February 2012: on 8th February ADX reached above 35 then slightly above 40 on 21st February, but price did not find a high until the 29th of February. Price then dropped 2.8% over four days.

– In June 2012 at the end of a downwards wave.

– In August 2012. This was followed by a drop of 3.9% over two days.

– In February 2013: on the 5th of February ADX reached above 35 and continued higher with price to find a high on 19th February when ADX reached almost to 39. Price then dropped 3% over five days.

– In May 2013: on the 22nd of May ADX was almost 40. Price then dropped 7.5% over 23 days.

– In January 2016 during a downwards wave.

Conclusion: A reading of over 35 for ADX is extreme, and a reading over 40 is unusually extreme. However, this is not necessarily useful in pinpointing a trend change nor does it provide useful information on how far price may drop. In other words, it cannot tell us when price will turn nor how far it may fall.

ADX at the daily chart level is sounding a note of caution here. At the weekly chart level though it is not; at that time frame ADX it is bullish.

ATR is declining as price has consolidated for the last eight sessions. Bollinger Bands are flat.

Stochastics is still overbought, but this oscillator may remain extreme for reasonable periods of time during a trending market. RSI is now returning from overbought.

On Balance Volume should be watched closely. It has found resistance at the purple trend line. A breakout by OBV may indicate the next direction for price.

The trend is up. All three moving averages are pointing upwards and price is above all three. The small pennant has brought price away from the upper Bollinger Band extreme. There is again room for price to rise.


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 mostly 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 reasonable divergence is noted short term.


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.

There is now new divergence today between price and the AD line.


The DJIA, DJT, S&P500 and Nasdaq have made new all time highs in December of 2016. This confirms a bull market continues.

This analysis is published @ 08:27 p.m. EST.