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Upwards movement has invalidated the main hourly Elliott wave count and confirmed an alternate.

Summary: It is slightly more likely today that price has broken out upwards from a flag pattern. A target using the measured rule is 2,323 and an Elliott wave target is 2,382. If On Balance Volume can break above resistance tomorrow, then confidence may be had in these targets. A new low below 2,257.02 would indicate a deeper pullback to the purple trend line.

New updates to this analysis are in bold.

Last monthly and weekly charts are here. Last historic analysis video is here.



S&P 500 Daily 2017
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This first wave count is close to even in probability with the second wave count below. I would judge this first wave count to be about 45% likely with the second count below about 51% likely. The remaining 4% is the possibility that both are wrong, but with these two wave counts covering both directions of up and down they should suffice for trading purposes.

Intermediate wave (4) is exhibiting alternation with intermediate wave (2). Intermediate wave (2) is a double zigzag and intermediate wave (4) is an incomplete expanded flat.

Along the way up to the final target at 2,500 a more time consuming fourth wave correction for primary wave 4 would be expected for this wave count.

The purple trend line is the most important piece of technical analysis on all charts. Draw it carefully from prior all time highs of 2,134.28 on the 21st of May, 2015, to 2,193.81 on the 15th of August, 2016. Extend it out. Daily charts are on a semi log scale.

The correction for intermediate wave (4) should end if price comes down to touch the purple trend line.

Intermediate wave (4) may not move into intermediate wave (1) price territory below 2,193.81.

At this stage, intermediate wave (4) has lasted 27 sessions. With the very slow rate of this correction it may now be possible for it to continue for another 7 sessions to total a Fibonacci 34. This would see it end on the 2nd of February.

Expanded flats are very common structures. This would allow intermediate wave (4) to exhibit alternation with the double zigzag of intermediate wave (2).

When minor wave B is twice the length of minor wave A at 2,321.44, then the idea of a flat correction for intermediate wave (4) should be discarded based upon a very low probability. This idea may be discarded before that price point is reached if classic technical analysis indicates it is highly unlikely.


S&P 500 hourly 2017
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Minor wave B may be a zigzag that may be complete or may continue higher.

The target for minor wave C assumes the most likely Fibonacci ratio to minor wave A, and would see price come down to sit almost exactly on the purple trend line.

Minor wave B is today seen as a zigzag. So far it is a 1.15 length of minor wave A, so it remains within the normal range of 1 to 1.38 times the length of minor wave A.

If price makes a new low below 2,257.02, the second wave count below would be invalidated and some confidence may be had in this first wave count.



S&P 500 Daily 2017
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This second wave count today is judged to be slightly more likely, about 51%. If tomorrow continues higher, and if On Balance Volume breaks above resistance, then this wave count will be the only wave count.

It is possible that intermediate wave (4) is a complete combination: zigzag – X – flat. If it is over here, it would have been even in duration with intermediate wave (3), both lasting 26 days.

Intermediate wave (3) is shorter than intermediate wave (1). One of the core Elliott wave rules states a third wave may never be the shortest wave, so this limits intermediate wave (5) to no longer than equality in length with intermediate wave (3) at 2,450.76.

Within intermediate wave (5), no second wave correction may move beyond its start below 2,257.02.

The proportion here between intermediate waves (2) and (4) is acceptable. There is alternation. Both are labelled W-X-Y, but double zigzags are quite different structures to double combinations.

I have considered a triangle for intermediate wave (4). It will fit and meet all Elliott wave rules, but I have discarded the idea based upon a very low probability due to the triangle not sitting within its trend lines. The idea does not have the right look.


S&P 500 Hourly 2017
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If intermediate wave (4) is over as a double combination, then intermediate wave (5) has begun. The target for intermediate wave (5) assumes it should end before it reaches its limit.

Targets for minor wave 2 tomorrow would be the 0.382 and 0.618 Fibonacci ratios of minor wave 1, with the 0.618 Fibonacci ratio slightly favoured as this would be a second wave correction.

Intermediate wave (5) must subdivide as a five wave structure. It may be either an impulse or an ending diagonal. If it is an ending diagonal, then it would most likely be of the contracting variety. The classic technical analysis equivalent pattern is a rising wedge.

A Fibonacci 13 or 21 days duration would be the first expectation.



S&P 500 weekly 2017
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A very small range inside week completes a small green doji candlestick. Price is consolidating.

A decline in volume last week supports the idea that price is consolidating. This supports the main Elliott wave count that sees a correction unfolding for intermediate wave (4).

On Balance Volume last week has come down to the long held yellow support line. This line goes back to September 2015 and it has been tested four times so far. This would be the fifth test. This line has good technical significance. It looks like OBV may be breaking below this line, but there is a little leeway in exactly how this line is drawn, so a clearer break is required before it may be read as a bearish signal.

A break below the long yellow support line by OBV would be a good bearish signal supporting the main Elliott wave count.

RSI is not extreme. There is room for the upwards trend to continue.

ADX is still increasing and is above 15 indicating the market may be in the early stages of an upwards trend.


S&P 500 daily 2017
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It looks like a bull flag pattern has completed and today an upwards breakout closed above prior resistance. The flag pole is short, only 48.48 points, so a target using the measured rule would be about 2,323.

Today’s upwards day comes with a slight increase in volume to support the rise in price, but volume is lighter than the last upwards day two days prior. This small increase in volume is not what would usually be expected for a breakout to have confidence. However, it is noted that after the last major low on the 4th November, 2016, the first three upwards days came on relatively light and declining volume. At this time, this market appears to be often rising due to a lack of resistance and not necessarily due to the increased activity of buyers.

The next strong resistance may be the next round number pivot about 2,300.

ADX is declining, indicating the market is not currently trending. This is a lagging indicator based upon 14 day averages.

ATR is overall flat but may be beginning to show some increase.

On Balance Volume is at very strong resistance today. The purple resistance line is long held, almost horizontal, and has been tested now multiple times. If OBV can break above resistance tomorrow, then confidence may be had in an upwards breakout. If that happens, then members should join the upwards trend.

Resistance here by OBV indicates some downwards movement tomorrow may be very likely.

There is now strong and long held divergence between price and RSI at today’s new high.

There is strong and long held divergence between price and Stochastics.

Divergence between RSI and Stochastics, and price, has been noted before yet price broke out to new all time highs. It will be noted again today, but it comes with a warning that it may not be reliable.

MACD today remains bearish.

Bollinger Bands remain tightly contracted. Price has touched the upper edge of Bollinger Bands today, but this may continue for several more days if an upwards breakout has just occurred as it did recently from the 7th of December to the 14th of December before a consolidation began.


VIX daily 2017
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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.

There is no new divergence between price and inverted VIX at today’s new high.


AD Line daily 2017
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No new divergence at today’s new high is noted between price and the AD line. Upwards movement today has support from market breadth.


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 @ 12:31 a.m. EST on 25th January, 2017.