Select Page

Friday completed an inside day which fits the Elliott wave count well.

Summary: Minor wave 4 may continue. Price may consolidate here for another three days.

A new low below 2,322.17 now would confirm minor wave 4 has arrived. At its end, minor wave 4 should offer an opportunity to join the upwards trend.

New updates to this analysis are in bold.

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



S&P 500 Weekly 2017
Click chart to enlarge.

Cycle wave V is an incomplete structure. Within cycle wave V, primary wave 3 may be relatively close to completion.

When primary wave 3 is complete, then the following correction for primary wave 4 may not move into primary wave 1 price territory below 2,111.05.

Primary wave 2 was a flat correction lasting 47 days (not a Fibonacci number). Primary wave 4 may be expected to most likely be a zigzag, but it may also be a triangle if its structure exhibits alternation. If it is a zigzag, it may be more brief than primary wave 2, so a Fibonacci 21 sessions may be the initial expectation. If it is a triangle, then it may be a Fibonacci 34 or 55 sessions.

Primary wave 3 at this stage though is incomplete and shouldcontinue to move price higher if this wave count is correct.


S&P 500 Daily 2017
Click chart to enlarge.

Intermediate wave (4) is a complete combination: zigzag – X – flat. 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.

Minor wave 3 has moved beyond the end of minor wave 1, meeting the rule.

Minor wave 2 was a deep 0.77 zigzag lasting three days. Minor wave 4 may exhibit alternation as a flat, triangle or combination and may last about a Fibonacci three or five days. It may not move into minor wave 1 price territory below 2,300.99.

Minor wave 4 may find support now at the upper cyan trend line. This may assist to force it to be very shallow. Minor wave 4 may not move into minor wave 1 price territory below 2,300.99.

Intermediate wave (5) has so far lasted 19 days. It may be expected to be shorter both in length and duration compared to intermediate wave (3). At this stage, an expectation of a Fibonacci 34 days total for intermediate wave (5) looks reasonable, so it may now continue for another 15 days or sessions.

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.


S&P 500 hourly 2017
Click chart to enlarge.

A new low below the start of minute wave v at 2,322.17 could not be a second wave correction within minute wave v, so at that stage confidence may be had that minor wave 3 is over.

Minor wave 4 may be a choppy, overlapping time consuming correction. It is most likely to be a flat, triangle or combination. Expanded flats are very common structures and they include B waves that move beyond the start of their A waves. A new high within minor wave 4 is entirely possible.

Flats, combinations and triangles are all more time consuming structures than zigzags. Minor wave 2 lasted a Fibonacci three days, so minor wave 4 at this stage may be reasonably expected to be longer in duration. A Fibonacci five days will be the expectation at this stage. If it does not look complete after a Fibonacci five days, then the next expectation would be for it to complete in a Fibonacci eight days.

Minor wave 4 would most likely end about either the 0.236 or 0.382 Fibonacci ratios.

Minor wave 4 may end within the price territory of the fourth wave of one lesser degree; minute wave iv has its territory from 2,331.58 to 2,322.17.

If it gets down that low, or takes long enough, minor wave 4 may find support at the lower edge of the wider blue Elliott channel that is copied over from the daily chart.

A zigzag downwards may be unfolding for minute wave a.

There are multiple structural options open for minor wave 4 at this very early stage. The labelling within it will change as it unfolds, as the structure becomes clearer. My focus next week will be to identify when minor wave 4 may be considered complete in order to find an entry to join the upwards trend.

At this stage, I can still not see minor wave 4 as a complete corrective structurem, so expect it to continue.

Although the arrow indicates an expanded flat (because this is the most common structure), this does not mean that this must be how minor wave 4 unfolds. It may be a triangle which would see sideways movement in an ever decreasing range for a few days.



S&P 500 weekly 2017
Click chart to enlarge. Chart courtesy of

This week completes the third candlestick in a Three White Soldiers pattern on the weekly chart. This is a bullish continuation pattern. The lower edge of the first candlestick may now offer support about 2,267.21.

A slight increase in volume this week beyond the prior week is also bullish.

On Balance Volume at the weekly chart remains very bullish.

RSI is only just now entering overbought at the weekly chart level. This may remain extreme for a few weeks during a strong trend. At this stage, it does not exhibit any divergence with price to indicate weakness.

ADX still indicates an upwards trend that has some distance to travel before it becomes extreme.

This weekly chart is very bullish indeed.


S&P 500 daily 2017
Click chart to enlarge. Chart courtesy of

Friday is an inside day with the balance of volume upwards. There was some support for the rise in price during the session with an increase in volume. This is bullish.

With RSI overbought at the weekly and daily chart levels, it would be reasonable to look out for a small consolidation to relieve this extreme. This supports the Elliott wave count.

This daily chart is also very bullish.


VIX daily 2017
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 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.

Thursday saw the strongest divergence yet between price and VIX. Price moved strongly higher with support from volume. Normally, volatility should decline on rising price as it almost always does. However, inverted VIX moved strongly lower. Volatility sharply increased as price moved higher. The increase in volatility is quite reasonable, so this is not a small divergence.

This divergence indicates something wrong during Thursday with the upwards movement from price, and it is interpreted as very bearish. It has been followed by an upwards day (just, technically) with a balance of volume downwards and then an inside day also with the balance of volume upwards. This strong divergence may still be followed by more downwards movement before it may be considered resolved.

Bearish mid term divergence is still in place.


AD Line daily 2017
Click chart to enlarge. Chart courtesy of

There is no short nor mid term divergence today between price and the AD line. The rise in price to a new high today was accompanied by a corresponding new high in the AD line. The rise in price has support from a rise in market breadth. Lowry’s OCO AD line also shows new highs along with price. Normally, before the end of a bull market the OCO AD line and the regular AD line should show divergence with price for about 4-6 months. With no divergence, this market has support from breadth.

Price moved sideways for Friday to complete an inside day. The candlestick closed green and the balance of volume for the session was upwards. Normally, the AD line should also rise, but for Friday it declined. Upwards movement during the session did not have support from market breadth and this makes sense if it was a B wave. This supports the Elliott wave count.


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 @ 7:07 p.m. EST on 18th February, 2017.