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Upwards movement for the start of the week breaks above a prior small consolidation with a breakaway gap. Gaps can be useful for trading.

The target given by the Elliott wave count can now be calculated at two degrees, so it widens to a small zone.

Summary: The correction was over more quickly than expected; it was brief and shallow. The target for this upwards wave to end can now be calculated at two degrees as a range from 2,382 to 2,386. If price makes a new low below 2,342.27, then a multi week primary degree correction may have arrived.

VIX divergence with price persists and offers a strong warning: if trading this upwards trend, then watch this market closely; there is potential for a surprisingly strong and sharp drop in prices here.

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
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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
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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 no Fibonacci ratio to minor wave 1.

Minor wave 2 was a deep 0.77 zigzag lasting three days. Minor wave 4 is now complete as a very brief and shallow triangle. There is good alternation and reasonable proportion although triangles normally are more time consuming structures than zigzags.

The invalidation point may be moved up today. Within minor wave 5, no second wave correction may move beyond the start of its first wave below 2,342.27.

Intermediate wave (5) has so far lasted 20 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 14 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
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Minor wave 4 will fit as a triangle as labelled, and it is more brief than expected. Upwards movement during Tuesday’s session has now moved too high for it to be considered a part of minor wave 4.

The gap up on the open looks like a classic breakaway gap. These are rarely filled (short to mid term). This may offer support.

Price has broken above the upper edge of the Elliott channel, which is now providing support. With a strong fifth wave, this market is behaving like a commodity.

The target may now be calculated at two degrees, so it widens to a small zone. Because minor wave 3 exhibits no Fibonacci ratio to minor wave 1 it is more likely that minor wave 5 will exhibit a Fibonacci ratio to either of minor waves 3 or 1, and equality in length with minor wave 1 is the most common ratio for a fifth wave.

If price breaks below 2,342.27, then the degree of labelling within minor wave 5 would be moved up one degree. It is possible that it could be over at today’s high. A new low below 2,342.27 would strongly indicate that primary wave 3 could be over in its entirety and primary wave 4 may then have arrived.



S&P 500 weekly 2017
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Last 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 last 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
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A breakaway gap upwards indicates the small consolidation, lasting only two days, is over. This gap may offer support.

Volume for the last two sessions of upwards movement is light with a slight decline today. The upwards movement in price was not supported by volume today. This is slightly bearish but not enough to call an end to this trend here.

Only when there is divergence at highs between RSI and price, while RSI is overbought, will an end to this trend be expected. So far there is no divergence at the daily chart level to indicate weakness. This trend can continue. This chart remains very bullish.


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.

Recent single day and multi day bearish divergence between price and inverted VIX has not been followed by any downwards movement. Price continues to rise higher. Today completes another day where price and VIX diverged: price moved up but volatility increased. Normally, volatility should decline on rising price. There is double multi day divergence now between price and inverted VIX. This is bearish.

Either VIX is now decoupled from this market, or this persistent divergence will be resolved by primary wave 3 ending sooner than expected and primary wave 4 beginning very strongly. This divergence signals traders to be very cautious; assume the trend remains the same, but if entering the trend be aware for the potential here of a swift drop in price and use stops accordingly. Risk no more than 1-5% of equity.

Warning: Watch this market closely. If it begins to move down, then downwards movement could be very quick.


AD Line daily 2017
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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.

There is no new divergence for some time between price and the AD line. The rise in price is supported by a corresponding rise in 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 @ 8:20 p.m. EST.