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A red daily candlestick with a long lower wick makes the Elliott wave count have a better look now at the daily chart level.

Summary: The target at minor degree is recalculated to 2,399. Persistent divergence with price and vix, and now today with price and the AD line, indicates caution here. Members holding long positions may raise stops to 2,355 to protect profits. The recent breakaway gap is providing support.

Members trying to enter the long side here risk entering late in the trend, so manage risk carefully. Always use a stop and do not invest more than 1-3% of equity 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 is now still incomplete.


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. It is more likely that minor wave 5 will exhibit a Fibonacci ratio to either of minor waves 3 or 1. The target assumes it will exhibit the most common Fibonacci ratio.

Minor wave 2 was a deep 0.77 zigzag lasting three days. Minor wave 4 today shows more clearly on the daily chart. It may have completed as a very common expanded flat correction. There is perfect alternation between minor waves 2 and 4 and they have better proportion now on the daily chart.

Intermediate wave (5) has so far lasted 22 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 12 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 fits perfectly as an expanded flat correction, which are very common structures. There was a triangle in there and it looks like it was a B wave within a B wave.

Within minor wave 5, no second wave correction may move beyond the start of its first wave.

The breakaway gap has offered support, as breakaway gaps often do. This adds a little confidence to using the invalidation point as a place to pull up stops to. Gaps can be useful in trading.

If this wave count is invalidated by a new low below 2,355.09, then minor wave 4 may be continuing further as a double flat. This is possible, but the probability is low because it does look like the breakaway gap is offering support.



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 new high for an outside day saw the balance of volume upwards. An increase in volume today supports upwards movement during the session. This supports the Elliott wave count and the targets.

The breakaway gap is offering support.

There is slight bearish divergence today with price and RSI while RSI is overbought. This indicates some caution for long positions here. Stochastics also shows very weak single divergence with price at this new high.

MACD shows longer term divergence with price.

The problem with divergence is that it can continue and persist for reasonable periods of time. The most reliable is RSI when it is extreme, but this can develop into double and even triple divergence before price turns.

Divergence today indicates caution for long positions, but it does not mean price must turn here.


VIX daily 2017
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Normally, volatility should decline on rising price. There is triple 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 1-3% of equity.

Strong warning: Watch the market closely. Be disciplined with stops. Protect profits on long positions. If entering long here, reduce risk to only 1-3% of equity.


AD Line daily 2017
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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 new short term divergence today between price and the AD line. The new high today was not supported by a new high in market breadth. This is bearish.


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 @ 8:05 p.m. EST.