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Upwards movement was not expected for Monday. The main Elliott wave count expected downwards movement for the session.

The current situation has multiple possibilities and for members today three hourly Elliott wave counts are again presented along with some cautious trading advice on how to approach this market.

Summary: It looks like tomorrow may most likely be a downwards day. Expect price to move at least slightly below 2,352.87. Repeated divergence between price and VIX shows again today and this is a strong warning to traders that there is potential here for a surprising sharp drop in prices.

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 close to complete.


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 24 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 10 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.

Minor wave 4 may be still incomplete. It may not move into minor wave 1 price territory below 2,300.99.


S&P 500 hourly 2017
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A double flat may be unfolding. No target is given for minuette wave (c) down because it is still not clear if minuette wave (b) has ended.

Within the second flat of the double labelled minute wave y, minuette wave (b) would be twice the length of minuette wave (a) at 2,379.93. Above that price point the idea of a second flat unfolding would be discarded based upon a very low probability. Unfortunately, this price point may be too high to be useful.

This wave count expects a downwards wave to move below 2,352.87, so that minuette wave (c) moves below the end of minuette wave (a) avoiding a truncation and a very rare running flat.

There is some small support today for this first wave count from light volume and divergence with VIX. For these reasons it is my judgement today that this first hourly wave count is the most likely, about 65%.


S&P 500 hourly 2017
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Alternatively, it is possible that minor wave 4 could be a completed regular flat.

Within the regular flat, minute wave a is a three, itself a flat correction. Minute wave b is a zigzag. Minute wave c moves below the end of minute wave a.

Price does not have support from volume although it moved higher today. A new target is calculated for minor wave 5. Within minor wave 5, minute wave iv may not move into minute wave i price territory below 2,361.24.


S&P 500 hourly 2017
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This second alternate hourly wave count is identical to the first alternate above up to the low labelled minor wave 4.

Thereafter, the upwards movement to start minor wave 5 is moved down one degree and labelled slightly differently.

The target is higher; this is a more common Fibonacci ratio for a fifth wave to exhibit, so this target may have a higher probability.

When minute wave i is complete, then minute wave ii may not move beyond its start below 2,352.87.



S&P 500 weekly 2017
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There are now eight green weekly candlesticks in a row. A larger correction may be expected soon, but not quite yet.

There has been some decline in volume over the last three weeks. This trend is showing early signs of weakening.

On Balance Volume remains very bullish.

RSI is overbought, but in a bull market this can remain extreme for a reasonable period of time. If it begins to exhibit divergence with price at the weekly chart level, then a larger correction may be expected to begin. There is no divergence at this time.

This trend is not yet extreme.


S&P 500 daily 2017
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Two upwards days in a row come with declining volume. This is more typical of part of a correction than it is for part of a sustainable trend. This favours the main hourly wave count and it may also favour the first alternate hourly wave count, which sees an imminent trend change at primary degree.

ADX is now entering extreme territory. RSI has been extreme now for several days.

Assume the trend remains the same until proven otherwise. So assume the trend remains upwards, but notice that this upwards movement is looking overstretched and a reasonable pullback coming soon is expected. Because of this expectation consider protecting a reasonable amount of profit in long positions or taking some profit and scaling out.

Also, although there is a big risk that price could move suddenly and strongly lower at this time, it is advised to not try and pick a top and enter a short position here.


VIX daily 2017
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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 1-3% of equity.

Another day today closes with a reasonable upwards movement from price and a reasonable upwards movement from VIX (meaning inverted VIX moved downwards). This is absolutely not normal. Volatility reasonably increased today although price made new highs. This is read again as very bearish.

Although recent bearish divergence between price and VIX has not yet been followed by any downwards movement, that does not mean it cannot happen. There is much bearish warning here, so we should take it seriously.

There is potential here for a very quick sharp drop in price, which may be surprising, so watch this market carefully. Do not let your account be surprised. Protect it with stops.


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 no new divergence today between price and the AD line. The rise in price has support from a 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 @ 08:42 p.m. EST.