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Downwards movement is unfolding as the Elliott wave count and classic technical analysis expected.

Summary: A deeper pullback may have arrived. It may last about one to three months and may end either 2,368 – 2,353 or 2,282 – 2,234. A new low below 2,277.53 would indicate the lower target range should be used.

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 now be complete.

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.

As price moves lower look for support at each of the longer term trend lines drawn here across previous all time highs. Next support at the cyan line may be met soon.

A new low below 2,277.53 would invalidate the daily alternate wave count below and provide confidence that the pullback is at primary degree.


S&P 500 Daily 2017
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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). If intermediate wave (5) is now over, then this rule is met.

Minor wave 3 has no Fibonacci ratio to minor wave 1. If minor wave 5 is now over, then it is 4.14 points longer than equality in length with minor wave 3. Price today has closed just below the lower edge of the channel. If price can break below support at the lower edge of this channel, then further confidence in a multi week pullback may be had. I define a breach as a full daily candlestick below and not touching the lower edge of the channel.

Intermediate wave (5) may have ended in 27 days, just one longer than intermediate waves (3) and (4). This gives the wave count good proportions.

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.

The following correction for primary wave 4 should be a multi week pullback, and it may not move into primary wave 1 price territory below 2,111.05.


S&P 500 hourly 2017
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The last gap is now closed, so it is correctly named an exhaustion gap.

A new wave down at primary degree should begin with a five down on the hourly and daily chart levels. This is incomplete. During the first five down, no second wave correction may move beyond the start of its first wave above 2,400.98.

There are multiple ways to label downwards movement of the last five days. It is possible that minute wave i is not over and minute wave ii may yet move higher for a deep correction. For this reason the invalidation point is left as it is.

The lower edge of the blue Elliott channel provided some support today as only the last hourly candlestick closed below it. If price breaks below it, then look out for a throw back to find resistance at the lower edge of the channel. If price behaves like that, it would offer a good entry point to join a new short term downwards trend for aggressive traders.

Less aggressive traders may choose to patiently wait for this correction to end before entering long. The larger trend is still upwards and this is expected to be a counter trend movement.

Always remember my two Golden Rules:

1. Always use a stop.

2. Do not invest more than 1-5% of equity on any one trade.

There is more than one way now to label this downwards movement. Minute wave ii may be over as a brief shallow zigzag as labelled, or it may be continuing further as a deeper expanded flat. For this reason the invalidation point is left at the start of minute wave i today.


S&P 500 Daily 2017
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What if recent strong upwards movement was the middle a third wave at three degrees? This is supported by a fairly bullish look for the classic technical analysis chart.

All subdivisions are seen in exactly the same way for both daily wave counts, only here the degree of labelling within intermediate wave (3) is moved down one degree.

This alternate also expects a correction, but for minor wave 4, that may not move into minor wave 1 price territory below 2,277.53. A new low below this point would confirm the correction could not be minor wave 4 and that would provide confidence it should be primary wave 4.

Minor wave 4 may last about 26 days if it is even in duration with minor waves 1, 2 and 3. That would give the wave count good proportions and the right look.

Minor wave 4 may end within the price territory of the fourth wave of one lesser degree about 2,368 to 2,353.

Price today closed below the lower edge of the pink channel. This channel still needs to be properly breached for a reasonable level of confidence in this wave count. This wave count would then expect choppy overlapping movement to find support at the wider blue Elliott channel.

Both wave counts expect essentially the same direction next, so the hourly chart for this alternate would look the same with the exception of the degree of labelling.



S&P 500 weekly 2017
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There are now nine green weekly candlesticks in a row. A larger correction may be expected soon.

Volume last week is stronger than the three weeks prior. There was good support last week for upwards movement.

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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Three days now of downwards movement show some increase in volume to support the fall in price. This in conjunction with On Balance Volume giving a weak bearish signal supports the Elliott wave count.

It looks like price is finding support today about the 13 day moving average. If price breaks below this average, then look for next support about the 55 day moving average.

A pullback is a reasonable expectation here because ADX was very extreme. The pullback should bring ADX back down below both directional lines, RSI may reach oversold, and Stochastics should reach oversold. There is room now for this pullback to continue further.


VIX daily 2017
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Normally, volatility should decline as price moves higher and increase as price moves lower. This means that normally inverted VIX should move in the same direction as price.

Bearish divergence and bullish divergence spanning a few short days used to be a fairly reliable indicator of the next one or two days direction for price; normally, bearish divergence would be followed by one or two days of downwards movement and vice versa for bullish divergence.

However, what once worked does not necessarily have to continue to work. Markets and market conditions change. We have to be flexible and change with them.

Recent unusual, and sometimes very strong, single day divergence between price and inverted VIX is noted with arrows on the price chart. Members can see that this is not proving useful in predicting the next direction for price.

Divergence will be continued to be noted, particularly when it is strong, but at this time it will be given little weight in this analysis. If it proves to again begin to work fairly consistently, then it will again be given weight.


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.

Short term bullish divergence noted in prior recent analysis has not been followed by upwards movement. There is still mid term bullish divergence between price and the AD line. Today the AD line made a new low beyond the prior low of the 17th of February, but price has not made a new low. This indicates weakness in price.

This divergence does not support the idea of a pullback right here and now. However, more weight will be given to the main technical analysis chart, which shows overbought and extreme conditions.


The DJIA, DJT, S&P500 and Nasdaq continue to make new all time highs. This confirms a bull market continues.

This analysis is published @ 09:23 p.m. EST.