Select Page

Monday was expected to be an upwards day, but this is not what happened.

Summary: The picture today looks more bearish. The alternate wave count has substantially increased in probability. A new high in the short term, above 2,354.54, would indicate the pullback is over and the next wave up should be underway. At that stage, the invalidation point may be moved up to the last low and the profit target would be 2,447.

While price remains now below 2,354.54, there is a reasonable probability this pullback may be deeper and continue for a few more weeks yet.

Today, there is now two sessions in a row of divergence between price and VIX and the AD line. This is bullish but has proven lately to be unreliable. It should be noted, but it may again prove unreliable.

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 incomplete or it may be complete (alternate wave count below).

Primary wave 4 may not move into primary wave 1 price territory below 2,111.05.

As price moves lower look for support at each of the longer term trend lines drawn here across previous all time highs. The cyan trend line may provide support. (The trend line has been copied over to hourly charts.) The cyan line is drawn from the prior all time highs of 16th August, 2016, at 2,193.81, to 13th December, 2016, at 2,277.53. Weekly and daily charts are on a semi-log scale.

If price keeps falling here, then look for next support about the lilac line. The lilac line is drawn from the prior all time highs of 20th July, 2015, at 2,132.82, to 15th August, 2016, at 2,193.81.


S&P 500 Daily 2017
Click chart to enlarge.

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 wave count expects the current correction is minor wave 4, which 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 is a little below the fourth wave of one lesser degree. Because it has now clearly breached an Elliott channel drawn using the first technique, the channel is now redrawn using Elliott’s second technique. There is good alternation between the very shallow combination of minor wave 2 and the deeper zigzag of minor wave 4.

If minor wave 4 is over, then a target for minor wave 5 is calculated.

It is concerning that price has breached the cyan trend line with a full daily candlestick below and not touching the line. This would tend to support the alternate Elliott wave count now, which sees this correction as primary wave 4.

Minor wave 3 is shorter than minor wave 1. So that the core Elliott wave rule stating a third wave may not be the shortest is met, minor wave 5 is limited to no longer than equality in length with minor wave 3.


S&P 500 hourly 2017
Click chart to enlarge.

Minor wave 4 may still be seen as a complete structure, but with further downwards movement today this wave count has reduced in probability. It would be my judgement now that it may be about even in probability with the alternate.

Price has broken below the Elliott channel which contains minor wave 4. It looks like the end of this session saw a bounce to test resistance at the lower edge of the pink channel for a typical throwback, and this has a bearish look.

This wave count will remain viable as long as price remains above 2,277.53.

A new high above 2,354.54 now is required for confidence in a trend change at minor degree and confidence that the next wave up is underway. This would invalidate the alternate wave count below at the hourly chart level.

There is still no Fibonacci ratio between minute waves a and c.


S&P 500 Daily 2017
Click chart to enlarge.

The subdivisions of upwards movement from the end of intermediate wave (2) are seen in the same way for both wave counts. The degree of labelling here is moved up one degree, so it is possible that primary wave 3 could be over.

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.

The 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
Click chart to enlarge.

A movement at primary degree should begin with a five down at the daily chart level, particularly if primary wave 4 unfolds as the most likely structure, a zigzag.

Minor wave 3 has now breached the base channel drawn about minor waves 1 and 2. This is used to confirm a third wave.

The structure of minor wave 3 may now be a complete impulse. It does not exhibit a Fibonacci ratio to minor wave 1, and it is shorter than 1.618 the length of minor wave 1.

The next correction for minor wave 4 may not move into minor wave 1 price territory above 2,354.54.



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

The week before last completed a green weekly candlestick that moved price upwards on some increase in volume. Now last week completes a red weekly candlestick that moves price lower on a slight decline in volume. The volume profile short term looks bullish.

New trend lines are drawn across On Balance Volume, but these do not yet have any reasonable technical significance.

RSI is now back down from overbought.

ADX still indicates an upwards trend that is not yet extreme, but it is nearing extreme.


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

Warnings in last technical analysis section have proven to be timely. This chart is looking more bearish today.

It does now look like the small consolidation of three days last week was a small pause within a downwards trend that is now in place, at least short term.

Today’s session moves price lower, with a lower low and a lower high. The balance of volume during the session was down. Even though the candlestick closed green, this increase in volume supports downwards movement during the session.

ATR indicates a trend; with price moving lower, it would be downwards.

On Balance Volume is bearish, MACD is bearish, and Bollinger Bands are bearish.

The slightly longer lower wick on today’s candlestick is slightly bullish, as is the colour green.

Single divergence with Stochastics and price while Stochastics is oversold is bullish, but this can persist for long periods of time and could develop into multiple divergence before price turns.


VIX daily 2017
Click chart to enlarge. Chart courtesy of

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.

There is now two days in a row of diverging price and inverted VIX. Price has moved lower for two days in a row, which would normally come with some increase in volatility but has come with a decline in volatility. This is not normal and should be interpreted as bullish. This divergence today is quite strong, but it will be given only a very little weight only because it is so strong and has now persisted for two days.


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

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 short term bullish divergence between the AD line and price from yesterday’s low to the low of 14th of March (and also back to the 9th of March). Price has not come with a corresponding decline in market breadth while it has made a new low. There is weakness within this downwards movement from price. This supports the main hourly Elliott wave count which sees a low in place.

There are now two days in a row of bullish divergence with price and the AD line. Market breadth has improved while price has moved lower and this indicates weakness in price and must be interpreted as bullish.


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

This analysis is published @ 08:05 p.m. EST.