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An upwards breakout from a bull flag pattern was expected. This looks like what has happened at the end of Friday’s session.

Summary: The upwards trend has most likely resumed, but a strong warning from ADX at the weekly chart level means members should keep stops on long positions tight and be prepared to take profits more quickly than usual. Stops may be set just below 2,389.38 at this time. The profit target remains at 2,469.

Always remember my two Golden Rules for trading:

1. Always use a stop.

2. Invest only 1-5% of equity on any one trade.

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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This wave count sees the middle of primary wave 3 a stretched out extension, which is the most typical scenario for this market.

Primary wave 3 may be incomplete. A target is now calculated for it on the daily chart.

There is alternation within primary wave 3 impulse, between the double zigzag of intermediate wave (2) and the possible triangle or combination of intermediate wave (4).

When primary wave 3 is a complete impulse, then a large correction would be expected for primary wave 4. This may be shallow.

Thereafter, primary wave 5 may be expected to be relatively short, ending about the final target at 2,500.


S&P 500 Daily 2017
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Primary wave (4) may be a complete regular contracting triangle. It may have come to a surprisingly swift end with a very brief E wave.

There is already a Fibonacci ratio between intermediate waves (3) and (1). This makes it a little less likely that intermediate wave (5) will exhibit a Fibonacci ratio to either of intermediate waves (1) or (3); the S&P often exhibits a Fibonacci ratio between two of its three actionary waves but does not between all three.

Within intermediate wave (5), minor waves 1 and now 2 look to be complete.

Within minor wave 3, no second wave correction may move beyond its start below 2,379.75.


S&P 500 hourly 2017
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The last gap has continued to provide support, and it still looks like a measuring gap. Minor wave 2 may have competed as a double combination: zigzag – X – triangle.

At the end of Friday’s session, price moved up and away to get very close to the last all time high at 2,400.98. At the hourly chart level, this looks like an upwards breakout from a sideways consolidation for minor wave 2.

So far minute waves i and ii may be complete within minor wave 3. Within minute wave iii, no second wave correction may move beyond the start of its first wave below 2,389.38.


S&P 500 Daily 2017
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What if intermediate wave (4) was not a complete triangle but is still unfolding as a double combination?

Double combinations are very common structures. This would still provide perfect alternation in structure with the double zigzag of intermediate wave (2). Although double zigzags and double combinations are both labelled W-X-Y, they are very different structures and belong to different groups of corrections.

The purpose of combinations is the same as triangles, to take up time and move price sideways. Intermediate wave (2) lasted 58 days. So far intermediate wave (4) has lasted 47 days. If it continues for another two or three weeks, it would still have excellent proportion with intermediate wave (2).

Although this wave count actually has a better look than the main wave count, it does not have support from classic technical analysis. For this reason it will be published as an alternate with a lower probability.


S&P 500 Hourly 2017
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Minuette wave (b) will also fit as a double zigzag. This does not have as good a look as the combination idea on the main wave count though. Double zigzags normally have a clear slope against the prior trend but this one moves sideways.

Minute wave b may be over here, or it may continue higher. Only a new high above 2,427.77 should see this alternate wave count discarded.

When minute wave b is complete, then a five wave structure downwards for minute wave c would be expected to most likely take price at least slightly below the end of minute wave a at 2,322.25, so that a truncation is avoided.



S&P 500 weekly 2017
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Volume for the last three upwards weeks is all stronger than the two downwards weeks prior. There is more support for upwards movement than downwards. This is bullish.

The only concern here is ADX is extreme. Within this bull market, beginning in March 2009, this has happened at the weekly chart level on four occasions: January 2010, the end of February 2011, early June 2013, and late July 2014. On each occasion it was immediately followed by three to four weeks of downwards movement.

Extreme ADX at the weekly chart level supports the alternate Elliott wave count.

Very bullish On Balance Volume supports the main Elliott wave count.


S&P 500 daily 2017
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Friday’s session looks like an upwards breakout from the bull flag consolidation pattern. However, it lacks support from volume and should be approached with some suspicion. It may turn out to be false.

Friday’s candlestick is bullish with price closing at the high and no upper wick and a longer lower wick.

ADX at the daily chart level indicates room for the upwards trend to continue, so it is bullish. On Balance Volume is also very bullish at the daily chart level.

There is room for price to continue higher yet, but extreme ADX at the weekly chart level is sounding a strong warning. Keep stops on long positions tight and be prepared to exit quickly.


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.

It is noted that there are now six multi day instances of bullish divergence between price and inverted VIX, and all have been followed so far by at least one upwards day if not more. This signal seems to again be working more often than not. It will again be given some weight in analysis.

There is single day bearish divergence for Friday between price and VIX: volatility increased and did not show a normal decline while price moved higher. This divergence indicates weakness within price. The last three occasions noted here of single day bearish divergence were followed by some downwards movement.


AD Line daily 2017
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Single day bearish divergence noted in last analysis has not been followed by downwards movement. It has been followed by upwards movement, so it may have failed.

There is short / mid term bearish divergence with a slightly higher high for price on Friday but a lower high for the AD line. This divergence is weak though and should not be given much weight.


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

The following lows need to be exceeded for Dow Theory to confirm the end of the bull market and a change to a bear market:

DJIA: 17,883.56.

DJT: 7,029.41.

S&P500: 2,083.79.

Nasdaq: 5,034.41.

Charts showing each prior major swing low used for Dow Theory are here.

This analysis is published @ 10:11 p.m. EST on 6th May, 2017.