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A new low below 2,422.88 has invalidated the main Elliott wave count and confirmed the alternate. Yesterday’s bearish divergence between price and the AD line and VIX did warn of a possible breakdown.

Summary: Expect now a multi week to multi month pullback has begun. The target zone for it to end is about 2,400 to 2,322. In the short term, expect another downwards day tomorrow towards a short term target at 2,413.

If choosing to trade this correction, remember to always use a stop and invest only 1-5% of equity on any one trade. Less experienced members should reduce equity to only 1-3%.

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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Price today has indicated that this should be the main wave count.

Primary wave 4 may now be underway.

Primary wave 2 was a regular flat correction that lasted 10 weeks. Given the guideline of alternation, primary wave 4 may most likely be a single or multiple zigzag or a triangle and may last about a Fibonacci eight or thirteen weeks, so that the wave count has good proportion and the right look.

Primary wave 4 may end within the price territory of the fourth wave of one lesser degree. Intermediate wave (4) has its range from 2,400.98 to 2,322.35.

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


S&P 500 Daily 2017
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If primary wave 4 unfolds as the more common single or multiple zigzag, then it should begin with a five down at the daily chart level.

So far minor waves 1 and 2 may be complete. Within minor wave 3, no second wave correction may move beyond the start of its first wave above 2,450.42.

When intermediate wave (A) is complete, then intermediate wave (B) should unfold higher or sideways for at least two weeks.


S&P 500 hourly 2017
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The structure of minor wave 1 downwards can be resolved as a five wave impulse. Five and one minute charts were published in comments after the close of this session today for those members who may be interested in viewing the breakdown. Some gross disproportion must be accepted; the wave count does not have the right look at the five and one minute chart level. However, strong downwards movement this session indicates this is the correct wave count.

Now that price is below the lower edge of the base channel, it may provide resistance.

Minor wave 3 must complete as a five wave impulse structure. This wave count expects downwards movement tomorrow with a small fourth wave correction along the way for minute wave iv.

Minute wave iv may not move into minute wave i price territory above 2,437.03.



S&P 500 Weekly 2017
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This wave count is now an unlikely alternate.

Primary wave 3 may be complete. Primary wave 5 may be close to an end. Within primary wave 5, intermediate wave (4) may not move into intermediate wave (1) price territory below 2,398.16.


S&P 500 Daily 2017
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At this stage, this is the only alternate wave count that remains.

If primary wave 5 is unfolding as an impulse, then within it there is no longer any alternation between the structures of intermediate waves (2) and (4); both would be expanded flat corrections. This has substantially reduced the probability of this alternate.

Minor wave C must complete as a five wave impulse. This alternate wave count requires more downwards movement for the structure of minor wave C to complete. There is no divergence at this stage in expected direction between the two wave counts.



S&P 500 weekly 2017
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Price is moving higher with a higher high and a higher low, but upwards movement is weak. Volume is light and the candlestick is a small spinning top pattern.

The bullish signal from On Balance Volume has proven this time to be false. Unfortunately, there is nothing within technical analysis which always works. While On Balance Volume works far more often than it fails, it is not 100% reliable.


S&P 500 daily 2017
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Price is still range bound with resistance about 2,450 and support about 2,420. During the consolidation period, it is still upwards days that have strongest volume suggesting an upwards breakout is more likely than downwards. This technique does not always work, but it works more often than it fails. This does not support the new main Elliott wave count.

In the short term, On Balance Volume and the volume profile are bearish today.


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 noted in last two analyses has now been followed by a strong downwards day. This divergence may now be resolved, or it may yet require another downwards day to resolve it.

There is no new divergence today with price and inverted VIX.


AD Line daily 2017
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With the last all time high for price, the AD line also made a new all time high. Up to the last high for price there was support from rising market breadth.

There is normally 4-6 months divergence between price and market breadth prior to a full fledged bear market. This has been so for all major bear markets within the last 90 odd years. With no divergence yet at this point, any decline in price should be expected to be a pullback within an ongoing bull market and not necessarily the start of a bear market.

Bearish divergence noted in last analysis has now been followed by one strong downwards day. This divergence may now be resolved, or it may need one more day to resolve it.

There is today new bullish divergence between price and the AD line: price has made a new low below the low of the 21st of June, but the AD line has not made a corresponding new low. Downwards movement today lacks support from a decline in market breadth.

The mid caps and small caps have made new all time highs along with recent last all time high for large caps. The rise in price is seen across the range of the market, so it has internal strength.

However, there is now some weakness becoming evident within small and mid caps. The number of equities down 20% or more from their all time highs is greatest in small caps, next in mid caps, and least in large caps. This is only an early sign of weakness developing.


At the end of last week, DJIA and the S&P500 have all made new all time highs. DJT and Nasdaq last week did not make new all time highs. However, at this stage, that only indicates some potential weakness within the ongoing bull market and absolutely does not mean that DJT and Nasdaq may not yet make new all time highs, and it does not mean a bear market is imminent.

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 @ 10:00 p.m. EST.