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A downwards day was expected for Wednesday, but this did not happen. Upwards movement invalidated the hourly Elliott wave count.

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. Expect downwards movement for tomorrow’s session: short term volume profile is bearish, On Balance Volume is at resistance, long upper candlestick wicks for three days are bearish, and AD line exhibits bearish divergence.

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 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. This is incomplete.

So far minor waves 1 and 2 may be complete. Minute wave ii may not move beyond the start of minute wave i 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 lower edge of the base channel did not provide resistance. Price gapped up back to within the channel at the open of the session.

If minute wave ii continues higher, then it should find very strong resistance at the upper edge of the channel. Lower degree second wave corrections should remain within base channels drawn about first and second waves one or more degrees higher.

Minute wave ii may not move beyond the start of minute wave i above 2,450.42.

Minute wave iii within minor wave 3 should exhibit a strong increase in downwards momentum. If it is extended, then the subdivisions within it would also be extended in time, showing up possibly on the daily chart.



S&P 500 Weekly 2017
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This wave count is 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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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.

On Balance Volume, the volume profile, and long upper candlestick wicks suggest a red daily candlestick for tomorrow.


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.

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.

There is new bearish divergence today between price and the AD line: the AD line has made a new all time high, but price has not. This indicates weakness within price during today’s session.

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 @ 10:55 p.m. EST.