A green daily candlestick was expected, but price has moved lower and that was not expected.
Summary: The profit target is at 2,478. The upwards trend has internal strength and health. Use corrections as an opportunity to join the trend. Today’s low presented such an opportunity as it bounced up off the channel on the hourly chart.
Expect a green daily candlestick and upwards movement to a short term target at 2,474 – 2,475 tomorrow.
Always use stops. They should be set at this time just below 2,430.98, or for profitable positions use a trailing stop. 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.
MAIN ELLIOTT WAVE COUNT
WEEKLY CHART
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This wave count is identical to the alternate wave count up to the high labelled minor wave 3 within intermediate wave (5) within primary wave 3.
This wave count sees primary wave 3 as incomplete, but close to completion.
Within primary wave 3 impulse, the final wave of intermediate wave (5) is seen as incomplete. Intermediate wave (5) is subdividing as an impulse.
When intermediate wave (5) is complete, then primary wave 3 would be complete. Primary wave 4 may not move into primary wave 1 price territory below 2,111.05.
If price reaches the target at 2,500 and either the structure is incomplete or price keeps rising, then the next target would be the next Fibonacci ratio in the sequence between cycle waves I and V. At 2,926 cycle wave V would reach 1.618 the length of cycle wave I.
DAILY CHART
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The daily chart shows only the structure of intermediate wave (5); this structure is an impulse.
Within intermediate wave (5), minor waves 1 through to 4 are now complete. The final fifth wave of minor wave 5 should now be underway. Within minor wave 5, the upcoming correction for minute wave iv may not move into minute wave i price territory below 2,430.98.
Minor wave 5 looks like it is extending. When waves extend, they show their lower degree subdivisions at higher time frames and here, within minor wave 5, minute wave ii is clear and minute wave iv should be also. That means that when it arrives minute wave iv may last two or so days.
Within minute wave iii, the subdivisions of minuette waves (ii) and (iv) now look clear on the daily chart.
There is perfect alternation between the deep expanded flat of minor wave 2 and the shallow double zigzag of minor wave 4.
HOURLY CHART
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Minor wave 5 may be subdividing as an impulse so far. The middle of the third wave is showing an increase in upwards momentum.
There is no Fibonacci ratio between minuette waves (i) and (iii). This means it is more likely that minuette wave (v) will exhibit a Fibonacci ratio to minuette waves (i) or (iii), and the most common Fibonacci ratio for a fifth wave is equality in length with the first wave. The target is widened to a small 1 point zone calculated now a two degrees, and it has a reasonable probability.
Minuette wave (iii) exhibits stronger momentum than minuette wave (i). This wave count fits with MACD.
Minuette wave (iv) looks like it has ended as expected during this session, finding support perfectly at the lower edge of the green Elliott channel. Now that this channel shows where price is finding support and resistance, expect the fifth wave of minuette wave (v) to end either mid way within it (more likely) or at the upper edge (less likely). When the channel is breached by subsequent downwards movement, that shall be now taken as an indication that minute wave iii is over and minute wave iv is underway.
When minute wave iii is complete, then minute wave iv may not move into minute wave i price territory below 2,430.98.
ALTERNATE ELLIOTT WAVE COUNT
WEEKLY CHART
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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. So far it has lasted three weeks. This is far too brief to be considered complete or even close to complete.
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.
DAILY CHART
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A new all time high means a double zigzag for primary wave 4 is still possible but much less likely. A double combination would be more likely but would not offer very good alternation with the flat correction of primary wave 2.
What would still offer good alternation would be a running contracting triangle.
Within the triangle, intermediate wave (A) can be easily seen as a double zigzag. All remaining sub-waves of the triangle should then be simple A-B-C corrections.
There is no rule stating a limit for B waves within running triangles. There is a convention within Elliott wave for flat corrections that states when a possible B wave is more than twice the length of the A wave, the idea of a flat should be discarded based upon a very low probability. That convention will be applied here to the triangle. At 2,500 intermediate wave (B) would reach twice the length of intermediate wave (A). A triangle should be discarded above that point.
HOURLY CHART
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Intermediate wave (C) of a contracting triangle may not move beyond the end of intermediate wave (A) below 2,407.70. Although an expanding triangle would be valid, they are the rarest of Elliott wave structures. In my nine years of daily Elliott wave analysis I have only ever seen one structure which in hindsight was an expanding triangle. If price makes a new low here below 2,407.70, then another scenario would be considered.
If price makes a new all time high tomorrow, then the probability of this wave count would be reduced.
TECHNICAL ANALYSIS
WEEKLY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
Candlesticks, volume, and On Balance Volume are bullish.
ADX, RSI and MACD are bearish.
Overall, give more weight to volume and On Balance Volume.
DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
Look now for support about 2,450 for any pullbacks within this upwards trend.
On Balance Volume is very bullish. Give this more weight than other indicators. It correctly predicted the upwards breakout before it happened, as it so often does.
Today’s candlestick, On Balance Volume, ATR, ADX, MACD and Bollinger Bands are all bullish.
Volume today is again very slightly bullish.
VOLATILITY – INVERTED VIX CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
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 between price and inverted VIX. Both moved lower.
BREADTH – AD LINE
Click chart to enlarge. Chart courtesy of StockCharts.com.
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.
Today there is no divergence between price and the AD line. Both moved lower.
Lowry’s measures of internal market strength and health continue to show a healthy bull market. The rise in price comes with expanding buying power and contracting selling pressure, normal and healthy for a bull market, even an old one.
Historically, almost every bear market is preceded by at least 4-6 months of divergence with price and market breadth. There is no divergence at all at this time. This strongly suggests this old bull market has at least 4-6 months to continue, and very possibly longer.
DOW THEORY
The S&P500, DJIA and DJT have all made new all time highs.
Nasdaq still has not made a new all time high. Modified Dow Theory (adding in technology as a barometer of our modern economy) indicates some weakness at this time within the bull market, but there is zero indication that it is over. What is much more likely is that Nasdaq may too make a new all time high this week. If it does, the ongoing bull market will again be confirmed.
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 @ 08:47 p.m. EST.
Hourly chart updated:
So far price remains nicely within this channel. So let us assume this channel will continue to work, until proven otherwise.
When this channel is breached by downwards movement assume minute iii is done and minute iv is underway.
While price remains within the channel assume it’ll keep going up.
What happens if minuette V surpasses 2,478, the target for Intermediate V and Primary 3? Have you been working on a new alternate?
I guess minute three could go higher. SVXY sporting a spinning top above the upper BB so a reversal is probably close. I may have jumped the gun a bit but I executed a bearish SPY 247/247.5 bear call credit spread to get positioned for minute four. Spread expires next week so that gives enough time for minute four to play out over a few days. I don’t expect to make a big profit on the spread but just to get positioned for minute five and will close the short leg of the spread the minute it breaks even, holding the 247.5 long calls for the ride up in minute five.
Since we had an expanded flat for minute two I imagine we will see something else for minute four. A straightforward zig zag would be nice but for that exact reason we probably are going to get some kind of torturous combination! 🙂
Out of my spreads and waiting for the turn. Daily chart does have me wondering about the current degree. I guess we will know for certain by the depth of the fourth wave correction. Another awesome call on target by Lara. Paying attention to her targets has been a real game changer in terms of not exiting trades too early. Well done!
That’s great Verne 🙂
Tentative close is less than two tenths of a point under 2474. One more slight adjustment upward and it’s a bullseye…
Amazing isn’t it? I still remember when the lights went on about a year ago on the matter of the wave targets. I kept leaving all kinds of money on the table due to fear of being whipsawed, only to see price eventually go on to exactly the targets Lara had indicated. It really takes discipline and a lot of confidence in the chartist but I becoming more convinced than ever it is the most valuable piece of information Lara’s analysis provides, after of course establishing the right trend.
Here we go. Minuette V is approaching the length of minuette I and is less than 2 pts shy of the target range. Minute IV upcoming, or will we plow through to 2500 and have to reset the wave count?…
SPX, Nasdaq-100, Nasdaq-composite, RUT are all at ATHs. DJI & DJT lagging today but DJI closed Monday’s gap.
I don’t even know where you would reset it to…
2,926
That made my eyes go O O.
Lara did mention that cycle wave V could extend to 2,926. That would really put a wrinkle in the current wave counts as far as I can tell, but then again I’m no expert on Elliot Waves.
Cycle I is not extended, cycle III is extended.
The target 2,500 expects that only cycle III will be extended and cycle waves I and V will be equal, not extended.
The higher target at 2,926 expects both cycle III and V will be extended.
So both targets 2,500 and 2,926 are entirely reasonable and viable. But 2,500 would be more common so has a higher probability.
R3 SPX pivot at 2475 today…. is this an omen?
I mistakenly posted this on an earlier thread:
Interesting that DJI and Transports so far not joining the new highs party. Transports down significantly, DJI failing to close open gap from Monday. Will it play catch up, or will the divergence persist? Transports my be leading the way….
Very interesting indeed….. yes, a good downwards day for DJT. Also DJIA had a big drop today. But the S&P just up and up.
Big divergence.
Sold my DIA and SPY calls on minor pop this morning and glad I waited as the move up today gave a double. Still holding a few bullish put credit spreads and watching the bids on both legs closely. Generally the bid on the short leg pops when a turn is imminent. It looks as if, based on bids so far, that upside is limited so we could see minute four get going before the close.
First…
oh no,,,at least it wasn’t dat darn wabbit
Dat’s right, dag nabbit!!!
I heard that!