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A short term pullback was expected to begin on Friday. A downwards day completed with a lower low and a lower high, exactly as expected.

Summary: The trend is up. Trading with the trend is the safest approach for your account. Use corrections as an opportunity to join the trend.

Only the most experienced traders should attempt to trade the small whipsaws within corrections; if doing so, reduce risk to less than 3% of equity. Long positions may risk more, up to 5% of equity on any one trade.

Friday’s low was another opportunity to join the trend. The short term target is now at 2,490. The longer term target still at 2,500, but a higher possibility is now 2,926.

In the short term, next week may see the small correction over, or less likely price may move sideways for another day to three before an upwards breakout.

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 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.


S&P 500 Daily 2017
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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 is underway. Within minor wave 5, minute wave iv may not move into minute wave i price territory below 2,430.98.

Minor wave 5 is extending. Within minor wave 5, minute waves ii and iv now both show up clearly at the daily chart level. This portion of the wave count has now the right look. It would still look right if minute wave iv continued sideways for another day to three, taking up a bit more time.

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.


S&P 500 hourly 2017
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Minor wave 5 may be subdividing as an impulse so far. The middle of the third wave has the strongest upwards momentum. This wave count fits so far with MACD.

If minute wave iv is over as a quick shallow zigzag at Friday’s low, then there is perfect alternation between minute waves ii and iv. Zigzags are quicker structures than flats, so the disproportion between them is entirely acceptable.

If minute wave v has begun, then within it no second wave correction may move beyond its start below 2,465.06.

The old target for primary wave 3 now looks to be too low. A new target is calculated at minute degree, now that minute wave iv may be over.

This new target at 2,490 may still work with the higher final target at 2,500, but that is now beginning to look less likely. When primary waves 3 and 4 may be over, then the final target for primary wave 5 may be calculated at two degrees with more confidence.


S&P 500 hourly 2017
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It is also possible that minute wave iv may not be over and may continue further sideways for one to three days next week.

Minute wave ii was an expanded flat correction, so the least likely structure for minute wave iv would also be an expanded flat as that would offer no alternation in structure. Minute wave iv may be a triangle and still have good alternation, or a combination and still have reasonable alternation.

Both triangles and combinations are sideways movements. Lower degree Elliott wave triangles equate to pennant patterns and combinations equate to flag patterns. Both are reliable continuation patterns and should be used as opportunities to join a larger trend.

If it is a combination, then it is possible that minute wave iv may still reach down to end within the target range, but now at this stage that range is looking a little too low.

Minute wave iv may not move into minute wave i price territory below 2,430.98.

Minute wave iv may end within the price territory of the fourth wave of one lesser degree. Minuette wave (iv) has its price territory from 2,463.54 to 2,450.34. The lower edge of this range is also a strong area of support. There may also be strong support at the last breakaway gap at 2,460.92.



S&P 500 Weekly 2017
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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.


S&P 500 Daily 2017
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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 a rule for expanding triangles stating that no sub-wave may be longer than 1.5 times the length of the prior wave. This rule will be applied here to intermediate wave (B) of this triangle, which may be any of the three types (contracting, barrier or expanding). That price point is at 2,477.88.

At this stage, intermediate wave (B) is now reasonably longer than intermediate wave (A). As price moves higher, the probability of this wave count reduces. The probability today is now fairly low.


S&P 500 Hourly 2017
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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.



S&P 500 weekly 2017
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Volume is bullish. On Balance Volume is very bullish.

ADX is extreme and usually at the weekly chart level this quickly leads to a pullback to last two to four weeks. During the current bull market, which began in March 2009, ADX has only reached extreme on four previous occasions. On each of those occasions it was immediately followed by two weeks of downward movement in one case and four weeks of downwards movement in the other three cases.

In all four prior cases the pullback was sufficient to bring ADX down back below the directional lines and below extreme.

This time ADX has remained extreme for 17 weeks although the ADX line has not been rising for the whole time, only fluctuating. This trend is looking very stretched, but at this stage it may be better to rely upon Elliott wave structure and other indicators to tell when the next multi week pullback may begin.


S&P 500 daily 2017
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If the last gap is correctly labelled a breakaway gap, then it may not be closed; this one may offer support. Breakaway gaps may be used in trading to set stops.

Price fell of its own weight on Friday. This does not mean the market can’t fall further, it just means the probability of more downwards movement here is lower. This favours the first hourly Elliott wave chart.

On Balance Volume along with support at the gap may prevent price from falling much further here.

Although Stochastics is overbought, at this time it does not exhibit divergence with price at highs to indicate weakness. Only when it exhibits multiple divergence and RSI is also overbought would the probability of a bigger deeper pullback be reasonable.

There is room for upwards movement to continue.


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.

Hidden bearish divergence noted in last analysis has now disappeared. It is considered to have failed.

There is now single day bearish divergence between price and inverted VIX: price moved lower, but inverted VIX indicates volatility declined. This indicates weakness within the downwards movement from price, so it may be followed by one to two days of upwards movement.


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 no divergence today between price and the AD line. Both moved lower for Friday.

Lowry’s measures of internal market strength and health continue to show a healthy bull market. This week has seen a further increase in internal health of the market, so we may have some confidence that this bull market shall continue.

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.


The S&P500, DJIA and DJT have all made new all time highs.

Nasdaq has made a new all time high. Modified Dow Theory (adding in technology as a barometer of our modern economy) sees all indices confirming the ongoing bull market.

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.

Published @ 03:02 a.m. EST on 22nd July, 2017.