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A small diamond pattern may be forming. This supports the Elliott wave count.

Summary: It looks likely now that primary wave 3 may be over and primary wave 4 may be in its very early stages. Some confidence in this view may be had if price makes a new low below 2,459.93.

Primary wave 4 may be expected to last at least 8 weeks and may end about 2,320.

Alternatively, if price makes a new high tomorrow, then the target for primary wave 3 to end would be at 2,497.

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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It is possible that primary wave 3 is complete. However, some confidence may be had in this view only with a new low below 2,459.93 now. Further and substantial confidence may be had if price makes a new low below 2,405.70. Fibonacci ratios are calculated at primary and intermediate degree. If primary wave 3 is complete, then it exhibits the most common Fibonacci ratio to primary wave 1. It also perfectly exhibits a Fibonacci 55 weeks duration.

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

Primary wave 4 should last about 8 weeks minimum for it to have reasonable proportion with primary wave 2. It is the proportion between corrective waves which give a wave count the right look. Primary wave 4 may last 13 or even 21 weeks if it is a triangle or combination.

If primary wave 4 reaches down to the lower edge of the Elliott channel, it may end about 2,320. This is very close to the lower range of intermediate wave (4); fourth waves often end within the price territory of the fourth wave of one lesser degree, or very close to it.

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.

At the end of last week, Lowry’s analysis favours the idea that primary wave 4 has begun.


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.

There is perfect alternation between the deep expanded flat of minor wave 2 and the shallow double zigzag of minor wave 4.

There are no adequate Fibonacci ratios between minor waves 1 and 3. Minor wave 3 exhibits strongest momentum and is the longest actionary wave, so this wave count fits with MACD.

It must be accepted that it is entirely possible that primary wave 3 may not be over and may continue higher while price remains above 2,405.70.

The hourly counts will again be named “first” and “second” after the lack of an upwards breakout. With Lowry’s analysis favouring a larger pullback now underway, the wave count which sees primary wave 4 underway may be slightly favoured.


S&P 500 hourly 2017
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If primary wave 3 is over and primary wave 4 has begun, then minute waves i and now only ii may be complete. The first second wave correction within a new trend is often very deep.

The base channel is redrawn. If minute wave ii moves any higher tomorrow, it may not move beyond the start of minute wave i above 2,484.08. If it does move higher, then redraw the base channel.

Minute wave iii should have the power to break below support at the lower edge of the base channel. Once it has done that, the lower edge may provide resistance.

There is almost no room left for minute wave ii to move into. If this wave count is correct, then the next session should move price strongly lower.

The Fibonacci ratio applied to the target for minute wave iii is chosen because minute wave ii is very deep.


S&P 500 hourly 2017
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It is still possible that minor wave 5 is incomplete.

The problem of a lack of alternation is resolved if minute wave iv is a triangle.

The triangle would be a regular barrier or contracting triangle.

Four of the five sub-waves of a triangle must be zigzags or multiple zigzags. One sub-wave may be a different A-B-C structure. Here, minuette wave (a) may have been an expanded flat correction.

The triangle sub-waves are relabelled today. The triangle may be continuing even further sideways.

Minuette wave (c) may not move beyond the end of minuette wave (a) below 2,459.93.



S&P 500 weekly 2017
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RSI, ADX and the two doji support the idea that primary wave 4 has begun.


S&P 500 daily 2017
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Monday’s upwards day does not fit a pennant pattern, but it does now fit a possible diamond pattern.

From Kirkpatrick and Dhalquist (pages 321 – 322):

“Bulkowski’s figures show that around 58% of the time, the preceding price action in a diamond top was a steeply rising trend. When this occurs, the odds increase that the breakout from the diamond will be downward and will be equally as sleep, and 82% of the time, it will retrace the entire prior rise. These figures are only valid for a downwards reacts from a top, which occur 67% of the time. Upward breakouts from a diamond top have a very poor performance history and should be avoided. Thus, action should only be taken once the pattern has been identified and the downward breakout has occurred.

… As in most patterns, volume usually declines (67% of the time) during its formation, but declining volume is not necessary. Indeed, rising volume is a pause for performance after the breakout.

…The diamond formation, once properly defined, tends to have a fast-moving price run on the breakout.”

On Balance Volume and MACD suggest the pattern may be complete and a downwards breakout may be imminent.


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.

Bullish divergence noted two sessions ago has now been followed by two upwards days, so it may now be considered resolved. There is no new divergence today.


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.

Last bullish divergence noted was followed by an upwards day, so this may now be resolved. Price moved higher today but breadth declined. This is interpreted as bearish; there was weakness today within upwards movement from price.

Lowry’s measures of internal market strength and health continue to show a healthy bull market. While the bull market overall remains healthy, there are signs at the end of this week of some short term weakness which may indicate a pullback to develop here. This supports the labelling of the Elliott wave count at the daily chart level.


The S&P500, DJIA, DJT and Nasdaq have all made new all time highs within the last month.

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 @ 07:30 p.m. EST.