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Price moved higher as the main Elliott wave count expected.

Summary: If price makes a new high above 2,462.59 tomorrow, then the target for the bounce to end is at 2,482.

If price breaks below the upwards sloping green channel on the hourly charts tomorrow, then expect a third wave down has just begun. Its short term target would be about 2,382.

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

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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Primary wave 3 now looks complete. 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 still exhibits the most common Fibonacci ratio to primary wave 1.

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.


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.

Primary wave 2 was a regular flat correction lasting 10 weeks. Given the guideline of alternation, primary wave 4 may most likely be a single or double zigzag. Within both of those structures, a five down at the daily chart level should unfold. At this stage, that looks incomplete.

While primary wave 4 would most likely be a single or double zigzag, it does not have to be. It may be a combination or triangle and still exhibit structural alternation with primary wave 2. There are multiple structural options available for primary wave 4, so it is impossible for me to tell you with any confidence which one it will be. It will be essential that flexibility is applied to the wave count while it unfolds. Multiple alternates will be required at times, and members must be ready to switch from bear to bull and back again for short term swings within this correction.

Members with a longer term horizon for their trading may wait for primary wave 4 to be complete to purchase stocks or enter the index long.


S&P 500 hourly 2017
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Minor wave 1 downwards looks very clear as a five wave structure.

If price does not make a new high above 2,468.22 tomorrow, then upwards movement will look like a clear three wave structure.

If this is correct, then a five down followed by a three up means another five down should follow it. A target is calculated for minor wave 3 using the most common Fibonacci ratio to minor wave 1.

Within minor wave 3, no second wave correction may move beyond its start above 2,468.22.

The final hourly candlestick of Monday’s session is above the upper edge of the base channel about minor waves 1 and 2. This indicates that minor wave 2 may not be over, so an alternate below is provided.

Use the small green best fit channel about minor wave 2 to indicate when it is over. When price breaks below the lower edge of this channel, it would provide a strong indication that minor wave 2 would most likely be over.

Minor wave 3 should have the power to break below the lower edge of the blue base channel. Once it has done that, upwards movement should find resistance at the lower edge.


S&P 500 hourly 2017
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It is entirely possible that minor wave 2 is not over and may continue higher as a double zigzag, or it may continue sideways as a double combination.

Allow for these possibilities while price remains within the small green channel.

Minor wave 2 may not move beyond the start of minor wave 1 above 2,490.87.



S&P 500 weekly 2017
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This weekly candlestick is very bearish. A Bearish Engulfing pattern is the strongest reversal pattern.

If this week also moves price lower, then On Balance Volume would give an important bearish signal. For now it may offer some support and assist to initiate a bounce here.

RSI, ADX and MACD all remain bearish.

This weekly chart offers good support to the Elliott wave count.


S&P 500 daily 2017
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The short term volume profile remains firmly bearish. This supports the Elliott wave count. Price is finding resistance now about 2,470. Next strong resistance would be about 2,485.

There is a little distance to go before On Balance Volume finds resistance. This may allow for one more day of upwards movement, and then it may halt the rise in price.

While ADX does not indicate a new trend, ATR suggests one may be in the early stages.


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 longer term divergence between price and inverted VIX, shown in gold lines. However, mid and long term divergence has proven to be reasonably unreliable, so it will be given no weight in this analysis.


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 new divergence between price and market breadth today.


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 @ 06:36 p.m. EST.