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The first hour of the session saw a break below the channel on the hourly Elliott wave charts. At that stage, downwards movement was expected, and an increase in downwards momentum was also expected. So far price is fulfilling those expectations.

Summary: The short term target for a third wave is at 2,389. Use the base channel on the hourly chart; look for support initially, and after price breaks below it look for a back test to resistance.

Any upwards bounces here should find strong resistance at the upper edge of the base channel.

A deeper pullback 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.

The final target for Grand Super Cycle wave I to end is at 2,500 where cycle wave V would reach equality in length with cycle wave I. 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.

Minor wave 2 upwards ended just above the 0.618 Fibonacci ratio. Minor wave 3 downwards has now made a new low below the end of minor wave 1, meeting the Elliott wave rule.

Minor wave 3 does not yet exhibit stronger momentum than minor wave 1, so a further increase in downwards momentum would be expected.

But look out, it is possible that there may be another bounce. Minor wave 3 may only subdivide as an impulse. Within minor wave 3, minute wave ii may show up on the daily chart as a green candlestick or a doji. It may not move beyond the start of minute wave i above 2,474.93. Minute wave ii should find very strong resistance at the upper edge of the blue base channel, if it gets that high.

Use the narrow best fit channel as a guide tomorrow. Expect price to keep falling while price remains within it. If price breaks above the upper edge, then look out for another bounce which would then be labelled minute wave ii.

The target expects minor wave 3 to be an extension. When third waves extend, they do so both in price and time. They often show their subdivisions at higher time frames, which is why minute waves ii and iv may show up on the daily chart.

Use bounces as an opportunity to enter the downwards trend. Always use a stop and invest only 1-5% of equity on any one trade.



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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Give some reasonable weight today to the bearish signal from On Balance Volume. The purple resistance line has now been tested five times and has a shallow slope. It offers reasonable technical significance. That line may now assist to halt any bounce from being too deep or long lasting if it continues to offer resistance.

While ADX still does not indicate a downwards trend, ATR indicates a returning trend and Bollinger Bands agree.

With RSI and Stochastics neutral, there is still room for price to fall lower. Look for next support about 2,420. If price falls through that, then next support is about 2,400.


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.

There is short term bullish divergence today between price and inverted VIX: price has made a slightly lower low from the last low five sessions ago, but inverted VIX has not. This indicates some weakness today within downwards movement from price. However, because there is no similar divergence today between price and the AD line, very little weight should be given to this divergence between price and VIX; it may just disappear tomorrow.


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 market breadth. The fall in price today has support from a corresponding fall in breadth.


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

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 @ 06:41 p.m. EST.