A green daily candlestick was expected for Monday. Although price has made a lower low and a lower high, the candlestick did close green as the expected bounce came at the end of Monday’s session.
Summary: The target for a bounce to end tomorrow is at 2,448. Thereafter, the next wave down should show a strong increase in momentum and should have support from volume.
The short term target for a third wave down is at 2,389.
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.
ELLIOTT WAVE COUNT
WEEKLY CHART
Click chart to enlarge.
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. So far it has lasted only one full week.
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.
DAILY CHART
Click chart to enlarge.
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.
HOURLY CHART
Click chart to enlarge.
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 now exhibits slightly stronger momentum than minor wave 1. A further increase in downwards momentum would be expected.
Within minor wave 3, minute wave ii now shows up on the daily chart as a one green candlestick so far. It may end tomorrow with a second green candlestick, or a red candlestick with a long upper wick. At this stage, minute wave ii looks like an expanded flat correction, which are very common structures. Minute wave ii 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.
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.
TECHNICAL ANALYSIS
WEEKLY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
Another red weekly candlestick is very bearish. Long upper wicks now on two weekly red candlesticks are bearish. A Bearish Engulfing pattern is the strongest reversal pattern.
On Balance Volume has given an important bearish signal with a break below the yellow support line. This line has been tested five times before and is long held, but it has a reasonable slope. This is a reasonable bearish signal, not a very strong one.
RSI, ADX and MACD all remain bearish.
This weekly chart offers stronger support to the Elliott wave count.
DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
Price bounced up off support about 2,420.
The long upper wick for Friday’s candlestick is bearish. Now the long lower wick for Monday’s candlestick is bullish. This supports the hourly Elliott wave count.
StockCharts data for volume has been changed retrospectively. Friday’s volume is now slightly stronger than Thursday. Now Monday sees a downwards day, but the balance of volume was upwards and it is much lighter than Thursday and Friday. This is bearish.
Resistance on On Balance Volume may stop this bounce from being very deep.
Bullish divergence between price and RSI is very slight. This divergence will not be given much weight.
Overall, the chart looks reasonably bearish.
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 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.
For Friday there is single day bullish divergence: price moved lower, but inverted VIX moved higher. The fall in price did not come with a normal corresponding increase in volatility. This indicates weakness within price for Friday. It has now been followed by a green daily candlestick for Monday. It may be followed by one more green daily candlestick for Tuesday before it is resolved.
There was bullish divergence today between price and inverted VIX: price moved lower with a lower low and lower high, but inverted VIX moved higher. The fall in price today was not followed by a normal increase in volatility; the fall in price today is weak. This supports the Elliott wave count which sees downwards movement today as a B wave.
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.
There is single day divergence for Friday between price and breadth: price moved lower, but market breadth improved. This indicates weakness within downwards movement for Friday. It is now followed by a green daily candlestick for Monday. It may be followed by one more green daily candlestick for Tuesday before it is resolved.
DOW THEORY
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 @ 06:50 p.m. EST.
Price now past (almost…but maybe reversing??) the 3rd of the 4 decision areas for the top of C. The “final” one aligns highly with the upper downchannel line. I have a 76.4% retrace of minute 1 of minor 3 down (to the bottom of b actually, a tad below the formal end of minute 1) at 2461.7, and a 61.8% retrace of all of the 4 down to date at 2462.6. I suspect a tag of that area right about when and where the downchannel line intersects, sometime tomorrow. This leaves room for the necessary 4’s and 5’s of this move up to unwind, something that is arguably still ahead (I don’t quite buy Lara’s call on that little 4 at this point, myself. I expect more 4 type structure tomorrow before a top). I’m continuing to keep my shorting powder dry, for now.
Putting some labels on minuette (c).
I’m going to acknowledge the disproportion between subminuette ii and iv, but I’m also going to accept it. The S&P just does not always have nice proportion. Here the difference looks small at the hourly chart level, although it looks big on the five minute chart level. And as for the one minute… Olga’s already repeated my views on that one 🙂
And so this looks done or very close to done.
Expanded flats don’t fit into channels. But their C waves do. The narrow orange channel is the first indication of an end to minute ii: when price breaks below the lower edge with downwards (not sideways) movement, expect the bounce is over and the next wave down has just begun.
And now I’m off to chart and consider a leading diagonal. We need to be on our toes if this is P4, so I need to consider all possibilities before they surprise us.
Hourly chart updated:
This still looks right. Minute ii still looks like a fairly normal expanded flat, for the S&P.
If price continues a little higher it should stop at the upper edge of the base channel. If this wave count is right, that should provide very strong resistance. Price should react downwards from that line.
The next move down should be a good one.
I was eyeing the long lower wick with some slight concern yesterday as that has been of late a fairly reliable signal of strong upward movement to come. In the past that upward run has lasted several days and would generally come after an interim bottom. That was what primarily prompted the volatility hedging via selling of the UVXY calls and clearly I bought them back too early. Having said all that, the technical damage done to the market the last two weeks is not going to be repaired by one day of strong upward movement, particularly coming on very slight volume. Market participants are behaving as they always have, and the robust selling of volatility today amply illustrates that the crowd is convinced that the bottom is in. The confidence in central bank prowess to arrest any downward trend is alive and well to a degree even larger than I expected!
While I am still holding a couple DIA 217.50 calls expiring Friday, I remain uber bearish! 🙂
Maybe this works?
Your c wave is truncated and overlapping (c in any flat should be a 5) – very low probability imho.
I do like someone else analysing a 1 min chart though (beware though – Lara will put you in the same crazy camp as me for doing so 😛 )
Oh – and your labels do not quite adhere to Lara’s wave notation lol 😀 )
Lol, we will wait for Lara. My analysis is done for the day;)
What Olga said 🙂
We keep getting higher highs, but RSI and MACD are not excited by it at all atm.
Assuming they don’t speak with forked tongue a change in direction should soon be upon us.
This latest move beyond the 2450 pivot has me worried. But there is not a whole lot of volume to it.
If we look at the SPX daily, we can see what’s most likely here. A day or two of small bars (like Aug 15,16) that will at some point touch the upper down channel line, then, kaboom, a big drop. Symmetry (or, for others, “ranging behavior”, because SPX is just oscillating in a large down channel) is the second most powerful tool in the box, imo. Right behind the EW power tool!! And maybe fibo retraces, of course.
Classic shaking of the trees. Volume saying much ado about nada! 🙂
Looks like we are in fourth wave correction now. See if we get a new high into the close.
Have targets of 2454, .618 retracement and about 2465 which is where top of downtrend channel comes in since high. Any move significantly above that and will bail on short positions.
If wave three of C is over,it would be nice to get fourth wave correction to 2442-2443. Wave 1 is 13 pts so that would give wave 5 target of 2455.
Wrong about that idea. Perhaps recent low of 2446.97 was a quick fourth wave and we are now in third wave of last fifth wave up? Referring to 5 min chart.
Volume on daily chart remains unimpressive so far for such a move, suggesting head fake rally.
Looking for one more high before close.
I commented yesterday on the symmetry of action of Aug 8-14 and Aug 16-close yesterday. The symmetry has continued almost perfectly all morning. So looking ahead…well, check it out!!! A long sideway pattern (like we’ve just started), then a final kicker up (like we expect)…then over the falls, like we expect. At some point of course, the symmetry will break down but so far, its been golden for me! And if it holds…2462 is the target…
I agree Daniel – the upper edge of that minor 1,2 base channel should provide very strong resistance – if we go above that (and stay above it) I would be very concerned about the near term bearish case.
Doesn’t seem like we have a four down,yet we are past Lara’s target and approaching the .618 retracement. We hit the retracement on the qqqs already.
I can count a very small degree 5 down on the 1min chart from todays high – if we get a small degree 3 up and then reverse I’m all in with a stop at todays high.
Atm it looks to me that perhaps wave 4 of (c) was very quick / shallow and wave 5 was perhaps an ending diagonal but the fat lady aint quite singing yet 🙂
I should probably know better than trying to pick tops but you never know! (also div on RSI at todays high atm)
I’ll call the top for you: 2449.38 ;o)
cheers
😀 VIX not looking too worried yet so I’m still a little wary.
Yep that has me concerned, also wave two and wave four don’t have symmetry to me. I would think that we might have an hour or two down for wave four and then another push up to slightly new highs for the day. I think that once we get below wave one of this c wave around 2430 we can safely say we had four down five up (as Verne has noted). I guess to be safe though if you go short now you probably aren’t going to miss much more upside action, imo. Lara should be able to shed some good light on it if she isn’t surfing today ;). Looking forward to your update Lara.
Yep – I was zoomed in too close (was looking only at wave 3 of (c))
Now I’ve zoomed out I agree that we have probably only seen the top of wave 3 of (c) with 4 of (c) still to go (maybe currently in progress?). As noted by others, below 2430ish could no longer be wave 4.
It looks like wave 3 has extended as well, it is well over 1.618 x wave one. Perhaps 2.618 X wave one. If so are there any rules for wave fours/fives we should look for?
This could also be wave 4 of wave 3 of wave c.
Yep – I guess we’ll know by how long it takes.
With regards extensions – usually only one wave extends (can be W1, 3 or 5)
If we are now launching 5 of 3 of c, then the much more likely final high is up at the fibo’s around 2461-2463. I don’t see enough price room to contain the rest of 5 of 3 of c, then the final 4 and 5 of c. Also, with this count the high is likely tomorrow morning I believe. On the other hand, if I start seeing some swing lows violated here on the 5 minute chart, I will be quickly revising my views!!!
Vix moving off lows of 12.56.
Using trendlines and ‘the right look’, wave 3 of (c) is now complete imho – what I thought was the end of (c) (as 2 of (c) wasn’t on my screen – doh!) I think was actually the end to 3 of (c).
2 of 3 of (c) was fairly brief – this sideways movement looks to be one degree higher to me.
Wave 4 of (c) could move quite a bit lower to allow wave 5 to be similar size to wave 1 (but stay above 2430) and still only make slightly higher highs to avoid a truncation.
We’ll see…. at such low degree the count changes by the second 😀
I just looked at it on the 5 minute chart and ED was exactly what I thought Olga!
Looking for VIX reversal and gap fill. 🙂
Looks like a small degree 5 down 3 wave up – if it reverses now I’m in – finger on the trigger 😉
Of course it could just be a zig zag correction down (5,3,5) – isn’t EW fun! 😛
Current UVXY price is concerning me though – needs to get a move on
My thought at the moment is that we haven’t finished wave 3 of C yet. The little pullback around 11:30 is the 4 of that 3. We’ve launched the 5 of the 3 of C, but still have the 4 and 5 of C to come. I am also very dubious of this location as an ultimate high of C. An alternative view, anyway.
I’m quite bullish gold, and believe it’s going up significantly as the market falls deeper into this 4 wave. Today/tomorrow should be a good opportunity to load up on GLD at the same time the SPX short develops, IMO.
Meanwhile…SPX price has approached the 2445-46 zone and is stalling….but I still suspect we need a 4 then a 5, and I’m holding out for now for the 53-54 zone to be the top. However, my UPRO trade is stopped just under this little consolidation area, just in case.
Lara’s EW gold service is superb imho and might save you some money on that trade if her counts are correct (there is always a chance of course that they are not)
I’ll investigate, thanks. My counts and others I’ve seen are strongly bullish, so I’d be fascinated to contrast with a bearish view.
TBF – Lara does have an alternate that is more bullish short term so perhaps that is what you / others are seeing.
As per the analysis here – Lara looks at classic technical analysis to decide the most probable count.
BTW – Lara also undertakes Oil and Silver EW analysis over on that site. Oil is also at quite an interesting juncture atm.
Over at tradingview, Ignat Borishenko does complete wave work ups on multiple markets that seem quite credible. His fairly recent gold chart has gold launching a minor 3 after a minor 2 and a very strong minor 1. I know Robert Miner is awfully bullish gold too, similar/same reasons I believe, though I haven’t seen a Miner gold chart now in about 8 weeks (but did see a written view about 2 weeks ago, big picture very bullish). I’ll investigate Lara’s work.
Yes indeed! Do take a peek…. 🙂
Next decision zone, 2453-54!! Which I believe is Lara’s target, too. Rock on, SPX.
Target is 2448. 61% fib would be 2454.
2448 target is also 50% fib
I don’t see any four. Yet.
I agree, Kevin. Subminuette 3 probably soon to be complete?
I can’t count that finely, and get it wrong at higher levels all the time too. What I DO know here is, I’m not giving up my profits for any significant 4 wave here, sorry Mr. Market!! My stop is jammed now. I also note this is an unlikely (but not impossible) place for a top, it’s just not “right” re: satisfying lots of fractal relationships. Oops!!! Ka-ching….I’m flat.
If you think 2453-54 is the likely top, then yes, a 4 is certainly necessary right about now. But there’s another way to view this: yesterday’s malaise period was the 2 of C, we got a 1 and 2 of the 3 of C yesterday late, everything up to the high now is the 3 of the 3 of C, and now forming is the 4 of the 3 of C. Leaving us a 4 and 5 to complete the 3 of C, then a 4 and 5 of C still to go. In which case, a higher target is likely. However, counting at this level of timeframe is real questionable and/or challenging, I believe, certainly for amateurs like me.
Buying KSS September 13, 38 strike puts for 1.75…
Short sale restriction in place on UVXY already on Interactive Brokers.
Awaiting a reversal signal to start scaling in with stop at Minor 2 high (already seeing div in RSI at todays high).
Todays high is overlapping so perhaps a small degree ending diagonal is playing out or wave 4 of (c) is still in progress.
Aren’t ABC patterns supposed to be structured as 5-3-5’s? I see a 5 in the A wave up. I see a 3 in the B wave down. I see a 1 and a 2 and now a 3 in progress for C. In which case, we need a 4 and 5.
Agree. Hoping for 2448-2454.
Zig Zags are 5,3,5
Flats are 3,3,5 🙂
C wave always five
Excellent, TY!! And it appears perhaps we have the 4 in development here…
2430.57 says C wave up probably done….
I meant to say of course BELOW 2430.58
Exactly.
Selling 217.5 Diamond calls. Holding short leg of strangle via 215 puts…
Filled on September 20 VIX 10.50 calls via contingent order to buy at market if VIX falls to 11.89. Nice fill at 2.80 per contract as VIX fell to 11.88. Bid back up to 3.10/3.20 but I expect a double dip with another opportunity to get filled at possibly lower prices…
Buying back UVXY 37 strike calls for 0.75, reducing cost basis for long position to around 0.20 per contract…
The big money trade in the market right now is taking advantage of the massive short volatility positions, who are confident that they can once again survive another VIX cycle without fully unwinding . I suspect every savvy vol trader has hired a big rig and backed it up to the vol warehouse.
Why?
They are also looking at the VIX 200 day moving average.
The hapless short vol/juice equities traders clearly are not.
The 11.89 area should trigger the filling of all those backed-up rigs.
I would not be at all surprised to see price move temporarily beneath that price area as the usual suspects continue to do what they have successfully done the last year or so.
The times. they are a changing…
I love the fibonacci fractal internal geometry of the market. Today’s high just short of 61.8% retrace of wave b, and was at the same time almost exactly at the 23.6% retrace of all of minor 3 top to bottom so far.
Looking forward, when I overlay the fibo lines for both the minor 3 bottom to top retrace, and the entire corrective A wave retrace, I see four fibo clusters of two lines that represent most likely turn areas:
2439.4
2445-46
2453-54
2461.5-2462.5
2439.4 is only a single 38% retrace but it is also almost exactly at the wave a high and minor 1 low, so that’s definitely another likely zone. I would expect SPX to turn within or extremely close to one of those zones tomorrow. I’ll be watching for such a turn and a sell trigger thereafter (8/34 ema crossover and some lower lows/lower highs on 2 minute and 5 minute at least). Initial turns outside these zones will impress me less and require more “proof” than turns in or very close to these zones.
The symmetric projection of the size of minor 2 from the bottom of minor 3 so far points
exactly to the cluster at 2453-54. The next significant low-high move back is the July 27 low to Aug 8 high move which symmetrically projects to just above the 2445-46 cluster. So yet added significance for turns in those two zones.
I agree – that area is also where a gap was the morning of 8/14 . I will be looking at that 2454 – 55 to add short positions . Will look to see if RSI gets stretched in that area . May take more that a day
By the 2439 area. On to the 45-46 zone….quickly!! Lots of momentum this morning. I’m guessing one of the higher zones, probably 53-54 area (the .618 retrace of minor 3 so far).
howdy do,,hey Rodney,,how did the eclipse go for you? did you see a mass exodus after?
Yes Ronald, the highways were lined with cars, pick up trucks and all sorts of RV’s. I watched it on TV when I got home this evening! It certainly looked strange and erie outside though.
just call me doc,,
🙂