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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.



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. 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.


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 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.



S&P 500 weekly 2017
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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.


S&P 500 daily 2017
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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.


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.

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.


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 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.


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.