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Price is moving sideways in a small range for the last two sessions. The short term direction expected by the Elliott wave count remains the same.

Summary: The bigger picture sees the S&P now in a primary degree pullback to last a minimum of 8 weeks and find support at the maroon channel on the weekly chart.

For the short term, a bounce may continue slightly higher to find strong resistance at the upper edge of the base channel on the main hourly chart.

The short term target for a third wave down is still at 2,389.

If price moves above 2,474.93, then use the alternate hourly chart.

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 and is completing its second.

If primary wave 4 reaches down to the lower edge of the Elliott channel, it may end about 2,325. This is within the 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 will now focus in on the unfolding structure of primary wave 4.

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.

While intermediate wave (A) is labelled as an unfolding impulse, it may also be a diagonal. Both structures are considered at the hourly chart level.

Intermediate wave (A) may also be a zigzag if primary wave 4 is to be a triangle. So far it is possible a zigzag downwards could be complete, but it is not deep enough for wave A of a triangle when it is viewed on the weekly chart. And so that possibility will not be considered at this time.


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 three candlesticks so far. It has reached just above the 0.618 Fibonacci ratio. It may move a little higher to test the upper edge of the base channel.

Minor wave 2 lasted four sessions. If minute wave ii ends in one more session, they would be even in duration, which is entirely acceptable for proportion. If minute wave ii lasts a little longer, that may also be reasonably acceptable. When the duration of minute wave ii is comfortably longer than minor wave 2 though, the proportion would not have the right look at higher time frames.

A small channel is drawn about minute wave ii. Minuette wave (b) has continued during Thursday’s session as a zigzag. It is still possible that it may continue further as a double zigzag, combination, or even a triangle.

After a little upwards movement, which may be considered minuette wave (c), then the green channel may have some purpose. At that stage, a breach of the lower edge of the channel would provide earliest indication that minute wave ii may be over and a third wave down may be underway.

In the first instance expect very strong resistance at the upper edge of the blue base channel.

If price moves higher above the upper edge of the base channel, then the alternate below should be preferred as soon as that trend line is breached and before the invalidation point is passed.

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 hourly 2017
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The other possible structure for intermediate wave (A), if it is to be a five, would be a leading diagonal. These are not as common as impulses, so this must be an alternate wave count judged to have a lower probability than the main wave count. However, low probability does not mean no probability. All possibilities should be considered.

Within leading diagonals, the first, third and fifth waves are most commonly zigzags. They may also appear to be impulses. Here, minor wave 1 will fit as a zigzag.

Second and fourth waves must be zigzags. Minor wave 2 may not move beyond the start of minor wave 1 above 2,490.87.

Second and fourth waves within diagonals are usually very deep; a range is given for the common depth.

Minor wave 3 would have to move below the end of minor wave 1 at 2,417.35. Minor wave 3 downwards of a leading diagonal should still exhibit an increase in downwards momentum and should still have support from volume.



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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Again, StockCharts has retrospectively changed volume data. After yesterday’s session, it was noted that volume was slightly lower than the prior session but today shows a slight increase.

Today printed another red daily candlestick with the balance of volume down. A further increase in volume is bearish.

The volume profile short term remains bearish.

On Balance Volume will be watched carefully in the next one to few days. It is at support today and this may initiate a small bounce for price. But if not, then it would give a reasonable bearish signal. A signal here would be given reasonable weight because the support line is almost horizontal.


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.

Last bearish divergence noted has now been followed by two red daily candlesticks, so it is now considered to be resolved. No new divergence is noted 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.

Bullish divergence noted in last analysis has been followed by a red daily candlestick, so it is considered to have failed. No new divergence is noted today between price and 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 @ 11:37 p.m. EST.