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Last end of week analysis warned that On Balance Volume supported the alternate Elliott wave count and a target for more upwards movement was given. Price has moved higher as that wave count expected and the On Balance Volume signal is now clear and strong.

Summary: Assume the trend remains upwards while price remains above 2,480.38. The very clear and strong bullish signal from On Balance Volume supports this view. The next target for profit taking is 2,531.

However, stay nimble and keep stops tight. This trend is extreme and over stretched. There is reasonable downside risk.

Last monthly and weekly charts are here. Last historic analysis video is here.

I am very reluctant at this time to pick one wave count over the other, between these two wave counts. At this time, classic analysis still favours the second wave count. But I would rather label these as “first” and “second”, rather than “main” and “alternate”. I will lay out the arguments for and against each wave count in terms of Elliott wave and classic analysis, and let members make their own judgements.



S&P 500 Weekly 2017
Click chart to enlarge.

Primary wave 3 may be complete. Further and substantial confidence may be had if price makes a new low below 2,480.38 now. That would invalidate the second wave count published below. 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 may have completed its fifth week.

If primary wave 4 unfolds as a single or double zigzag, then it may find support about the lower edge of the maroon Elliott channel. If it is a triangle or combination, it may be more shallow, ending about mid way within the channel. At this stage, a single zigzag has been invalidated and a double zigzag is discarded based upon a very low probability. It looks like primary wave 4 is to be a very shallow sideways consolidation rather than a deeper pullback.

Only two daily charts are now published for primary wave 4: a triangle and a combination. It is impossible still for me to tell you with any confidence which of these two structures it may be. The labelling within each idea may still change as the structure unfolds.

The daily charts are presented below in order of probability based upon my judgement.

The final target for Grand Super Cycle wave I to end is at 2,926 where cycle wave V would reach 1.618 the length of cycle wave I.


S&P 500 Daily 2017
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This first daily chart will illustrate how price might move if primary wave 4 unfolds as a triangle.

Intermediate wave (B) may be continuing higher as a double zigzag. One of the five sub-waves of a triangle should be a more complicated multiple; most commonly that is wave C, but it may be any sub-wave. Intermediate wave (B) has made a new all time high, so it may be a running triangle.

The triangle may still last a total of at least eight weeks, but so far it has lasted five weeks and may only be completing wave B. It now looks like it will need to take longer. If longer, then a Fibonacci 13 or 21 weeks may be expected.

Both intermediate waves (A) and (B) look like three wave structures.

Intermediate wave (C) may not move beyond the end of intermediate wave (A).


S&P 500 Hourly 2017
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A double zigzag may be almost complete for intermediate wave (B).

Use the black best fit channel. If price breaks below the lower edge, then expect the upwards swing is over and the next swing down has begun. While price remains within this channel, then it is entirely possible price may continue higher; minute wave c may not be complete.

There is still zero evidence of a trend change. A new low below 2,480.38 is required for any confidence that a high is in place.

Labelling within the zigzag of minor wave Y is today changed to see minute waves a and b completed higher up. This has a better overall look to it.

Minute wave c looks now to be incomplete. A final fifth wave upwards looks like it is required.

A best fit channel is drawn about minor wave Y in pink. Assume the upwards trend remains intact while price remains within this channel.

We should assume that the trend remains up while price remains within the black channel and above 2,480.38.


S&P 500 Daily 2017
Click chart to enlarge.

A combination for primary wave 4 would still offer some alternation with the regular flat of primary wave 2. Whenever a triangle is considered, always consider a combination alongside it. Very often what looks like a triangle may be unfolding or may even look complete, only for the correction to morph into a combination.

There may only be one zigzag within W, Y and Z of a combination (otherwise the structure is a double or triple zigzag, which is very different and is now discarded). At this stage, that would be intermediate wave (W), which is complete.

Combinations are big sideways movements. To achieve a sideways look their X waves are usually deep (and often also time consuming) and the Y wave ends close to the same level as wave W.

Here, intermediate wave (X) is very deep.

Intermediate wave (Y) may be a flat correction or a triangle. A flat correction should be expected for intermediate wave (Y).

Intermediate wave (Y) may be unfolding as an expanded flat, the most common variety. So far minor wave B may be a 1.83 length of minor wave A, substantially longer than the most common range of up to 1.38. If minor wave B reaches twice the length of minor wave A at 2,514.21, then the idea of an expanded flat should be discarded based upon a very low probability.

It is also possible that intermediate wave (X) is continuing higher as a double zigzag, as labelled on the triangle daily chart. While waves W, Y and Z within combinations may only be simple corrections labelled A-B-C (or A-B-C-D-E as in the case of triangles within combinations), the X waves within combinations may be any corrective structure including multiples. However, while this is valid, it is fairly unusual. I am always uncomfortable with labelling X waves as multiples until price proves in hindsight that they were, because of the low probability.

Minor wave C should move below the end of minor wave A. This structure may take another few weeks to complete.



S&P 500 Weekly 2017
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This second wave count has strong support from a clear and strong bullish signal from On Balance Volume. If asked to pick a winner, this would be the wave count I would favour because of OBV’s signal. But I am concerned that indicators are so extreme.

If primary wave 3 isn’t over, then how would the subdivisions fit? Would it fit with MACD? What would be the invalidation point and would the Fibonacci ratios be adequate?

Of several ideas I have tried, this one has the best fit in terms of subdivisions and meets all Elliott wave rules.

Despite this wave count appearing forced and manufactured, and despite persistent weakness in volume and momentum for this third wave, On Balance Volume does now strongly favour it. It may be that as a Grand Super Cycle wave comes to an end, that weakness may develop and persist for very long periods of time (up to three years is warned as possible by Lowry’s for the end of a bull market), so this weakness may be viewed in that larger context.

Within minute wave v, no second wave correction may move beyond the start of its first wave below 2,417.35.


S&P 500 Daily 2017
Click chart to enlarge.

To see details of the whole of primary wave 3 so far and compare and contrast with the main wave count, see the analysis here.

Minute wave v to complete minor wave 3 must subdivide as a five wave structure. It looks like an incomplete impulse. Within the impulse, subminuette wave iv may not move into subminuette wave i price territory below 2,480.38.


S&P 500 Hourly 2017
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At the hourly chart level, this wave count now still has a better look over the first wave count. It looks like sideways movement over the last few days was a small fourth wave counterpart to a prior second wave correction ending on the 8th of September. These are labelled at micro degree.

A short term target is provided. Because there is such an excellent Fibonacci ratio already between micro waves 1 and 3, micro wave 5 may not exhibit a Fibonacci ratio to either of micro waves 3 or 1. The target is best calculated only at subminuette degree.

When subminuette wave iii is over, then subminuette wave iv should be a shallow correction lasting about one to three days. For the very short term, when markets open tomorrow, any continuation of sub-micro wave (4) may not move into sub-micro wave (1) price territory below 2,499.25.



S&P 500 weekly 2017
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A strong weekly candlestick gaps higher and has support from volume. This looks like a classic upwards breakout after a small consolidation, and there may have been a small flag pattern in it. This supports the second Elliott wave count.

If the flag pole is taken from 2,405.70 to 2,490.87, then a target for the next wave up may be about 2,527.

On Balance Volume looks like it may be breaking above the resistance line. However, the break is very small and so is unclear. One more upwards week would make it much clearer and then confidence may be had in the signal.

ADX is extreme and RSI now exhibits double bearish divergence. This trend is very extreme; beware that the first wave count may still be correct.


S&P 500 daily 2017
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Another green daily candlestick moves price higher with a slight increase in volume over the session of the 14th of September. Even if the volume spike of the triple witching day is ignored, there is still some support here from volume for upwards movement. This supports the second Elliott wave count.

Further support for the second Elliott wave count comes from: On Balance Volume, MACD and Bollinger Bands widening.

RSI is not yet extreme, so there is a little room for price to rise.

A small warning today is sounded by Stochastics exhibiting divergence, but this can develop further (or just disappear). As it is only single divergence and not multiple, it is a small warning. Wait for RSI to do the same; if that happens, the warning would be stronger.


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 still mid and longer term bearish divergence, but it has been noted in the past that divergence over a longer term does not seem to work as well for VIX. Short term bearish divergence is still present, but it is far too small to note here.


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 again no new divergence today between price and the AD line. The new high today for price has support from rising market breadth. This is bullish.

I have learned recently from Lowry’s reports that market breadth may lead price. I had previously interpreted any divergence between market highs in price and breadth as bearish, which is the usual technical interpretation. However, with Lowry’s expertise in the area of market breadth I will change my approach to this indicator and read any future divergence between market highs, with breadth higher than price, as a bullish leading indicator.


The S&P’s new all time high last week is confirmed by DJIA and Nasdaq also making new all time highs. However, DJT has not yet made a new all time high, so the continuation of the bull market at this stage lacks confirmation.

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 @ 11:55 p.m. EST.