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Another new high was expected, but the sharp pullback during Wednesday’s session was not expected. Price remains well above the invalidation point on the hourly Elliott wave count.

On Balance Volume and the AD line give strong clues today as to what to expect next.

Summary: Classic technical analysis is very bullish for the short term. The next target is now a small zone calculated at two degrees, from 2,526 to 2,529. It may be met in another 6 sessions.

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

Always trade with stops and invest only 1-5% of equity on any one trade.

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

Due to strong support for a bullish wave count from On Balance Volume and the AD line, the wave counts are now labeled “main” and “alternate” and have been swapped over.



S&P 500 Weekly 2017
Click chart to enlarge.

This wave count has strong support from a clear and strong bullish signal from On Balance Volume. While classic analysis is still very bullish for the short term, there will be corrections along the way up. Indicators are extreme and there is considerable risk to the downside still.

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.

The next reasonable correction should be for intermediate wave (4). When it arrives, it should last over two months in duration, and it may find support about the lower edge of this best fit channel. The correction may be relatively shallow, a choppy overlapping consolidation, at the weekly chart level.


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 alternate 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, if it continues further, subminuette wave iv may not move into subminuette wave i price territory below 2,480.38.

So far minuette wave (iii) has lasted 15 sessions. If it exhibits a Fibonacci duration, then the next number in the sequence is 21; this duration would see it end in another 6 sessions.


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 alternate wave count. Subminuette wave iii looks so far like a typical unfolding impulse and its second and fourth wave corrections for micro waves 2 and 4 both look to be in proportion.

Subminuette wave iii may have completed its structure today; however, it exhibits no Fibonacci ratio to subminuette wave i and falls well short of the target.

The pullback during today’s session may have been subminuette wave iv already complete as a very shallow flat correction. This subdivides well on the five minute chart and has perfect alternation with subminuette wave ii. Both subminuette waves ii and iv show up on the daily chart giving the wave count the right look at that time frame. There is good proportion between them.

Because there is no Fibonacci ratio between subminuette waves i and iii, it is more likely that subminuette wave v will exhibit a Fibonacci ratio. The target is calculated at two wave degrees now and should have a reasonable probability.

Within subminuette wave v, no second wave correction may move beyond its start below 2,496.96.



S&P 500 Weekly 2017
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Primary wave 3 may be complete. Confidence may be had if price makes a new low below 2,480.38 now. That would invalidate the main wave count. 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 last a total of a Fibonacci 13 or 21 weeks.

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 again 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.

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.

This wave count sees upwards movement continuing as intermediate wave (X). Unfortunately, there is no Elliott wave rule regarding the length of X waves, so they may make new price extremes. I am applying the convention within Elliott wave regarding B waves within flats here to this X wave within a combination: When it reaches more than twice the length of intermediate wave (W), then the idea of a combination continuing should be discarded based upon a very low probability.

With intermediate wave (W) a zigzag, intermediate wave (Y) would most likely be a flat correction but may also be a triangle. Because a triangle for intermediate wave (Y) would essentially be the same wave count as the triangle for the whole of primary wave 4, only a flat correction will be considered.

But first, an indication would be needed that the upwards wave of intermediate wave (X) is over. As yet there is no evidence of this.



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
Click chart to enlarge. Chart courtesy of

The long lower wick on today’s candlestick creates a Hanging Man pattern, which is a bearish reversal pattern. However, the bullishness of the long lower wick means that Hanging Man patterns require bearish confirmation before they may be read as reversals; tomorrow will be important to confirm or non confirm this pattern.

Strong bullishness from On Balance Volume should be taken seriously. It very strongly supports the main wave count.

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 has disappeared.


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.

The AD line made a new all time high again today. Market breadth continues to be very bullish supporting the main wave count.


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 @ 10:00 p.m. EST.