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Price moved lower to break below the very close by invalidation point on the hourly chart.

Summary: On Balance Volume and the AD line remain very bullish, supporting the main Elliott wave count. The next target is now at 2,521 to 2,526. It may be met in another 3 sessions.

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
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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
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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, subminuette wave iv may not move into subminuette wave i price territory below 2,480.38.

Subminuette wave iv has continued further during Monday’s session. Although it has now lasted three sessions to one session for subminuette wave ii, the structure still has a reasonably normal look at the daily chart level.

So far minuette wave (iii) has lasted 18 sessions. If it exhibits a Fibonacci duration, then the next number in the sequence is 21; this duration would see it end in another 3 sessions.


S&P 500 Hourly 2017
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Subminuette wave iv will fit as a completed double zigzag structure (all subdivisions fit on the five minute chart). There is still some alternation between the single zigzag of subminuette wave ii. There is good alternation in depth.

The target is recalculated and is now a 5 point zone.

If subminuette wave iv continues any further tomorrow, then it may not move into subminuette wave i territory below 2,480.38.

If subminuette wave iv does continue any lower, then it may end when price finds support at the lower edge of the orange Elliott channel.



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 at the daily chart level. 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 sixth 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 a single zigzag. One of the five sub-waves of a triangle should be a more complicated multiple; most commonly that is wave C. If intermediate wave (B) is correctly labelled as a single zigzag, then intermediate wave (C) may be a longer lasting and more complicated double zigzag.

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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The best fit channel drawn in last analysis about prior upwards movement has been clearly breached. With price remaining within the Elliott channel on the main hourly chart though, it should not be taken as indication of a trend change. Both channels should be breached for confidence.

A best fit channel is drawn about new downwards movement. If price continues to find resistance about the upper edge, then for the very short term the trend may remain down.

There would now be four overlapping first and second waves complete for this alternate wave count. This wave count expects a strong increase in downwards momentum this week.


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 main 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.

The bullish signal from On Balance Volume is clear. It should be given reasonable weight. This supports the main Elliott wave count.

ADX is still just extreme. If the black ADX line crosses above the +DX line, then the upwards trend would no longer be considered extreme. RSI still exhibits double bearish divergence. This trend is extreme; beware that the alternate wave count may still be correct.


S&P 500 daily 2017
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Price has now moved lower overall for a few days after the Hanging Man candlestick pattern.

Another long lower wick on today’s candlestick is bullish. As this candlestick is not the end of a downwards trend of any reasonable length, it will not be read as a Hammer pattern. Reversal patterns should only be read as such when they come after a trend and not within a possible consolidation as this one may be. There has to be something to reverse.

The long lower wick may still be read as bullish. Long lower candlestick wicks are a feature in this market at the end of smaller pullbacks and consolidations .

Support for downwards movement from volume today contradicts the bullishness in the candlestick wick. But with On Balance Volume still very bullish overall, this chart still looks more bullish than 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 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.

There is no new short term divergence with price and inverted VIX.


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.

Price moved lower today but the AD line has moved higher. This will be interpreted as bullish divergence. A new high for breadth may be a leading indicator of new highs for price this week. This supports the main Elliott 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 @ 09:35 p.m. EST.