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The main Elliott wave count expects more upwards movement, and it has strong support from classic technical analysis, particularly a very bullish On Balance Volume and rising market breadth.

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 now be met within a few days.

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.

MAIN ELLIOTT WAVE COUNT

WEEKLY CHART

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.

DAILY CHART

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. So far it looks like subminuette waves i through to iv are complete. Within subminuette wave v, no second wave correction may move beyond the start of its first wave below 2,488.38.

Subminuette wave iv 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 21 sessions. The structure is still incomplete at the hourly chart level, so it may not exhibit a Fibonacci duration.

HOURLY CHART

S&P 500 Hourly 2017
Click chart to enlarge.

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.

It is possible that minuette wave (iii) could be over at yesterday’s new all time high, falling well short of the targets. This possibility will be considered if price makes a new low below the start of subminuette wave v at 2,488.38. At that stage, downwards movement could not be considered as a second wave correction within subminuette wave v, so subminuette wave v would have to be over.

The small pullback within this last session, which is labelled sub-micro wave (2), has a strong three wave look to it on the five minute level. This strongly suggests that upwards movement for now is not over.

The degree of labelling within subminuette wave v is today moved up one degree. The final fifth wave of micro wave 5 may be extending up towards the target. Within micro wave 5, the correction of sub-micro wave (2) may not move beyond the start of sub-micro wave (1) below 2,495.94.

ALTERNATE WAVE COUNT

WEEKLY CHART

S&P 500 Weekly 2017
Click chart to enlarge.

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.

DAILY CHART – TRIANGLE

S&P 500 Daily 2017
Click chart to enlarge.

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).

HOURLY CHART

S&P 500 Hourly 2017
Click chart to enlarge.

Intermediate wave (B) may be continuing higher. It is again possible that the structure is complete, but there is no evidence yet of a reversal.

This wave count is now less likely. But it remains possible because running triangles are not rare structures and intermediate wave (B) is within a normal length.

However, this wave count does not have much support from classic technical analysis. It must be understood to be a less likely alternate at this stage.

Today, the small downwards wave labelled minor wave 1 would have to be seen as a five wave structure. This is possible, but it does not look right at the five minute chart level. That reduces the probability of this labelling at the hourly chart level being correct today.

DAILY CHART – COMBINATION

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.

TECHNICAL ANALYSIS

WEEKLY CHART

S&P 500 weekly 2017
Click chart to enlarge. Chart courtesy of StockCharts.com.

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.

DAILY CHART

S&P 500 daily 2017
Click chart to enlarge. Chart courtesy of StockCharts.com.

Volume shows some weakness today, but this will not be taken as an indication that a pullback should likely begin here. This weakness in volume is a feature of this market at this time. As evidence of this statement see the fall in volume yet persistent rise in price from the 18th to the 30th of May this year.

On Balance Volume remains very bullish and this will continue to be given reasonable weight in this analysis. So far it has proven to be a more reliable indicator for price.

Stochastics can remain extreme for quite reasonable periods of time for the S&P in a bull trend. It is not particularly helpful as a timing tool for highs; it is only a warning of an extreme market and for traders to be aware of an approaching pullback, which can be sharp.

VOLATILITY – INVERTED VIX CHART

VIX daily 2017
Click chart to enlarge. Chart courtesy of StockCharts.com.

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.

Short term bearish divergence noted in last analysis has now disappeared. There is no new short term divergence today.

BREADTH – AD LINE

AD Line daily 2017
Click chart to enlarge. Chart courtesy of StockCharts.com.

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.

The rise in price today is again supported by a rise in market breadth. The AD line continues to remain very bullish.

DOW THEORY

The S&P’s new all time high is confirmed by DJIA and Nasdaq also making new all time highs. DJT has also now made new all time highs, so the continuation of the bull market is now confirmed.

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 @ 09:19 p.m. EST.