Price continues to rise as expected from the Elliott wave count and classic technical analysis.

The Elliott wave target coincides nicely with a classic analysis target calculated using the measured rule from a small flag pattern.

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 early next week.

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

Click chart to enlarge.

This wave count has strong support from another bullish signal from On Balance Volume at the weekly chart level. 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

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 minuette waves (i) and (ii) are complete with minuette wave (iii) now very close to completion.

When minuette wave (iii) is complete, then minuette wave (iv) may not move back down into minuette wave (i) price territory below 2,454.77.

For now, with minuette wave (iii) incomplete, no second wave correction within subminuette wave v may move beyond its start below 2,488.38.

So far minuette wave (iii) has lasted 22 sessions. The structure is still incomplete at the hourly chart level, so it may not exhibit a Fibonacci duration.

HOURLY CHART

Click chart to enlarge.

The target is now a 5 point zone.

Labelling within subminuette wave v is today changed to fit better with MACD. The S&P often exhibits strong third waves and with MACD showing an increase in upwards momentum for Friday this looks like a small third wave.

The middle of the third wave has a good five wave look to it on the hourly chart.

Within the middle of the third wave, micro wave 4 may not move into micro wave 1 price territory below 2,507.60.

Keep redrawing the acceleration channel as price moves higher. When micro wave 3 is over, then that shall be an Elliott channel which may show where micro wave 4 may find support.

Minuette wave (iii) may end about the upper edge of the orange Elliott channel.

ALTERNATE WAVE COUNT

WEEKLY CHART

Click chart to enlarge.

Primary wave 3 may be complete. Confidence may be had if price makes a new low below 2,488.38 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

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).

This would be a running triangle, which allows for intermediate wave (B) to move beyond the start of intermediate wave (A). About 40% of triangles are running triangles; this is not a rare structure, so this wave count remains viable.

However, this wave count does not have much support from classic technical analysis. It should only be used if confidence points are passed.

HOURLY CHART

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.

At this stage, both wave counts will see the current upwards wave in the same way; both wave counts for the short term will expect more upwards movement. After considering a few different ways to label this upwards movement, it is my judgement at the end of this week that this labelling has the best look.

DAILY CHART – COMBINATION

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

Click chart to enlarge. Chart courtesy of StockCharts.com.

The candlestick is bullish. On Balance Volume is very bullish. MACD is now bullish. ADX remains bullish.

ADX is extreme but not by much.

This analysis strongly supports the main Elliott wave count. The trend is up. Keep all trades with the trend. Always use stops as there is always risk to the downside. Invest only 1-5% of equity on any one trade to manage risk.

From the small flag pattern, using the measured rule gives a target about 2,520; this is nicely close to the Elliott wave target.

DAILY CHART

Click chart to enlarge. Chart courtesy of StockCharts.com.

If there was a small flag pattern as outlined recently, then using the measured rule gives a short term target about 2,548. However, I would give preference to the target calculated from the flag on the weekly chart as that pattern there is clearer.

There is clearly an upwards trend and there is room for it to continue.

VOLATILITY – INVERTED VIX CHART

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.

There is no new short term divergence today. The rise in price came with a normal corresponding decline in market volatility.

BREADTH – AD LINE

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.

The mid and small caps have also made new all time highs. The rise in price is supported in all sectors of the market. Lowry’s measures of supply and demand continue to show expanding demand and contracting supply, which is more normal for an early bull market. This market shows reasonable internal health.

Go with the trend. Manage risk.

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 @ 12:14 a.m. EST on 30th September, 2017.