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A Gravestone doji comes just three days after a Bearish Engulfing candlestick pattern. These two patterns together are giving a strong signal.

Summary: The fourth wave may be relatively brief and shallow as minor wave 4, or it may be a much deeper multi week pullback or consolidation as intermediate wave (4). At this stage, it is still impossible to tell which scenario may play out.

At this stage, classic technical analysis is looking fairly bearish. For the short term, use the lilac trend line on the first hourly chart; expect an increase in downwards momentum to a new low while price remains below that line. If price breaks above that line, then the main hourly wave count would increase in probability and a new all time high shortly thereafter would be a possibility.

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



S&P 500 Weekly 2017
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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.

As a Grand Super Cycle wave comes to an end, 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 weakness in volume 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 see the analysis here.

Minor wave 3 may be complete and may not exhibit a Fibonacci ratio to minor wave 1.

Minor wave 2 was very brief at only three days. It is possible for good proportion that minor wave 4 could be as brief.

The 0.146 and 0.236 Fibonacci ratios should be first and second targets for minor wave 4 to end.

Minor wave 4 should break down below the green channel containing minuette wave (v). A breach of this channel would add substantial confidence in this wave count. Note that the green channels are drawn differently on the daily charts. While price is breaking below the channel on the alternate chart, it has not yet done so here on this main daily chart.

If minor wave 4 were to end within the price territory of the fourth wave of one lesser degree, then a target range would be from 2,490.87 to 2,417.35. The 0.382 Fibonacci ratio of minor wave 3 is within this range at 2,455.


S&P 500 Hourly 2017
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If minor wave 4 is to be more long lasting than minor wave 2, and so to be a more normal duration for a correction at minor degree, then a five down on the hourly chart may be still unfolding.

Two overlapping first and second waves may be complete today. This first hourly chart has some support today from the Gravestone doji on the daily chart.

This first hourly wave count suggests a strong increase in downwards momentum tomorrow and for another one to three sessions thereafter.

While price continues to find resistance at the lilac trend line, this first wave count should be understood to be very likely. If price moves above that trend line, then the second hourly chart below would increase in probability.

Subminuette wave ii may not move beyond the start of subminuette wave i above 2,572.18.


S&P 500 Hourly 2017
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For the main wave count there are more possibilities open at this stage for minor wave 4. Because minor wave 2 only lasted three days, it is also possible that minor wave 4 could be relatively brief.

Minor wave 2 was a zigzag, so minor wave 4 would most likely be a flat, combination or triangle. Within all of those possible structures, minute wave a must subdivide as a three.

Here, minute wave a may be unfolding as a flat correction, which is classified as a three. Within a flat correction, minuette wave (a) must be a three; this may be a complete zigzag. Minuette wave (b) must then retrace a minimum 0.9 length of minuette wave (a) and make another new all time high. The most common range is given on the chart.

This wave count attempts to visually illustrate how minor wave 4 could unfold as a choppy overlapping sideways consolidation, with strong swings from support to resistance and back again, which may include overshoots of support and resistance before price returns into the consolidation zone. This may continue for a few days.



S&P 500 Daily 2017
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It is also possible that both minor waves 3 and 4 could be over.

My initial judgement was to label this as an alternate because of the brevity and shallowness of minor wave 4. This does not look right. However, there is still good alternation and good proportion with minor wave 2, which lasted only three days and was a zigzag. Here, minor wave 4 may have also lasted only three days and may have been a flat correction.

Intermediate wave (3) could be over. A deep multi week correction for intermediate wave (4) may have arrived.

Intermediate wave (2) lasted eleven weeks and was a relatively deep 0.54 double zigzag. Intermediate wave (4) may be a shallow flat, triangle or combination to exhibit alternation. To exhibit good proportion, it may last about eleven weeks or possibly a Fibonacci eight or thirteen.

A new low below 2,547.92 could not be a second wave correction within minor wave 5, so at that stage minor wave 5 must be over. This would add reasonable confidence that a correction has arrived.


S&P 500 Hourly 2017
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A new trend down at intermediate degree must begin with a clear five down on the hourly chart. That would be incomplete.

If a five down is unfolding, then it may be as an impulse with two overlapping first and second waves; the first hourly chart for the main wave count illustrates this idea. It works in the same way for this alternate wave count.

The other structural option for minor wave A would be as a leading diagonal; here, it may be expanding.

The degree of labelling within the diagonal may need to be moved down one degree for this wave count. It may be only minute wave i of minor wave A that is completing.

Within the diagonal, minute wave iv may not move beyond the end of minute wave ii above 2,572.18.

If price makes a new high above 2,572.18, then it may be possible that the zigzag downwards was minute wave i within a leading diagonal for minor wave A. If that idea is correct, then minute wave ii within a diagonal may not move beyond the start of minute wave i above 2,578.29. That is the final invalidation point for any alternate idea for this wave count at this stage.



S&P 500 weekly 2017
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At the weekly chart level, the technicals last week look even more bullish than the week prior.

Longer term divergence with price and RSI does not appear to be very reliable; it has again disappeared. Like divergence with VIX and the AD line, divergence with price and RSI appears to be more reliable for the short term when it is clear and strong.

This chart is fully bullish. There is nothing bearish yet here.


S&P 500 daily 2017
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A Bearish Engulfing candlestick pattern and now a Gravestone doji close to the last high are together giving a very bearish signal. This offers strong support to the Elliott wave counts, and more support to the alternate than the main wave count.

On Balance Volume will be watched very carefully over the next few days.


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.

Price moved higher today with a higher high and a higher low, but inverted VIX declined indicating an increase in volatility today. The rise in price did not come with a normal decline in volatility, so this divergence is interpreted today as bearish. It indicates weakness within price.


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 no new divergence today between price and market breadth. The small rise in price today had support from a small rise in breadth.


At the end of last week, only the Dow Jones Transportation Average has not made new all time highs. The continuation of the bull market has not this week been confirmed. However, the Dow Jones Transportation Average is not far off its last all time high. If it does make a new all time high, then this analysis will be totally and fully bullish.

Failure to confirm an ongoing bull market should absolutely not be read as the end of a bull market. For that, Dow Theory would have to confirm new lows.

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 @ 05:45 p.m. EST.