A new all time high at the start of the session has been followed by a small pullback. A pullback was expected from the last Elliott wave analysis as another second wave correction.
Summary: The Elliott wave target is at 2,616 and a target from a small pennant pattern is 2,617. The upwards trend has support from very bullish On Balance Volume.
Assume the trend remains the same until proven otherwise. The trend is up.
If price breaks below the green Elliott channel on the hourly charts, then expect a multi day pullback or consolidation is underway.
Pullbacks and consolidations at their conclusions offer opportunities to join the upwards trend.
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
This wave count has strong support from very bullish 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.
When minor wave 3 is complete, then minor wave 4 should find support about the lower edge of the best fit channel. Minor wave 4 may not move into minor wave 1 price territory below 2,299.55.
The next reasonable correction should be for intermediate wave (4). When it arrives, it should last over two months in duration. The correction may be relatively shallow, a choppy overlapping consolidation, at the weekly chart level.
DAILY CHART
Minute wave v is completing as an impulse. The final fifth wave of minuette wave (v) is underway.
The target for minor wave 3 expects to see the most common Fibonacci ratio to minor wave 1.
Within minuette wave (v), no second wave correction may move beyond the start of the first wave below 2,544.00.
HOURLY CHART
Assume the trend remains the same until proven otherwise. Assume the trend remains up while price remains within the green channel and above 2,566.17.
Minuette wave (v) must subdivide as a five wave structure. It may be an impulse with subminuette waves i and ii complete.
This wave count expects to see a further increase in upwards momentum as a small third wave up unfolds.
Within the impulse of subminuette wave iii, micro wave 1 may now be complete. Micro wave 2 looks incomplete. It may not move beyond the start of micro wave 1 below 2,566.17.
Micro wave 2 may end when price finds support about the lower edge of the orange base channel.
A breach of the green channel by downwards movement would be the earliest indication that this first wave count may not be correct. If that happens, then seriously consider the alternate hourly wave count below.
ALTERNATE HOURLY CHART
This alternate simply moves the degree of labelling within the last five up all up one degree. It is possible again that minor wave 3 could be over.
Minor wave 2 was a quick shallow 0.16 zigzag lasting just three days. Minor wave 4 should also show up at the daily chart level. It may be a sideways consolidation, subdividing as a flat, combination or triangle, to exhibit alternation with the zigzag of minor wave 2. These structures are often more time consuming than zigzags. So far minor wave 4 may have lasted seven days and the structure would be incomplete. It may end in a total Fibonacci thirteen days.
A new correction at minor degree should begin with a five down at the hourly chart level. This has not happened, a three down only is complete. The probability of this wave count is reduced.
It is possible that minor wave 4 is beginning with a flat correction for minute wave a. Within the flat, minuette wave (b) has passed the minimum 0.9 length of minuette wave (a). The most common length for B waves within flats is from 1 to 1.38 times the length of the A wave. Minuette wave (b) is now just beyond this common range.
There is reasonable support from volume for recent upwards movement. This reduces the probability of this wave count substantially; B waves should exhibit weakness and not strength.
This alternate is an unlikely scenario; it is only published to consider all possibilities.
TECHNICAL ANALYSIS
WEEKLY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
The Hanging Man candlestick requires bearish confirmation because the long lower wick has a strong bullish implication. Last week has not given bearish confirmation, so the Hanging Man candlestick should not be read as a reversal signal.
Indicators are now extreme, but at this stage there is not enough weakness in price to indicate an end to the upward trend here. Extreme conditions for ADX and RSI may persist for several weeks while price continues higher.
DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
Pennants are one of the most reliable continuation patterns. The measured rule calculates a target about 2,617. Because this is only one point off the Elliott wave target, this area may offer strong resistance.
This chart today is even more bullish than yesterday. The trend is clearly up. Go with the trend. But risk management is essential, as always: with RSI and Stochastics both extreme, there is risk here of a pullback to resolve these conditions.
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.
Bearish divergence noted in last analysis has been followed by an outside day with the balance of volume downwards. This divergence may now be resolved, or it may need another clearer downwards day to resolve it.
BREADTH – AD LINE
Click chart to enlarge. Chart courtesy of StockCharts.com.
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 longer term 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 still some mid term divergence back to the 20th of October. As minor wave 3 comes to an end, this should be expected.
There is no new divergence today between price and market breadth. Today’s candlestick closed red and the balance of volume was down. Downwards movement during the session had support from declining market breadth. This is bearish.
Small caps have moved lower during last week failing to make new all time highs. Mid caps made their last all time high on Wednesday and have failed to make a new all time high for Friday. There is some very short term weakness within this market developing.
DOW THEORY
At the end of last week, only DJT failed to make a new all time high. The S&P500, DJIA and Nasdaq have made new all time highs. DJT has failed so far to confirm an ongoing bull market.
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 @ 07:49 p.m. EST.
Buying last 1/4 for 0.90. I should probably wait but don’t mind going underwater for a bit. Cost basis now at 0.95.
Bought 1/4 VIX 10.00 strike calls at 0.90…hoping for move a bit lower….
Sold half TZA Jan 13 strike calls for 50% gain ( in at .95 out at 1.50). Looking to reload on pullback….this trade just getting up a head of steam imho…
I notice volume spikes on each of the last three 5 minute bars in TZA. Perhaps because the RUT climb has hit the 38% retrace of the Nov 6-today move down. Might be an indicator a bottom (top for RUT) is just about at hand. I’m watching closely for a buy trigger…
Updated hourly chart:
I still think micro 2 would look better if it’s not over yet.
If there’s a new ATH then I’m wrong. It would have been over at the last low.
Thank you for the early update! It’s helpful.
🙂
Except now it’s all over and I have end of session data…. I’m gonna change the short term outlook now. Sorry folks.
This non-commital sideways action starts to look like maybe a triangle. If so, it’s still in submicro-B, then down further in submicro-C to end micro-2 ???
Possibly Lara’s “B” label was placed to soon, and this push up is the B of an ABC down (as a micro 2). Or…the micro 2 is complete, and the micro 3 is underway. This looks more likely to me from looking at the hourly, but I’m long so I’m biased!!! Lol!!
Possibly 🙂
Continuing weakness in breadth has me suspicious… RUT hovering around its lowest levels since September. DJT has also been dogging it. I think a breakout from positive news on the tax overhaul is a possible savior but barring that there seems to be little momentum upwards through the end of the year. Especially now that the GOP’s stranglehold on Congress looks ever more in doubt.
Opening BTO order for VIX 10.00 strike calls for limit price of .80 per contract. If filled position cost basis wil be 0.90 per contract…
I’m looking for a turn in SPX at 2582 (the 50% retrace of Nov 2-7), or 2578 (the 61.2%, and where length of C = A.
This whole correction starting to look like a flat, now complete, and a new 1-2 complete with a 3 launched? I won’t quite know how else to model it, at this point. Corrections…
Selling half VIX 10 strike calls for 1.20, holding remaining…
Verne,
Expecting a sharp selloff otherwise it is going to be a very boring market into the year end. Interesting that Saudi is planning to take state owned oil company public on NYSE. It is expected to be 1 trillion placement (hence important as it creates demand for USD)
Interesting… Where does the $1 Trillion come from? It can’t just materialize.
BTW: Has that been officially announced yet?
Lara, looks like a big swell is headed your way Friday/Saturday. Waves here today were perfect head high a frames!!
Awesome! And I’ll be home just in time to catch it too. Down in the Bay of Plenty ATM visiting family.
Head high A frames….. mmmmmmmm……
I demand a re-match Doc…!
Again???