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A sharp downwards movement today remained above the invalidation point on the main hourly Elliott wave count, and the long lower wick on this candlestick is interpreted as bullish.

Although bears were able to push price sharply lower, they could not hold the lows and they could not make a new swing low below the low of the 2nd of November.

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.

For the alternate hourly wave count to become the main hourly wave count, price needs to make a new low below 2,566.17 and / or On Balance Volume needs to give a bearish signal. If either of these things happen, then the target for a multi day pullback would now be about 2,539.

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.



S&P 500 Weekly 2017
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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.


S&P 500 Daily 2017
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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.

The green Elliott channel is drawn about minute wave v using Elliott’s first technique. It almost perfectly showed where minuette wave (iv) found support. The lower edge of this channel is overshot today, so this may be a warning that the alternate hourly wave count may be correct.

However, the S&P does have a tendency to form slow curving rounded tops. When it does that, it will breach channels only to continue on to new highs before finally turning.


S&P 500 Hourly 2017
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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. Although price moved below the green channel during this session, it did not manage to print a full candlestick below the channel and it quickly returned back into the channel. The channel is overshot but not properly breached. A clear breach is at least one candlestick below and not touching the lower edge of the channel, preferably by clearly downwards movement and not just sideways movement.

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 may be complete. It may not move beyond the start of micro wave 1 below 2,566.17.

During today’s session micro wave 2 broke below a base channel, which was on yesterday’s hourly chart. That base channel is not working as base channels most often do, so it is removed. The green Elliott channel should suffice now.

Micro wave 2 is now very deep indeed, and is longer in duration than subminuette wave ii one degree higher. This does not have quite the right look, but the S&P does not always exhibit good proportions. This wave count is acceptable still for this market.

I have tried to see if subminuette wave i could have been over at the high labelled micro wave 1, but it will not fit and meet all Elliott wave rules.

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.


S&P 500 Hourly 2017
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If price makes a new low below 2,566.17, then we may have some confidence in this alternate wave count. A bearish signal from On Balance Volume would be given enough weight in this analysis to switch this alternate over to a main wave count.

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 nine 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.

Minor wave 4 may be closer to completion. It may still be a flat, combination or triangle although it is labelled here as the most common of these structures, an expanded flat.

The target for minute wave c to end is today recalculated. If minute wave c has now begun with two overlapping first and second waves, then it needs a reasonable amount of space below to complete a five wave structure.

It is also possible that minor wave 4 may be a triangle or combination. If price moves slowly sideways in a choppy consolidation, rather than sharply lower, then this wave count may be relabelled.

Although this alternate has been considered to be an unlikely scenario up until today, there was support today from volume for downwards movement and there is short / mid term divergence between price and the AD line to support this wave count.



S&P 500 weekly 2017
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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.


S&P 500 daily 2017
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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.

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.

Bullish: The long lower wick on today’s candlestick, ATR, Bollinger Bands, and On Balance Volume.

Bearish: Price today, volume today, RSI and Stochastics.

There is now enough warning signs to keep the alternate in mind as a serious possibility.

A Dragonfly doji can be a top reversal pattern. However, the long lower wick of the Dragonfly has strong bullish connotations, so this candlestick pattern requires bearish confirmation in the following candlestick. This essentially makes it a two candlestick pattern. If tomorrow prints a red candlestick, that would be taken as confirmation of a high and would favour the alternate hourly wave count. If tomorrow prints a green candlestick, that would favour the main hourly wave count.


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 no new divergence today between price and inverted VIX. The fall in price today had a normal corresponding increase in market volatility.


AD Line daily 2017
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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.

Short / mid term divergence with breadth and price will be noted today. This is bearish, and it may be indicating the end of minor wave 3 (main hourly Elliott wave count) to come in a few days, or it may be indicating the alternate hourly Elliott wave count is correct and price is ready to move strongly lower for a few days right here.

Price has moved lower and the AD line has moved lower today. The fall in price has support from a decline in 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.


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 @ 06:06 p.m. EST.