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A signal from On Balance Volume for Friday sees the main and alternate hourly Elliott wave counts swapped over.

The mid to long term picture remains the same, but the short term picture for next week is now changed.

Summary: The target for a multi day pullback is now 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
Click chart to enlarge.

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.

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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While it is still possible that minor wave 3 is not over, this will now be an alternate wave count.

Minor wave 2 was a shallow zigzag lasting only three days. It does not show up on the weekly chart, but at the daily and hourly chart levels the subdivisions all fit very well. Zigzags can be relatively quick structures.

Given the guideline of alternation, minor wave 4 should be expected to be a flat, combination or triangle. It is labelled here as an expanded flat, which is a very common structure. However, the labelling within it may still change as the structure unfolds next week; it may still morph into a combination or less likely now a triangle.

Minor wave 4 should be expected to break out of the channel that contains minor wave 3. Minor wave 4 in this instance would be expected to remain within the yellow best fit channel.

Minor wave 4 has lasted seven days so far. It looks unlikely to be able to complete in just one more day, so the next Fibonacci number in the sequence would be thirteen, requiring another six days to complete.


S&P 500 Hourly 2017
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If price makes a new low below 2,566.17, then we may have more confidence in this wave count. A bearish signal from On Balance Volume at the end of this week is given enough weight in this analysis to switch this over to a main wave count.

It is possible that minor wave 3 could be over.

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

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.

The following commentary assumes that minor wave 4 will complete as the most likely expanded flat correction, so please do keep in mind that this is not certain:

Minute wave c must subdivide as a five wave structure. So far it may have begun with two overlapping first and second waves. If this is correct, then a strong downwards movement may begin next week as the middle of a third wave down unfolds.


S&P 500 Hourly 2017
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This alternate hourly wave count assumes that minor wave 3 is not yet over, that minute wave v within it is extending.

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.

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.

A breach of the green channel by downwards movement would an indication that this first wave count may not be correct.



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

This week moves price higher with a higher high and a higher low, but the candlestick closed red and the balance of volume was down. Volume did not support downwards movement during the week; this is slightly bullish, but it would be better to look inside the week at daily volume to make a clearer judgement.

With ADX now extreme and RSI exhibiting divergence while overbought, some pullback to resolve this seems a reasonable expectation.

The overall trend does remain up though, so pullbacks are still an opportunity to join the trend.


S&P 500 daily 2017
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The trend line breached by On Balance Volume on Friday is long held and tested multiple times. It does have a reasonable slope though, so it only has reasonable and not strong technical significance. However, bearish signals from On Balance Volume are rare lately, so this one will be given some weight.

Divergence with price and RSI and Stochastics, and bearishness from MACD, all support the new alternate Elliott wave count.

However, extreme conditions can remain so for a reasonably long time in this market lately. The alternate does remain possible.

The balance of probability looks to have shifted after Friday to expectations of a pullback here.


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.

While price moved sideways during Friday, inverted VIX has moved strongly lower. The downwards movement for price on Friday had good support from declining 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.

There is not yet any short term divergence between price and the AD line. Downwards movement during Friday’s session comes with support from declining market breadth; this is bearish.

Small caps have moved strongly lower this week and mid caps have moved somewhat lower. This market continues to show some short term weakness in support of the new main hourly Elliott wave count.


At the end of this week, DJT has still 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 @ 01:41 a.m. EST on 11th November, 2017.