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Price has moved slightly higher, to complete an outside day, and remains within the invalidation point for the new main Elliott wave count.

Summary: The target for a multi day pullback is now about 2,539. Today, this is supported by bearish divergence with price and the AD line, price and inverted VIX, and On Balance Volume at resistance.

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.

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, that 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 eight days so far. The next Fibonacci number in the sequence would be thirteen, requiring another five 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.

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.

If minor wave 4 continues as a triangle, then waves A and now B would be complete. A smaller zigzag or double zigzag downwards for wave C may now begin. If downwards movement unfolds with a lack of momentum, then this hourly wave count may be relabelled as a triangle.

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.

Subminuette wave ii may now be a completed zigzag; micro wave C has moved above the end of micro wave A at 2,586.27. A zigzag upwards is complete. This labelling now expects to see an increase in downwards momentum this week.


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. So far the channel is overshot twice, but not properly breached. I define a breach as full candlesticks outside and not touching the channel.



S&P 500 weekly 2017
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Last 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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On Balance Volume suggests that upwards movement may end with resistance here, but volume suggests it is not over.

Overall, this chart is still looking more bearish for the short term than it has in quite some time.


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.

The balance of volume was upwards today and the candlestick was green. There is single day divergence with inverted VIX: as price moved higher overall volatility has increased. There is weakness within price; this is bearish.


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.

Small caps have moved strongly lower last 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.

There is today single day bearish divergence with price and the AD line: price moved higher during the session, but breadth has declined. This supports the main hourly Elliott wave count.


At the end of last 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 @ 07:23 p.m. EST.