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Downwards movement was overall expected, but it was expected that price should have a short term bounce first. Downwards movement is now choppy and overlapping, suggesting an Elliott wave diagonal may be unfolding.

Summary: The target for a multi day pullback is still about 2,539.

If price makes a new high tomorrow above 2,578.64, then it would be possible that the pullback is over already. A target would then be at 2,773.

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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Cycle wave V must complete as a five structure, which should look clear at the weekly chart level. It may only be an impulse or ending diagonal. At this stage, it is clear it is an impulse.

Within cycle wave V, the corrections for primary wave 2 and intermediate wave (2) both show up clearly, both lasting several weeks. The respective corrections for intermediate wave (4) and primary wave 4 should also last several weeks for the wave count to have the right look at the weekly and monthly time frames, so that they show up at weekly and monthly time frames.

Cycle wave V has passed equality in length with cycle wave I, which would be the most common Fibonacci ratio for it to have exhibited. The next most common Fibonacci ratio would be 1.618 the length of cycle wave I.

Intermediate wave (3) looks incomplete. It may only subdivide as an impulse. Within intermediate wave (3), minor wave 4 is currently unfolding and may not move into minor wave 1 price territory below 2,299.55. However, minor wave 4 should remain contained within the yellow best fit channel if this wave count is correct.


S&P 500 Daily 2017
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Minor wave 4 is so far a very shallow and overlapping sideways movement. When it is complete, the breakout is expected to be upwards. Minor wave 4 may end when price finds support about the mid line of the yellow best fit channel.

Minor wave 4 may be any one of multiple corrective structures. There is also variation in where the end of minor wave 3 may be seen. This first wave count sees minor wave 3 over earlier and minor wave 4 an expanded flat correction. This would provide alternation with the zigzag of minor wave 2.

So that members may compare this wave count with a new alternate below, Fibonacci ratios at minor degree and below to micro degree are provided on both daily charts. The ratios are overall slightly better for this main wave count.

At its end, minor wave 4 should offer a good entry point to join the upwards trend.


S&P 500 Hourly 2017
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Minor wave 4 may be an expanded flat correction. This would provide very good alternation with the zigzag of minor wave 2.

Within a flat correction, both minute waves a and b must be three wave structures. Here, they are both zigzags. Minute wave c must be a five wave structure, either an impulse or an ending diagonal. The overlapping downwards movement of the last days suggests a diagonal.

Most common diagonals are contracting. Minuette wave (iv) must end before the limit, so that it is shorter than minuette wave (iii), meeting the rule regarding wave lengths for contracting diagonals. If price moves above this limit, even prior to a full invalidation of this wave count, then a contracting diagonal would be invalid and this wave count would be discarded upon that basis.

The final fifth wave of a contracting diagonal almost always overshoots the 1-3 trend line. Here, as soon as downwards movement shows a small overshoot of the green (i)-(iii) trend line, then a quick sharp reversal may happen.

If the target at 2,539 is wrong, then it looks now to be a little too low. When minuette wave (iv) is complete, then the starting point for minuette wave (v) may be determined, and a limit for it to not be longer than minuette wave (iii) may be calculated. That cannot be done yet.



S&P 500 Daily 2017
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It is possible that minor wave 3 was over at the last all time high. Fibonacci ratios are given, but they are not quite as good as the main wave count’s ratios.

If minor wave 3 was over at that last high, then minor wave 4 may now be a completed double zigzag. This would not offer very good alternation with the single zigzag of minor wave 2. There is a little alternation though, in depth: minor wave 2 was relatively deep whereas minor wave 4 here would be very shallow.


S&P 500 Hourly 2017
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The double zigzag has a very good fit. The subdivisions are seen in exactly the same way for this portion of movement between both wave counts.

If minor wave 4 is over, then within minor wave 5 the correction for minute wave ii may not move beyond the start of minute wave i below 2,557.45.

A new high above 2,578.64 would see the probability of this wave count increase. If that happens, then look out for an imminent upwards breakout to a new all time high.



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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It now looks like a small flag pattern may again be completing. These are reliable continuation patterns. If the beginning of the flag pole is taken as the low for the 25th of October (which looks about right), then a target using the measured rule is about 2,630, if the breakout comes about 2,577.

An upwards breakout should have support from volume for confidence.

There is a series now of four candlesticks in recent days with long lower wicks. Together, this looks bullish. It looks like current downwards movement is a pullback or consolidation within the ongoing upwards trend at this stage. That should be used as an opportunity to join the upwards trend.

This consolidation has been long enough now to pull ADX down from extreme overbought.

There is room here for price to fall; On Balance Volume is not yet at support, and RSI and Stochastics are not yet oversold.


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.

Bearish divergence noted has now been followed by another downwards day. This divergence may now be resolved.

There is mid term divergence between price and inverted VIX: inverted VIX has made a lower low, but price has failed to make a corresponding new low. The conventional interpretation of this is bullish and may indicate weakness within price.

However, mid and longer term divergence between price and inverted VIX is not usually very reliable. It will not be given much weight in this analysis.


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.

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.

The AD line is bearish. It is making new lows while price is not. As the AD line may be a leading indicator, this divergence is interpreted as bearish. It is quite strong today, so it is given reasonable weight in this analysis. This offers reasonable support to the main 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 @ 10:50 p.m. EST.