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Last analysis expected at least a little more downwards movement for Thursday’s session. The main hourly chart expected movement to about 2,654, and the low for the session was just below this point at 2,652.10.

A candlestick reversal pattern on the S&P and another on VIX today indicate strongly what looks most likely to happen next.

Summary: This market is overbought and overstretched. A bearish candlestick pattern today on the S&P and a bullish candlestick pattern on VIX (which is bearish for the S&P), along with bearish On Balance Volume, is strongly indicating lower prices ahead.

How the S&P behaves when the market opens tomorrow will be strongly indicative. While price remains within the yellow channel on the hourly chart, assume the main wave count is most likely correct. The target remains at 2,773.

But if price breaks below the lower edge of that channel (which is now very close by) when markets open tomorrow, then the alternate wave counts will be preferred. That indicates a deeper pullback is underway.

A new low below 2,624.85 would indicate more downwards movement to a target at 2,607 – 2,600.

A new low below 2,557.45 would indicate a multi month pullback or consolidation has arrived.

Last monthly and weekly charts are here. Last historic analysis video is here.

The biggest picture, Grand Super Cycle analysis, 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, so that they show up at weekly and monthly time frames. The right proportions between second and fourth wave corrections give a wave count the right look. This wave count expects to see two large multi week corrections coming up, and the first for intermediate wave (4) may now be quite close by.

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) may now be nearing completion (the alternate hourly wave count looks at the possibility it could be complete at the last high). When it is complete, then intermediate wave (4) should unfold and be proportional to intermediate wave (2). Intermediate wave (4) may be very likely to break out of the yellow best fit channel that contains intermediate wave (3). Intermediate wave (4) may not move into intermediate wave (1) price territory below 2,193.81.

The yellow best fit channel is redrawn. Price points are given so that members may replicate this channel. This channel is copied over to the daily chart.


S&P 500 Daily 2017
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The main wave count will now expect that within minor wave 5 minute waves i and ii are complete.

Within minute wave iii, no second wave correction may move beyond its start below 2,624.85.

The target expects minor wave 5 to exhibit the most common Fibonacci ratio to minor wave 1.

Price is finding resistance about the mid line of the best fit channel.

The narrower channel, which is drawn on the hourly chart, is today added to the daily chart in order for members to see how it is drawn. Copy this channel over to the hourly chart. If minor wave 5 is incomplete, then price should remain within this channel.


S&P 500 Hourly 2017
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Minute wave iii may only subdivide as an impulse.

Within minute wave iii, only minuette wave (i) may now be complete. Minuette wave (ii) may be extremely close to completion and may find support just at the lower edge of the yellow best fit channel, which is copied over from the daily chart.

Minuette wave (ii) may be subdividing as a zigzag. Within subminuette wave c, the final fifth wave of micro wave 5 has not yet moved below the end of micro wave 3. As soon as price has made a new low below the end of micro wave 3 at 2,652.10, thus avoiding a truncation within subminuette wave c, then minuette wave (ii) may be complete and this wave count would expect a quick reversal.

The next wave up for minuette wave (iii) should exhibit a strong increase in momentum.

If price breaks below the lower edge of the best fit channel when markets open tomorrow, then the two alternate wave counts below would be preferred, even prior to price invalidation of this main wave count.

At this stage, this downwards movement no longer looks very good as a zigzag. Subminuette wave c is now longer than 2.618 the length of subminuette wave a. This is acceptable, but not very common.


S&P 500 Hourly 2017
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It is still possible that minute wave ii may not be complete and may be continuing as an expanded flat correction.

If price makes a new swing low below 2,624.85, then the target for downwards movement to end would be 2,607 to 2,600. This assumes the most common Fibonacci ratio between minuette waves (a) and (c), and the most common point for minute wave ii to end at.

Minuette wave (c) may last six days if minute wave (ii) exhibits a Fibonacci duration of thirteen.

At this stage, downwards movement fits best as an unfolding impulse than it does as a zigzag. That offers some support now for both of these alternate wave counts.


S&P 500 Hourly 2017
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A more bearish option is still technically possible. It is possible that intermediate wave (4) may begin here or very soon.

A new low below 2,624.85 would add a little confidence in this idea.

A new low below 2,557.45 is required for confirmation of this idea. Only then should it be taken seriously.

Intermediate wave (4) may last about three months. It may be a choppy overlapping large consolidation, or a deep sharp pullback (which may be over more quickly than three months). It should have some reasonable proportion to intermediate wave (2), so that the wave count has the right look at the weekly time frame.

Four bearish signals in a row now from On Balance Volume offer some support to this wave count. This is joined today by a bullish signal in VIX, which is bearish for the S&P. However, the AD line continues to rise and this contradicts the On Balance Volume bearishness. It would be best to let price tell us if this wave count is correct.



S&P 500 weekly 2017
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There is no candlestick reversal pattern yet at highs.

Price and On Balance Volume continue to make new highs. This is bullish.

The trend is extreme, but as yet there is no reversal signal at this time frame.


S&P 500 daily 2017
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This chart still looks reasonably bearish. This market is overbought and exhibits weakness; it looks susceptible to a reasonable sized correction. Today completes a strong bearish candlestick reversal pattern; this supports the alternate Elliott wave counts. However, candlestick reversal patterns make no comment on the next direction (it could be either down or sideways) nor do they make any comment on how far the next trend may go. And so this bearish engulfing pattern may support either alternate Elliott wave count; it does not favour one or the other.

If price makes a new swing low below 2,624.75, it would then look like a larger correction may have arrived.

There is divergence between price and On Balance Volume, Stochastics and RSI. ATR continues to decline.


VIX daily 2017
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So that colour blind members are included, bearish signals will be noted with blue and bullish signals with yellow.

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.

Inverted VIX has given two bearish signals in a row and now price has followed with a fairly strong downwards day. This bearishness may now be resolved, or it may require another downwards day to resolve it.


VIX daily 2017
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Thank you Joeseph, an EWSM member, for pointing out this candlestick pattern in VIX today.

From Nison: “If this pattern appears at a low price area or after a period of stable prices, then it is a sign of strength ahead”.

In this case, the second and third candlesticks close very close to their highs; the upper wicks are very small indeed. There is no weakness shown here, so this is a bullish reversal pattern.

If VIX is about to move strongly higher, then it looks likely that the S&P may move strongly lower. This supports the alternate Elliott wave counts, and may offer slightly more support to the second alternate Elliott wave count than the first.


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.

All of large, mid and small caps last week have made new all time highs. The rise in price has support from market breadth.

Breadth should be read as a leading indicator. Today’s downwards movement from price is supported by a decline in market breadth. This is bearish.


The DJIA, DJT, and S&P500 have last week made new all time highs. Only Nasdaq was unable to make a new all time high.

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 @ 9:35 p.m. EST.