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A small correction was expected to continue. With price moving slightly lower and closing as a small doji candlestick for Friday’s session, this is what is happening.

Summary: A small fourth wave correction may continue for a few more days overall, and may complete as a small triangle, or as a sideways choppy combination. At this stage, it looks like it may be very shallow.

When it is done, then the upwards trend should resume. The next target for the next interruption is about 2,835.

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 third waves at all degrees may only subdivide as impulses.

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.

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) has passed equality in length with intermediate wave (1). It has also now passed both 1.618 and 2.618 the length of intermediate wave (1), so it may not exhibit a Fibonacci ratio to intermediate wave (1). The target calculation for intermediate wave (3) to end may have to be done at minor degree; when minor waves 3 and 4 are complete, then a target may be calculated for intermediate wave (3) to end. That cannot be done yet.

When minor wave 3 is complete, then the following multi week correction for minor wave 4 may not move into minor wave 1 price territory below 2,400.98. Minor wave 4 should last about four weeks to be in proportion to minor wave 2. It may last about a Fibonacci three, five or even eight weeks if it is a time consuming sideways correction like a triangle or combination.


S&P 500 Daily 2017
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This wave count looks at the possibility that minute wave iii may have ended at the last high and minute wave iv may have just arrived.

There are better Fibonacci ratios in this wave count when compared to the last published alternate. At this stage, the last published alternate now looks less likely and will not be published again.

Draw an Elliott channel about this impulse. Minute wave iv may find strong support and remain within the channel, if it gets down that low. Minute wave iv may end within the price territory of the fourth wave of one lesser degree; minuette wave (iv) has its territory from 2,671.88 to 2,652.01. This target range would be possible for the alternate hourly wave count below.

Minute wave ii lasted nine days. For the wave count to have the right look (reasonable proportion), minute wave iv may be expected to most likely last either a Fibonacci five, eight, or possibly even thirteen days. So far it has lasted five days and the structure looks incomplete at the hourly chart time frame.

Minute wave ii was a zigzag. To exhibit alternation minute wave iv may most likely be a flat, combination or triangle. But it may also be a zigzag though because the S&P does not always exhibit perfect alternation and a zigzags is the most common corrective structure.

Minute wave iv may not move into minute wave i price territory below 2,490.87.


S&P 500 Hourly 2017
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There are more than 23 possible corrective structures that minute wave iv may take. At this stage, it looks unlikely now to be a zigzag. It may be a triangle or a combination, the most likely structures for this fourth wave to take. This first hourly chart looks at a possible triangle.

Minute wave iv may be either a regular contracting or regular barrier triangle. Within a contracting triangle, minuette wave (d) may not move beyond the end of minuette wave (b) above 2,692.64. Within a barrier triangle, minuette wave (d) may end about the same level as minuette wave (b) at 2,692.64, so that the (b)-(d) trend line is essentially flat. Unfortunately, this is the only Elliott wave rule that is not black and white, so the invalidation point at 2,692.64 would need to be breached by a reasonable amount for the triangle to be invalidated.

For both a barrier or contracting triangle, any continuation of minuette wave (c) downwards may not move beyond the end of minuette wave (a) below 2,676.11.

For both a barrier or contracting triangle, minuette wave (e) may not move beyond the end of minuette wave (c). Minuette wave (e) would most likely fall short of the (a)-(c) trend line.

The breakout from an Elliott wave triangle should always be in the same direction of entry; they are always continuation patterns. The classic pattern equivalent is a pennant.


S&P 500 Hourly 2017
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This alternate hourly chart looks at a different possible structure for minute wave iv.

It is important when an Elliott wave triangle is considered to also consider alternates. Triangles are tricky structures. What looks like a triangle can often turn out to be something else, most commonly a combination.

Combinations are very common structures, particularly for fourth waves.

Here, the first structure in the double combination would be a completed zigzag labelled minuette wave w. The double is joined by a three in the opposite direction, a zigzag labelled minuette wave x. Minuette wave x is relatively deep, which is normal for X waves within combinations.

The second structure in the double may be an unfolding flat correction labelled minuette wave y.

Within the possible flat correction of minuette wave y, subminuette wave (b) must retrace a minimum 0.9 length of subminuette wave (a) at 2,291.19. The most common length for subminuette wave (b) would be from 1 to 1.38 times the length of subminuette wave (a) giving a range from 2,692.64 to 2,698.15.

Combinations have a purpose, to take up time and move price sideways. To achieve this purpose the second structure in the double normally ends about the same level as the first. Minuette wave y may be expected to end about the same level as minuette wave w at 2,676.11.

If price breaks upwards to a new all time high on a strong upwards day with an increase in volume, then it should be considered a classic upwards breakout. If that happens before the Elliott wave structures on the hourly chart are complete, then my hourly analysis is wrong and the fourth wave was over already.



S&P 500 weekly 2017
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There is still no candlestick reversal signal at highs. The trend is now very extreme and overstretched, but this can continue for longer before price is ready to turn.

Overall, at this time frame, this market remains very bullish. That picture does not change this week.


S&P 500 daily 2017
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The last gap is now closed. It is now indicated as an exhaustion gap and not a breakaway gap. This is a bearish signal, at least for the short term.

The last few signals from On Balance Volume were bearish. RSI and Stochastics are bearish. But ADX indicates the trend is not yet extreme at this time frame.

There are now two bearish candlestick patterns: a bearish engulfing pattern and now a gravestone doji. Along with the closed gap, this offers some support to the main wave count. Reversal patterns indicate an end to one trend and the start of a new trend, which may be either sideways or a 180 degree reversal. They make no comment on how long the next trend may last nor how far it may travel.

A small pennant pattern may be forming. If price breaks out upwards, it should have support from volume. If that happens, then use the measured rule to calculate a target. Take the flag pole from the low of 6th of December at 2,624.75 to the last all time high, so a length of 70.22 points, and add this to the breakout point.

My decision for the start of the flag pole is subjective; members may disagree and have their own interpretations.

Pennants are one of the most reliable continuation patterns. If this completes and price does break out upwards, then have confidence that it should continue.


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.

There is no new divergence noted today between price and inverted VIX.


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.

Only large caps made new all time highs again this week. There is some weakness with mid and small caps unable to make new all time highs; this is bearish.

Breadth should be read as a leading indicator. At this stage, there is no divergence between price and the AD line to indicate weakness.


The S&P500, DJIA, DJT and Nasdaq this week all made new all time highs. The ongoing bull market is confirmed.

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 @ 12:09 a.m. EST on 23rd December, 2017.