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Price has moved lower. Last analysis warned that divergence with the AD line and bearish signals from VIX may be followed by some downwards movement.

Summary: Always assume the trend remains the same until proven otherwise. The trend is up. Corrections are opportunities to join the trend.

The main wave count expects upwards movement from here. The alternate expects a correction to continue lower to last for about two weeks.

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 2018
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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. It may now find support about the mid line of the yellow best fit channel. If it does find support there, it may be very shallow. Next support would be about the lower edge of the channel.

A third wave up at four degrees may be completing. This should be expected to show some internal strength and extreme indicators, which is exactly what is happening.


S&P 500 Daily 2018
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Keep redrawing the acceleration channel as price continues higher: draw the first line from the end of minute wave i to the last high, then place a parallel copy on the end of minute wave ii. When minute wave iii is complete, this would be an Elliott channel and the lower edge may provide support for minute wave iv.

Minute wave iii has passed 1.618 the length of minute wave i. The next Fibonacci ratio in the sequence is used to calculate a target for it to end.

Minute wave iv may not move into minute wave i price territory below 2,490.87. However, minute wave iv should most likely remain within the channel and not get close to the invalidation point. It may end within the price territory of the fourth wave of one lesser degree, that of minuette wave (iv) from 2,694.97 to 2,673.61.


S&P 500 Hourly 2018
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This is the main hourly chart because we should always assume that the trend remains the same until proven otherwise. At this stage, there is no technical evidence for a trend change; we should assume the trend remains upwards.

The lower edge of this base channel drawn from the start of subminuette wave i to today’s low perfectly shows where price found support at the end of today’s session. The channel is adjusted with the upper edge pushed higher to contain all of subminuette wave i.

On the five minute chart, the downwards movement for this session will subdivide as either a zigzag or an impulse. This wave count looks at it as a zigzag.

If this wave count is correct, then upwards movement should show an increase in momentum over the next few days as a low degree third wave unfolds.

Subminuette wave ii may not move beyond the start of subminuette wave i below 2,673.61. However, this main wave count may be discarded prior to invalidation in favour of the alternate below if downwards movement continues here and shows some strength.


S&P 500 Hourly 2018
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If the degree of labelling within the last wave up is moved all up one degree, then it is possible that minute wave iii is over and minute wave iv downwards has begun. This wave count was the third hourly chart in yesterday’s analysis.

If minute wave iv has begun, then it should continue for about two weeks. Minute wave ii was a shallow zigzag lasting nine days. Minute wave iv may exhibit alternation as a flat, combination or triangle. For good proportion, it may last about nine days but may be a little longer as sideways corrections tend to be more long lasting than zigzags.

Within the first wave down, no second wave correction nor B wave may make a new high above the start of minute wave iv. At this early stage, within minute wave iv, a three or five down should continue.



S&P 500 weekly 2018
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Indicators should be expected to be extreme as a third wave at four degrees comes to an end.

When third waves are ending they fairly often will show weakness at the weekly chart level. There is no evidence of weakness at this time. When intermediate wave (3) is close to or at its end, then we may expect to see some weakness.


S&P 500 daily 2018
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The flag gives a target at 2,755. The measuring gap gives a target at 2,760. The high yesterday at 2,759.14 perfectly meets this small 5 point target zone.

Price has not completed a red candlestick, and the real body is very small, although price has moved lower today. No candlestick reversal signal has completed. There is no indication of a trend change. The longer lower wick of today’s candlestick is slightly bullish.

RSI and Stochastics may continue for much longer although they are still extreme. There is not enough divergence at this stage to indicate weakness enough for a multi week pullback or consolidation here.


VIX daily 2018
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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.

The last three instances of bearish divergence have now been followed by a downwards day from price. This divergence may be resolved here, or it may need another downwards day before it is resolved.

Price moved lower today, but inverted VIX increased. The downwards movement in price did not come with a normal corresponding increase in volatility; volatility has declined. This divergence indicates weakness today in price and is bullish.


AD Line daily 2018
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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 mid and large caps made new all time highs last week. There is some weakness with small caps unable to make new all time highs; this is slightly bearish.

Breadth should be read as a leading indicator. Bearish divergence noted in yesterday’s analysis has now been followed by one downwards day. It may be resolved here, or it may need another downwards day to resolve it.

Price moved lower today and breadth declined. The fall in price has support from falling market breadth. This is bearish.


The S&P500, DJIA, DJT and Nasdaq last 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 @ 06:53 p.m. EST.