Select Page

Upwards movement continued for Friday to another new all time high as the main Elliott wave count expected.

Summary: Assume the upwards trend may remain intact and the next target for an interruption is at 2,821.

An alternate looks at a correction or pullback underway to last one to two weeks. Some confidence may be had in this view if price makes a new low below 2,792.56. This view has support still from bearish signals in VIX and the AD line.

The biggest picture, Grand Super Cycle analysis, is here.

Last historic analysis with monthly charts is here. Video is here.



S&P 500 Weekly 2018
Click chart to enlarge.

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
Click chart to enlarge.

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 iii may only subdivide as an impulse, and within it minuette wave (i) only may have recently ended as a long extension. This main wave count fits with MACD: upwards momentum is showing an increase as a third wave continues upwards.

Within the impulse of minute wave iii, the upcoming correction for minuette wave (iv) may not move back into minuette wave (i) price territory below 2,694.97.

Because minuette wave (i) with this wave count is a long extension, it is reasonable to expect minuette wave (iii) may only reach equality in length with minuette wave (i). This target fits with the higher target for minute wave iii one degree higher.


S&P 500 Hourly 2018
Click chart to enlarge.

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.

Subminuette wave iii is shorter than subminuette wave i. This limits subminuette wave v to no longer than equality in length with subminuette wave iii at 2,840.12, so that subminuette wave iii is not the shortest and the core Elliott wave rule is met.

The structure is incomplete within subminuette wave v, which needs to complete as a five wave structure, either an impulse or an ending diagonal. At this stage, it looks like an incomplete impulse.

The slope of upwards movement may now be reducing as the structure of a fifth wave comes to an end.

Minuette wave (ii) was a very shallow combination lasting eight days. Minuette wave (iv) may also last about a Fibonacci eight days.


S&P 500 Daily 2018
Click chart to enlarge.

It is possible that minute wave iii is over. Some confidence in this wave count may be had if the main hourly wave count above is invalidated with a new low below 2,768.64.

If minute wave iv is underway, then it may be expected to be reasonably in proportion to its counterpart minute wave ii correction. Minute wave ii lasted nine days, so expect minute wave iv to last a Fibonacci eight or thirteen days.

Minute wave iv may be unfolding as an expanded flat correction. These are very common structures.

Minute wave ii was a zigzag, so minute wave iv may exhibit alternation as a flat, combination or triangle. These corrections are all sideways and usually more time consuming than zigzags.

Minute wave iv may end when it finds support about the lower edge of the pink Elliott channel. If it does not end there and if it overshoots the channel, then minute wave iv may end within the price territory of the fourth wave of one lesser degree. Minuette wave (iv) has its territory from 2,694.97 to 2,673.61.

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



S&P 500 weekly 2018
Click chart to enlarge. Chart courtesy of

This upwards trend is extreme and stretched, but there is still no evidence of weakness at the weekly time frame.

As a third wave at multiple degrees comes to an end, it would be reasonable to see indicators at extreme levels.

A correction will come, but it looks like it may not be here yet.


S&P 500 daily 2018
Click chart to enlarge. Chart courtesy of

On Balance Volume has not yet broken out of its small range. This should happen on Monday.

The trend is stretched and extreme at daily and weekly chart levels, and close to extreme at the monthly chart level.

Divergence with price and RSI is too slight to indicate reasonable weakness.

This trend may still continue for longer.


VIX daily 2018
Click chart to enlarge. Chart courtesy of

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.

Bearish signals from VIX have not been followed by any downwards movement. They may have all failed, or it could be that these signals are early.

There is strong short term divergence between price and inverted VIX. The new high in price has not come with a normal corresponding decline in market volatility. This is bearish.


AD Line daily 2018
Click chart to enlarge. Chart courtesy of

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 small, mid and large caps last week made new all time highs. This market has good support from rising breadth.

Breadth should be read as a leading indicator.

The last bearish signal from the AD line has not been followed by any downwards movement. It may have failed, or it may be an early warning.

There is now divergence with the new high in price failing to be matched by a new high in market breadth. The rise in price does not have support from a rising AD line. 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 @ 05:39 p.m. EST on 20th January, 2018.