Select Page

Last analysis noted that bearish divergence between price and the AD line indicated a correction was not over. Sideways movement was expected, but price has moved lower.

Summary: A correction looks to be incomplete, so it may continue for a few more days. Targets for it to end are 2,796 or 2,749, with the higher target preferred.

The larger trend remains upwards and corrections still offer an opportunity to join the trend.

Always practice good risk management. Always trade with stops and invest only 1-5% of equity on any one trade.

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

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

An historic example of a cycle degree fifth wave is given at the end of the analysis 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. This target at 2,926 now looks too low. The next most common Fibonacci ratio would be 2.618 the length of cycle wave I at 3,616. This higher target is looking more likely at this stage.

Intermediate wave (3) has passed all of equality in length with intermediate wave (1), and 1.618 and 2.618 the length of intermediate wave (1). It is possible that intermediate wave (3) 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. An Elliott channel may be drawn about the impulse of intermediate wave (3) when minor wave 3 is complete, and minor wave 4 may end about the lower edge of that channel.

At this stage, a widened acceleration channel is drawn now in blue about the impulse of intermediate wave (3). This is drawn in the same way as an Elliott channel using Elliott’s first technique.

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. Members are advised to review the prior example given of a cycle degree fifth wave here. The purpose of publishing this example is to illustrate how indicators may remain extreme and overbought for long periods of time when this market has a strong bullish trend. If the current wave count is correct, then the equivalent point to this historic example would be towards the end of the section delineated by the dates November 1994 to May 1996. In other words, the upwards trend for this fifth wave may only have recently passed half way and there may be a very long way up to go yet.


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 lower down to contain all this upwards movement. When minute wave iii is complete, this would be an adjusted Elliott channel and the lower edge may provide support for minute wave iv.

Minuette wave (ii) subdivides as a combination and lasted only eight sessions, about only one and a half weeks. Minuette wave (iv) may be a zigzag, which tend to be quicker structures than combinations; a Fibonacci five days will be the first expectation, but it may be over within less than one week. Today, it looks like minuette wave (iv) may have arrived earlier than expected.

Minuette wave (i) was a long extension. Minuette wave (iii) may have ended at the last high and if so would be shorter than minuette wave (i). This limits minuette wave (v) to no longer than equality in length with minuette wave (iii) so that minuette wave (iii) is not the shortest actionary wave.

Minuette wave (iv) may not move into minuette wave (i) price territory below 2,694.97.

Minute wave iii has passed equality in length with minute wave i, and has passed 1.618 the length of minute wave i. The next Fibonacci ratio in the sequence is used to calculate a target. This would still allow minuette wave (v) within it to be shorter than minuette wave (iii), so all Elliott wave rules could be met.


S&P 500 Hourly 2018
Click chart to enlarge.

At this stage, it looks like a five down may be completing. With the larger trend still assumed to be upwards, if a five down unfolds, then that may not be a complete correction. Corrections subdivide as threes, not fives.

A five down may be only subminuette wave a within a zigzag for minuette wave (iv).

Within the first five down, micro wave 4 may not move into micro wave 1 price territory above 2,854.83. A new high above 2,854.83 prior to any new low below 2,818.27 would invalidate this main hourly wave count in favour of the alternate below.

Micro wave 5 would be very likely to make at least a slight new low below the end of micro wave 3 at 2,818.27 to avoid a truncation. As soon as price makes a new low below 2,818.27, then a five down may be complete at any stage. At that point, the invalidation point must move higher to the last all time high at 2,872.87. Subminuette wave a may be complete and subminuette wave b may not move beyond its start.

Minuette wave (ii) lasted eight days and was a complicated multiple (these tend to be more time consuming structures). So far minuette wave (iv) may have lasted only two days. It may continue for another three at least to total a Fibonacci five.


S&P 500 Hourly 2018
Click chart to enlarge.

It is also possible that only a zigzag downwards may be complete. This alternate will remain viable while price remains above 2,818.27. A new high above 2,854.83 would add confidence to it. At that point, the correction may have been over and may have been again very brief and shallow.



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.

There is no divergence to indicate any weakness yet between price and RSI.

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

Volume, Bollinger Bands and ADX today all support the main hourly wave count.


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.

Divergence with VIX and price will at this stage be read as a leading indicator, in the same way as the AD line is interpreted.

Price is moving lower and volatility is strongly increasing. Volatility is now stronger than the last recent swing low for inverted VIX. This is interpreted as a bearish signal today.


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.

Breadth today has made a new swing low below the 18th of January. This is a bearish signal. This supports the main hourly Elliott wave count.


The S&P500, DJIA and Nasdaq last week made new all time highs. Only DJT did not make a new all time high and has moved lower. This divergence is slightly bearish; DJT may be leading by beginning a correction first.

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 @ 07:30 p.m. EST.