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A correction was expected to be incomplete and continue for a few more days. The first target at 2,796 was met and passed. The second target has not yet been met.

Summary: Expect more downwards movement to begin next week. The target is at 2,749.

In the short term, a new high above 2,813.04 would indicate the correction may be over and the upwards trend may have resumed. A new all time high would add significant confidence to that view.

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
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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. 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, and then the lower edge is pulled down to contain all this recent upwards movement.

As intermediate wave (3) comes to an end, corrections on the weekly chart should begin to be longer lasting. The first of two or three may have begun this week. It still looks like intermediate wave (3) is incomplete, so this correction may last only about one to maybe about four weeks. It is not expected to be much longer lasting than that.


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 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. It is possible that it could be over at Friday’s low, lasting a Fibonacci five days, but it may also continue for another three to total a Fibonacci eight days.

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 and 2.618 the length of minute wave i. A target for minute wave iii to end must now be calculated at minuette degree. That cannot be done until minuette wave (iv) has ended.


S&P 500 Hourly 2018
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If minuette wave (iv) is a relatively quick zigzag, then it may be nearing completion. If candlesticks on the hourly chart develop early on Monday with long lower wicks, then look for a low to be found. The target may be about 2,749.

Looking back on the hourly chart to corrections back to October 2016, some corrections end with strong C waves and some do not. Almost all corrections (except two) end with candlesticks on the hourly chart that have long lower wicks. Long lower wicks do not mean the correction must end as they can appear during a fall in price yet price may keep falling. But the presence of long lower wicks is a common feature at lows, so a low may be more likely to be found if these develop.

A new high above 2,813.04 would be a short term invalidation of the alternate hourly chart below and offer some early confidence to this wave count. A breach of the best fit yellow channel by upwards movement would offer further confidence.


S&P 500 Daily 2018
Click chart to enlarge.

It is possible that minute wave iii was over at the last high. The current correction may be one degree higher for minute wave iv.

Fibonacci ratios for this wave count are fairly good.

The pink best fit channel is the same as the pink acceleration channel on the main wave count.

If the correction is minute wave iv, then it may not move into minute wave i price territory below 2,490.87. But price should first be expected to find support about the lower edge of the best fit channel. If it does break below that channel, then the 0.382 Fibonacci ratio of minute wave iii at 2,690 would be a reasonable target for minute wave iv.


S&P 500 Hourly 2018
Click chart to enlarge.

If the correction is one degree higher, then it may be longer lasting.

The strength of downwards movement for Friday looks like it may be a third wave. If that is correct, then the corresponding fourth wave of the same degree may not move into first wave price territory above 2,813.04.

If downwards movement to end Friday’s session is a third wave, then an impulse may be unfolding lower. This may be subminuette wave a. Subminuette wave b to follow may not move beyond the start of subminuette wave a above 2,872.09.

This alternate wave count expects the correction to still likely end about the lower edge of the channel, but it may take longer to get there.



S&P 500 weekly 2018
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This strong bearish weekly candlestick is not technically a bearish engulfing reversal pattern because the open this week gapped lower. However, the close this week well below last week’s open is very bearish. Support from volume is also very bearish.


S&P 500 daily 2018
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Next support may be at the mid term Fibonacci 55 day moving average.

Volume is bearish. Friday’s candlestick is bearish. On Balance Volume gives a weak bearish signal; weak because the support line was tested only twice before.

If downwards movement continues from here, then it would very likely end if RSI reaches oversold.


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.

Volatility still remains much stronger than downwards movement in price suggests. This may be still read as bearish.

There is mid term divergence between price and inverted VIX. This has not been as reliable as short term divergence, but it will still be noted.


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.

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 AD line has made a new low below the prior low of the 29th of December, 2017, but price has not. This divergence is interpreted as bearish.

All of small, mid and large caps this week made reasonable new lows. The fall in price has support from market breadth. This is bearish.


All indices have made new all time highs as recently as three weeks ago, confirming the ongoing bull market.

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 @ 07:00 p.m. EST on 3rd February, 2018.