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Downwards movement was expected, but the target at 2,749 was inadequate. The degree of labelling of this movement is moved up one degree today, and an alternate will consider it at up two degrees.

Summary: Every single bear market in the last almost 100 years was preceded by a minimum of 4 months divergence with price and the AD line. With no divergence yet let us assume the larger bull market remains intact.

The structure of cycle wave V is still incomplete. When pullbacks are deep and sharp, it is extremely difficult psychologically to use them as opportunities to join the trend. Use the channel on the hourly chart.

Price today has caught up with both the AD line and inverted VIX. There is no longer short nor mid term bearish divergence there. Price is also very close to a long term support line.

While price remains in the best fit yellow channel on the hourly chart, assume the current downwards trend remains intact. The next target is at 2,533.

If price breaks out above that trend line, that may be an early indicator that the pullback could be over and the upwards trend may then resume. The target would be at 2,965.

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 would most likely 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.

The many small subdivisions within minor wave 3 may be seen in several different ways. The degree of labelling within the current pullback is moved up one degree today. The pullback may be minor wave 4. Minor wave 2 was a shallow 0.25 double zigzag lasting 4 weeks. Minor wave 4 may be a single zigzag, or it may also be a sideways flat, combination or triangle which may last longer. So far minor wave 4 is 0.43 the depth of minor wave 3, and so far there is a little alternation in depth.

If minor wave 4 ends this week at support, then it would look reasonably in proportion to minor wave 2.

The black acceleration channel is drawn about intermediate waves. It shows where downwards movement may find support. If this support holds, then it is possible that minor wave 4 could be over here or very soon tomorrow.

Minor wave 4 may not move into minor wave 1 price territory below 2,400.98.


S&P 500 Daily 2018
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The black acceleration channel is copied over to this daily chart. There is still a little room below before minor wave 4 may find support there. If it breaks below this channel, then the next target for minor wave 4 to end may be about the 0.618 Fibonacci ratio of minor wave 3 at 2,533.

The S&P commonly will exhibit a Fibonacci ratio between two of its three actionary waves within an impulse, and very rarely between all three. The fact that this wave count has no Fibonacci ratio for minor wave 3 nor for minute wave v within minor wave 3 does not mean this wave count would therefore be wrong. This is entirely acceptable. There is a good Fibonacci ratio for minute wave iii.

So far downwards movement may only be either a zigzag, multiple zigzag or an impulse. Both a zigzag and an impulse are again considered on hourly charts below.


S&P 500 Hourly 2018
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This first hourly chart considers an impulse lower may be complete here or very soon. This may be followed by a relatively shallow three up for minute wave b. Thereafter, minute wave 4 may continue lower to the 0.618 Fibonacci ratio of minor wave 3 at 2,533.

Within each of the impulses of minuette waves (i) and (iii), there is one excellent Fibonacci ratio between two of the the three actionary waves. This is normal for the S&P.

The yellow channel is a best fit about downwards movement of the last few days. Assume the current downwards trend remains intact while price remains within this channel. If price breaks above the upper edge of this channel, then it may be either a deeper bounce for minute wave b, or the alternate hourly chart below may be correct.

Minute wave b may not move beyond the start of minute wave a above 2,872.09.


S&P 500 Hourly 2018
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This alternate hourly chart considers the possibility that downwards movement may subdivide as a zigzag. The lack of a Fibonacci ratio between minute waves a and c is not a large problem for this wave count; A and C waves do not always exhibit Fibonacci ratios. There is an excellent Fibonacci ratio within each of minute waves c and a.

On balance, the Fibonacci analysis of these two wave counts cannot point to one being more likely than the other.

It is possible that a zigzag is complete at today’s low or very soon during tomorrow’s session. Look for support at the lower edge of the black channel on the daily chart.

A breach of the yellow best fit channel may add some confidence to this idea. A new all time high should add substantial confidence.



S&P 500 Weekly 2018
Click chart to enlarge.

Despite the brevity of this downwards movement, the size of it means the possibility that intermediate wave (4) has arrived must be considered.

Even though intermediate wave (2) lasted 11 weeks, if intermediate wave (4) is over here within just two weeks, it would still have about the right look on the weekly and daily charts due to its size.

The black channel is drawn in exactly the same way on all charts today. Here it is correctly termed an Elliott channel about the impulse of primary wave 3. In the first instance, expect intermediate wave (4) may find support about the lower edge. This would see it over here or very soon indeed.

But fourth waves are not always contained within a channel drawn using Elliott’s first technique. This is why Elliot developed a second technique to redraw the channel when the fourth wave breached it. While intermediate wave (4) does not have to end at support here, it would be fairly likely to do so.


S&P 500 Daily 2018
Click chart to enlarge.

Fibonacci ratios are given on both this alternate daily chart and the main daily chart. There is not enough difference between them to discern one wave count as more likely than the other. They both have some close Fibonacci ratios.

There is a little room for price to fall before it perfectly finds support at the Elliott channel.

If intermediate wave (4) is over here, then a target for intermediate wave (5) may be calculated. Were intermediate wave (5) to only reach equality in length with intermediate wave (1) it would be truncated. The next Fibonacci ratio in the sequence is used to calculate a target. If intermediate wave (4) moves lower, then this target must also move correspondingly lower.

At the hourly chart level, this alternate idea works in exactly the same way as the main wave count. Both hourly charts work for this alternate, only the degree of labelling would be one degree higher.



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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Strong volume today may either be a signal that selling pressure will see more downwards movement tomorrow, or it could be a selling climax. Looking back over the last four years of pullbacks both scenarios are present.

Next support is about 2,600.

Little weight should be given to bullish divergence between price and On Balance Volume because it is not always very reliable.

The S&P tends to not remain with RSI oversold for very long when it moves strongly lower. With RSI moving today into oversold look for a low here or within a very few days. This does not preclude a further sharp fall in price though.


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.

Short and mid term divergence between price and inverted VIX has today disappeared. Price has caught up. The fall in price today now exhibits a normal increase in volatility.

There is longer term divergence, but this may be given little weight as it has proven to be unreliable over the last year or so.


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.

There is no longer short nor mid term bearish divergence between price and the AD line. The new lows in price are matched by new lows in market breadth, and not exceeded.

There is very slight longer term divergence, but this is too small to be noted.


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 @ 10:52 p.m. EST.