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Price overshot a support line and has reversed strongly from just below it.

Volume, RSI and the AD line today all point to the same direction next.

Summary: Today’s classic analysis favours a low in place: a piercing pattern, long lower candlestick wick on the daily chart, strong volume for upwards movement within today’s session, single day divergence with RSI from oversold, a bullish signal from the AD line, and a strong bounce after an overshoot of support.

A breach of the yellow best fit channel on the hourly charts would add some confidence to the idea a low may be in place. The targets are either 2,909, 2,920 or 3,104.

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 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 0.51 the depth of minor wave 3, and so now there is 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.

The alternate hourly wave count below will consider the possibility that minor wave 4 may continue lower. 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. Minor wave 4 has now overshot the channel, but at the daily chart level the channel is not breached. As this downwards movement was swift and strong an overshoot is entirely acceptable.

Fibonacci ratios for this main wave count and for the alternate below are provided on both daily charts. There is not enough difference between the two wave counts in terms of Fibonacci ratios to indicate which may be more likely.

Two targets are today provided for minor wave 5 to complete the impulse of intermediate wave (3).


S&P 500 Hourly 2018
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This first hourly chart has support today from classic technical analysis.

If a low is in place, then minor wave 4 may be a complete zigzag.

Some confidence in this wave count may be had if the yellow channel is breached by upwards movement. Strong confidence may be had in this wave count with a new high by any amount at any time frame above 2,872.09.

If a new wave up is beginning, then it may have started today with three small overlapping first and second waves. This indicates some increase in upwards momentum tomorrow.

Minute wave ii may not move beyond the start of minute wave i below 2,593.07.


S&P 500 Hourly 2018
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It is also possible that minor wave 4 may be an incomplete zigzag. Minute wave b within it may find resistance about the upper edge of the yellow best fit channel.

This wave count expects minor wave 4 to end within about one to a few days.



S&P 500 Weekly 2018
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Despite the brevity of this downwards movement, the size of it means the possibility must be considered that intermediate wave (4) has arrived and may be over at today’s low.

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.

When the S&P has strong downwards movement to end corrective waves on the daily and weekly time frames, it often ends with an overshoot of a channel. The end of cycle wave IV on the bottom left of this chart is a good example: the S&P overshot the teal channel and it quickly turned up there. The overshoot today of intermediate wave (4) looks similar.

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. If intermediate wave (4) does continue lower, then the channel may have to be redrawn.

Intermediate wave (4) may not move into intermediate wave (1) price territory below 2,193.81.


S&P 500 Daily 2018
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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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Price has bounced up strongly from support about 2,600.

A piercing pattern requires the close of the second daily candlestick to be at least halfway within the real body of the first daily candlestick. Today’s close is 50.15% of the prior day’s real body, and so meets the requirement for a piercing pattern but only just.

The long lower wick on today’s candlestick is also bullish. Volume is bullish.

Resistance for On Balance Volume is close by, but it is weak.

RSI gives a bullish signal. It is common at lows for the S&P for RSI to reach into oversold and then exhibit divergence with price, even single day. The new low for price today is not matched by a new low for RSI; this divergence is bullish.

ADX is bearish and Stochastics indicates there is room for price to fall further. Next support is about 2,540.


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.

There is single day divergence between price and inverted VIX: price has made a new low, but inverted VIX has moved higher. This is interpreted as 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.

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 any mid or long term divergence with price and the AD line. There is single day divergence today: the new low for price was not matched by a new low for the AD line. This is bullish.


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 @ 10:08 p.m. EST.