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Upwards movement has unfolded for Wednesday’s session as expected from yesterday’s Elliott wave count and technical analysis.

Summary: It still looks more likely that a low may be in place. The targets are either 2,909, 2,920 or 3,104.

However, risk still remains and the long upper wick on today’s candlestick is concerning for bulls. In the short term, a new low below 2,668.62 would indicate more downwards movement as more likely. The target would be at 2,555 or 2,533.

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 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 provided for minor wave 5 to complete the impulse of intermediate wave (3).


S&P 500 Hourly 2018
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If a low is in place, then minor wave 4 may be a complete zigzag.

Some confidence in this wave count may be had now that 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 must begin with a five wave structure. So far that may be incomplete, and it is labelled minute wave i.

So far, within minute wave i, the middle of it may have passed today and is labelled micro wave 3. Micro wave 4 may not move into micro wave 1 price territory below 2,668.62.

A new low for the short term below 2,668.62 would invalidate this first hourly chart in favour of the alternate hourly chart below.


S&P 500 Hourly 2018
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The best fit channel on this alternate hourly chart is drawn differently in order to contain all movement since the last all time high.

It remains possible that the pullback is not over and may continue lower as a zigzag.

The first target for downwards movement to end may be about 2,555 where minute wave c would reach 0.618 the length of minute wave a. If price keeps falling through this first target, then use the next target at 2,533 where minor wave 4 would correct to 0.618 the length of minor wave 3.

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



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 yesterday’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 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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Bullish: Price, short term volume, and RSI.

Bearish: Long upper wick on today’s candlestick, rising ATR, On Balance Volume (weak), and MACD.

Overall, it still looks like a low may be in place, but the long upper wick of today’s candlestick is concerning for that view.


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.

Yesterday’s bullish divergence has now been followed by an upward day. It may be resolved here, or it may need another upwards day to resolve it. There is no new divergence today; the rise in price came with a normal corresponding decline in market volatility.


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.

Yesterday’s noted bullish divergence with price has now been followed by an upwards day. It may be resolved here, or it may need another upwards day to resolve it. The rise in price today was supported by rising market breadth; 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 @ 8:55 p.m. EST.