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A new low below 2,668.62 in the first hour of trading invalidated the main hourly wave count and gave confidence to the alternate. At that stage, more downwards movement to new lows was expected. The targets have not yet been met.

Summary: Downwards movement looks incomplete. Targets are now at 2,449 or 2,385.

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.

This analysis is changed today to see the current correction as intermediate wave (4). Due to its size intermediate wave (4) looks proportional to intermediate wave (2), even though their durations so far are quite different.

Intermediate wave (4) has breached the Elliott channel on the last published weekly charts. The channel may be redrawn when it is complete using Elliott’s second technique. A best fit channel is used while it is incomplete to show where it may find support. Price points are given for this channel, so that members may replicate it on a semi-log scale.

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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The S&P has behaved like a commodity to end intermediate wave (3): a relatively strong fifth wave with a steep slope. The high looks a little like a blow off top. This is being followed by a sharp decline, which is typical behaviour for a commodity and not common for the S&P.

There are adequate Fibonacci ratios within this wave count. It is common for the S&P to exhibit a Fibonacci ratio between two of the three actionary waves within an impulse, and uncommon for it to exhibit Fibonacci ratios between all three actionary waves. This means that the lack of Fibonacci ratios for intermediate wave (3), minor wave 3, and minute wave v is not a concern. This is normal.

There is some distance below before intermediate wave (4) may find support about the lower edge of the yellow best fit channel.


S&P 500 Hourly 2018
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A zigzag downwards may be completing.

With the degree of labelling moved up one today, this affects the Fibonacci ratios of intermediate wave (3) and so affects the targets for intermediate wave (4).

The first target expects to see the most common Fibonacci ratio between minor waves A and C within the zigzag. If price keeps on falling through this first target, or if when it gets there the structure of minor wave C is incomplete, then the second target may be used.

The second target would see intermediate wave (4) a deep correction, providing poor alternation with the depth of intermediate wave (2).



S&P 500 Weekly 2018
Click chart to enlarge.

This alternate wave count is published with the caveat that at this stage it must be judged to have an extremely low probability for the following reasons:

1. There is no divergence between price and the AD line at the all time high. All bear markets within the last (almost) 100 years began after a minimum of 4 months divergence with the AD line. If this wave count is correct, then this is the first time in almost 100 years when divergence did not occur.

2. There is no divergence between price and RSI on the monthly chart at the last all time high. This is again highly unusual prior to a bear market.

3. The bear market may have begun suddenly without a normal prior increase in market volatility. Normally, corrections unfold prior to the end of a bull market that increase by degree prior to the bull market ending.

However, low probability (even as low as I judge this to be) does not mean no probability. I would rather members are aware of this risk and manage this risk accordingly.

This wave count absolutely requires a clear breach of the teal channel on the weekly chart before any confidence at all may be had in it. A breach would be a full weekly candlestick (not just daily) below and not touching the lower teal trend line. This channel is copied over from the monthly chart.

Thereafter, a new low by any amount at any time frame below 2,111.05 would add substantial confidence to this wave count. At that stage, downwards movement could not be a fourth wave correction within an ongoing impulse as it would be back in first wave price territory of primary wave 1.

If this wave count is correct, then a once in multi-generations trend change may have occurred last week. Grand Super Cycle wave II would be expected to last at least 20 years, and very likely a generation. It would be very likely to end substantially below the end of Super Cycle wave (IV) at 666.79.

I judge the probability of this alternate wave count to have such a low probability that I was hesitant in publishing it. But I am also aware that just because this kind of end to a bull market has not been seen in almost 100 years does not mean it cannot happen.



S&P 500 weekly 2018
Click chart to enlarge. Chart courtesy of

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 is about 2,540. Below that there is support at 2,490 and then strong support at 2,420.

RSI is oversold, but there is no divergence with price. If divergence again develops, even single day, a bounce would be expected.

Divergence with Stochastics indicates some weakness today in downwards movement. But this can develop further before a low is found.


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.

The new low today for price is not matched by a corresponding new low from inverted VIX. The fall in price did not come with a normal increase in volatility. This divergence is bullish and indicates some weakness within price.


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.

Both price and the AD line made a new swing low today. The fall in price has support from falling market breadth; this is bearish. Bearishness in the AD line will be given more weight in this analysis than the bullish divergence between price and inverted VIX.


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 @ 10:04 p.m. EST.