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Yesterday’s Elliott wave analysis expected price to continue to move lower and reach the first target, which is what has happened.

Summary: The larger trend is up. The next target is at 3,020.

Downwards movement should continue again tomorrow. A new target is at 2,671 – 2,670. If price keeps falling through this target, then the next target is at 2,617. This view has support from today’s candlestick, volume, and bearishness in the AD line.

Thereafter, the upwards trend should resume.

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 alternate idea at the monthly chart level is given here at the end of this analysis.

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.

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 drawn using Elliott’s first technique. The channel may be redrawn when it is confirmed as complete using Elliott’s second technique. A best fit channel is used while it may still be 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 followed by a sharp decline, which is typical behaviour for a commodity and not common for the S&P.

The very long lower wick on the candlestick at the end of intermediate wave (4) is strongly bullish. It looks like intermediate wave (4) may have ended there.

Despite the duration of intermediate wave (4) being much quicker than intermediate wave (2), the size is proportional. On weekly and monthly time frames intermediate wave (4) now has the right look.

The downwards wave labelled intermediate wave (4) may be seen as either a three wave zigzag, as labelled on this daily chart, or it may be seen as a five wave impulse. Both possibilities must be considered. The main hourly and alternate hourly charts consider it as a zigzag. The second alternate hourly chart considers it may have been a five.


S&P 500 Hourly 2018
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A new all time high would add confidence to this wave count (even though an alternate idea published would remain valid).

It is possible that minor wave 2 may be a relatively brief and shallow correction. This has been a feature of this bull market up until the arrival of intermediate wave (4). It may again be a feature of this market during intermediate wave (5). If it reaches the new target, then it would still be relatively shallow.

If price keeps falling through the new target, then the 0.618 Fibonacci ratio would be the next target for minor wave 2 to end.

Minor wave 2 may not move beyond the start of minor wave 1 below 2,532.69.


S&P 500 Daily 2018
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This wave count is identical to the main daily chart, with the exception of the degree of labelling within intermediate wave (4). If the degree is moved down one, then only minor wave A may be complete within a continuing correction for intermediate wave (4).

If it continues further, and if analysis of minor wave A as a zigzag is correct, then intermediate wave (4) may be a flat, combination, triangle or double zigzag. Of all of these possibilities a double zigzag is the least likely because that was the structure of intermediate wave (2). Intermediate wave (4) should be assumed to exhibit alternation until proven otherwise.

If upwards movement continues further, then the idea of a double zigzag may be discarded. Double zigzags normally have a strong slope against the prior trend, and to achieve a strong slope their X waves are usually shallow.

All of a flat, combination or triangle would have a very deep minor wave B. An expanded flat, running triangle or combination may have minor wave B or X make a new all time high. Unfortunately, for this reason there is no upper price point which differentiates this alternate idea from the main wave count.

Minor wave B or X should be expected to exhibit weakness. Light and declining volume and divergence with oscillators at its end are features of B waves, and also of X waves which are analogous.

Minor wave B or X may be any one of more than 23 possible corrective structures, but it would most likely be a zigzag. It looks like it may be subdividing as a zigzag at this stage.

This alternate wave count would expect a strong breach of the 200 day SMA, which would be unlikely. The first expectation should be for price to find strong support there.


S&P 500 Hourly 2018
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Upwards movement off the low may be an incomplete zigzag for minor wave B. Zigzags subdivide 5-3-5, exactly the same as the start of an impulse.

If intermediate wave (4) is a flat correction, then within it minor wave B must retrace a minimum 0.9 length of minor wave A.

If intermediate wave (4) is a triangle, there is no minimum requirement for minor wave B. It only needs to subdivide as a three wave structure.

If intermediate wave (4) is a combination, then the first structure may be a zigzag for minor wave W. Minor wave X may be any corrective structure and it may make a new high above the start of minor wave W. There is no minimum requirement for minor wave X of a combination, but it would very likely be fairly deep.

Minor wave B or X may be unfolding as a zigzag. So far, within minor wave B or X, minute wave a may be a complete five wave impulse. Minute wave b may correct to either the 0.618 or 0.382 Fibonacci ratios. Minute wave b may not move beyond the start of minute wave a below 2,532.69.


S&P 500 Hourly 2018
Click chart to enlarge.

It is also possible to see the last downwards wave as a five wave impulse. Intermediate wave (4) may be continuing lower as a single zigzag, subdividing 5-3-5.

Within a zigzag, minor wave B may not make a new high above the start of minor wave A at 2,872.87.

Minor wave B may be now complete ending close to the 0.618 Fibonacci ratio of minor wave A.

Minor wave C may now be underway. However, this wave count would expect a strong breach of the 200 day SMA, which looks unlikely. The first expectation should be for price to find strong support there.

This wave count illustrates risk now to any long positions. While the main wave count is preferred and it expects a third wave up, this alternate must be accepted as possible. It expects a third wave down.



S&P 500 weekly 2018
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Volume this week is much lower than the last downwards week, which is bearish, but it is stronger than the previous four upwards weeks, which is bullish.

There is nothing bearish about this weekly candlestick.

The pullback has brought ADX down from very extreme. A possible trend change to down is indicated, but as yet no new trend is indicated.


S&P 500 daily 2018
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Price is now at support. Next support is about 2,670, which coincides nicely with the Elliott wave target.

The long upper wick and support today from volume together strongly suggest another downwards day tomorrow.


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.

Price today moved lower, but inverted VIX increased. The downwards movement in price has not come with a normal corresponding increase in market volatility as volatility today declined. This divergence 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 moved higher. The bounce has support from wide breadth. They all also have long upper wicks on their daily candlesticks for Friday.

Breadth should be read as a leading indicator.

Bearish divergence noted yesterday has been followed by downwards movement. The new low today for price has still not made a new low below the session four days ago, so there is still bearish divergence. This supports the main Elliott wave count and the expectation of another downwards day tomorrow.


All indices have made new all time highs as recently as four 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 @ 11:22 p.m. EST.