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Downwards movement continues as expected.

A new alternate idea is published today.

Summary: Look for a slight new low which may begin tomorrow’s session, and then look out for a bounce. Downwards movement is weakening and inverted VIX today gives a bullish signal.

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.

Intermediate wave (4) has breached an Elliott channel drawn using Elliott’s first technique. The channel is redrawn using Elliott’s second technique as if intermediate wave (4) was over at the last low. If intermediate wave (4) continues sideways, then the channel may be redrawn when it is over. The upper edge may provide resistance for intermediate wave (5).

Intermediate wave (4) may not move into intermediate wave (1) price territory below 2,193.81. At this stage, it now looks like intermediate wave (4) may be continuing further sideways as a combination, triangle or flat. These three ideas are separated into separate daily charts. All three ideas would see intermediate wave (4) exhibit alternation in structure with the double zigzag of intermediate wave (2).

A double zigzag would also be possible for intermediate wave (4), but because intermediate wave (2) was a double zigzag this is the least likely structure for intermediate wave (4) to be. Alternation should be expected until price proves otherwise.


S&P 500 Daily 2018
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This first daily chart outlines how intermediate wave (4) may now continue further sideways as a contracting or barrier triangle. It is possible that minor wave B within the triangle was over at the last high, which would mean the triangle would be a regular triangle. Minor wave C downwards may now be underway and may be a single or double zigzag. One of the five sub-waves of a triangle is usually a more complicated multiple, and the most common sub-wave to do this is wave C.

Minor wave C may not make a new low below the end of minor wave A at 2,532.69.

Intermediate wave 2 lasted 11 weeks. If intermediate wave (4) is incomplete, then it would have so far lasted only six weeks. Triangles tend to be very time consuming structures, so intermediate wave (4) may total a Fibonacci 13 or even 21 weeks at its conclusion.

Because this is the only daily chart which expects price to continue to find support at the 200 day moving average, it is presented first; it may have a slightly higher probability than the next two daily charts.


S&P 500 Daily 2018
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Double combinations are very common structures. The first structure in a possible double combination for intermediate wave (4) would be a complete zigzag labelled minor wave W. The double should be joined by a three in the opposite direction labelled minor wave X, which may be a complete zigzag. X waves within combinations are typically very deep; if minor wave X is over at the last high, then it would be a 0.79 length of minor wave W, which is fairly deep giving it a normal look. There is no minimum nor maximum requirement for X waves within combinations.

The second structure in the double would most likely be a flat correction labelled minor wave Y. It may also be a triangle, but in my experience this is very rare.

A flat correction would subdivide 3-3-5. Minute wave a must be a three wave structure, most likely a zigzag.

The purpose of combinations is to take up time and move price sideways. To achieve this purpose the second structure in the double usually ends close to the same level as the first. Minor wave Y would be expected to end about the same level as minor wave W at 2,532.69. This would require a strong overshoot or breach of the 200 day moving average, which looks unlikely.


S&P 500 Hourly 2018
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If minor wave B or X is complete for a triangle or combination, then minor wave C or Y downwards should be underway.

Minor wave C may be a single or double zigzag for a triangle. Minor wave Y may be a flat or triangle for a combination. The first piece of downwards movement within a wave at minor degree should be a five on the hourly chart. The first five down may today be very close to completion. When it is complete, then the following bounce for minute wave b may not move beyond its start above 2,801.90.

A best fit channel is now drawn about downwards movement. Expect price to keep falling while it remains within this channel. If price breaks above the upper edge of the channel with upwards (not sideways) movement, then expect the first five down is complete and a three up has begun.


S&P 500 Daily 2018
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Flat corrections are very common. The most common type of flat is an expanded flat. This would see minor wave B move above the start of minor wave A at 2,872.87.

Within a flat correction, minor wave B must retrace a minimum 0.9 length of minor wave A at 2,838.85. The most common length for minor wave B within a flat correction would be 1 to 1.38 times the length of minor wave A at 2,872.87 to 3,002.15. An expanded flat would see minor wave B 1.05 times the length of minor wave A or longer, at 2,889.89 or above.

When minor wave B is a complete corrective structure ending at or above the minimum requirement, then minor wave C downwards would be expected to make a new low below the end of minor wave A at 2,532.69 to avoid a truncation.

This wave count would require a very substantial breach of the 200 day moving average for the end of intermediate wave (4). This looks unlikely.


S&P 500 Hourly 2018
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It is also possible that upwards movement is not over and minute wave c is incomplete. At this stage, minuette wave (iv) now looks grossly disproportionate to minuette wave (ii), so this wave count no longer has the right look.

If intermediate wave (4) is unfolding as a flat correction, then within it minor wave B has not yet met the minimum requirement of 0.9 the length of minor wave A at 2,838.85.

Within minute wave c, the correction of minuette wave (iv) may not move into minuette wave (i) price territory below 2,732.08.

Minuette wave (iv) has breached a channel drawn using Elliott’s first technique, so the channel is redrawn using the second technique. Draw the first trend line from the ends of minuette waves (ii) to (iv), then place a parallel copy on the end of minuette wave (iii). Minuette wave (v) may end either mid way within this channel, or about the upper edge.

A target for minute wave c to end is today re-calculated at minuette degree. This would see the minimum requirement for minor wave B just met.


S&P 500 Daily 2018
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It is possible still that intermediate wave (4) was complete as a relatively brief and shallow single zigzag.

A new all time high with support from volume and any one of a bullish signal from On Balance Volume or the AD line would see this alternate wave count become the main wave count.

Within minor wave 3, minute wave ii may not move beyond the start of minute wave i below 2,647.32.

This first alternate expects minor wave 1 was an impulse. This is the most common structure for a first wave, so this is the more likely of two alternates presented today.


S&P 500 Daily 2018
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It is also possible that minor wave 1 is an incomplete leading contracting diagonal. This is a less common structure for a first wave, so this is the least likely wave count published today.

The diagonal would be contracting because minute wave iii is shorter than minute wave i. Within a contracting diagonal, minute wave iv must be shorter than minute wave ii. Therefore, minute wave iv may not be equal or longer in length than minute wave ii, so it may not reach 2,660.07 or below.

Leading diagonals most often end with a small overshoot of the 1-3 trend line. As soon as price makes a small overshoot here of the upper pink i-iii trend line, if it quickly reverses and moves strongly lower, then this wave count would be indicated as more likely.

Leading diagonals in first wave positions are very commonly followed by very deep second wave corrections. If what looks like a diagonal upwards completes and price quickly reverses, then a Fibonacci retracement would be drawn along the length of the diagonal. Minor wave 2 would be expected to be deeper than the 0.618 Fibonacci ratio of minor wave 1.

Minor wave 2 may not move beyond the start of minor wave 1 below 2,532.69. Minor wave 2 may find support about the 200 day moving average.



S&P 500 weekly 2018
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The volume profile is bearish for the short term, but this has been the case for a long time in this market. Price has been rising on light and declining volume for years now. At this time, it will not be given much weight in this analysis.

The pullback has brought ADX down from very extreme and RSI down from extremely overbought. There is again room for a new trend to develop.


S&P 500 daily 2018
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The last gap is now closed, so it is now relabelled as an exhaustion gap.

Price continues to fall of its own weight. The smaller real body indicates downwards movement is weakening. Today’s bullish signal from inverted VIX indicates we may see a bounce here or very soon indeed.


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.

Bearish divergence has been followed by another downwards day. It may be resolved here.

Price today moved lower, but inverted VIX moved higher. The fall in price has not come with a normal corresponding increase in market volatility; volatility has declined. This divergence is interpreted as bullish because inverted VIX is read as a leading indicator.


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 completed an outside week. All sectors of the market at this time appear to be in a consolidation.

Breadth should be read as a leading indicator.

Bearish divergence noted two days ago has now been followed by two downwards days. It may be resolved here.

Price and the AD line both moved lower today, so there is no new divergence. The fall in price has support today from declining market breadth, which is bearish.


All indices have made new all time highs as recently as seven 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: 7,039.41.

S&P500: 2,083.79.

Nasdaq: 5,034.41.

Charts showing each prior major swing low used for Dow Theory are here.

Published @ 08:45 p.m. EST.