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Upwards movement was still expected.

There is today a new very important signal from the AD line, which prompts me to publish a new wave count. The expected direction is the same, but the target is new.

Summary: The target for a primary degree third wave to end is now at 2,913. This target may be reached in several weeks.

For the short term, any pullbacks may remain above 2,671.17. A low degree fourth wave may unfold tomorrow. If it does, then the target is either about 2,700 or 2,690; neither target may be favoured.

Always practice good risk management. Always trade with stops and invest only 1-5% of equity on any one trade.

New updates to this analysis are in bold.

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 with a slight adjustment. 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. However, it would be extremely likely to remain within the wider teal channel (copied over from the monthly chart) if it were to be reasonably deep. This channel contains the entire bull market since the low in March 2009, with only two small overshoots at the end of cycle wave IV. If this channel is breached, then the idea of cycle wave V continuing higher would be discarded well before the invalidation point is breached.

Intermediate wave (4) will be labelled as a complete triangle today, lasting 11 weeks. If this labelling is correct, then there would be perfect proportion and perfect alternation between intermediate waves (2) and (4).

There is no adequate Fibonacci ratio between intermediate waves (3) and (1). This would make it more likely that intermediate wave (5) may exhibit a Fibonacci ratio to either of intermediate waves (3) or (1). The most common Fibonacci ratio for intermediate wave (5) would be equality in length with intermediate wave (1), but that would expect a truncation, which is unlikely. The next likely Fibonacci ratio in the sequence is used to calculate a target.

In terms of weeks none of intermediate waves (1), (2), (3) or (4) exhibit a Fibonacci duration. Intermediate wave (5) may also not exhibit a Fibonacci duration, which makes an estimate on how long it may last very difficult. It may be expected to last several weeks, at least 8.


S&P 500 Daily 2018
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Intermediate wave (4) may be a complete regular contracting triangle, which may have come to a quicker than expected end nine sessions ago.

All sub-waves subdivide as single or multiple zigzags. Only one sub-wave is a more complicated multiple, which was minor wave C, which is the most common triangle sub-wave to subdivide as a multiple. Minor wave E falls well short of the A-C trend line, which is the most common way for triangles to end.

Intermediate wave (5) must subdivide as a five wave structure. It may only be an ending diagonal or an impulse. An impulse is much more common, so it will be expected until proven otherwise. Within both an impulse or diagonal, minor wave 2 may not move beyond the start of minor wave 1 below 2,586.27.


S&P 500 Hourly 2018
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Within intermediate wave (5), minor wave 1 may be an incomplete impulse.

So far within minor wave 1, minute wave i fits as a leading contracting diagonal. This was followed by a shallow zigzag for minute wave ii. Minute wave iii may be incomplete.

Minute wave iii may only subdivide as an impulse. So far within it minuette waves (i), (ii) and now (iii) may be complete.

Minuette wave (iv) may move lower tomorrow. It may end close to the 0.236 or 0.382 Fibonacci ratios of minuette wave (iii); neither ratio may be favoured as a target. Minuette wave (iv) may be expected to most likely be a single or double zigzag, but it may also be a flat or triangle to exhibit alternation with minuette wave (ii). If minuette wave (iv) exhibits perfect proportion with minuette wave (ii), then it may last a further eight hours so that they both last a Fibonacci thirteen hours.

Minuette wave (iv) may not move into minuette wave (i) price territory below 2,671.17.

If the new wave count is correct and if minuette wave (iv) does move lower, then it may offer a good entry point for a long term position within a new bullish trend.



S&P 500 Daily 2018
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This was the main wave count up until today. It remains possible that the triangle is incomplete.

The triangle may be either a regular contracting or regular barrier triangle. Within the triangle, minor waves A, B and C may be complete.

If intermediate wave (4) is a regular contracting triangle, the most common type, then minor wave D may not move beyond the end of minor wave B above 2,801.90.

If intermediate wave (4) is a regular barrier triangle, then minor wave D may end about the same level as minor wave B at 2,801.90. As long as the B-D trend line remains essentially flat a triangle will remain valid. In practice, this means the minor wave D can end slightly above 2,801.90 as this rule is subjective.

When a zigzag upwards for minor wave D is complete, then this wave count would expect a final smaller zigzag downwards for minor wave E, which would most likely fall reasonably short of the A-C trend line.

If this all takes a further two weeks to complete, then intermediate wave (4) may total a Fibonacci 13 weeks and would be just two weeks longer in duration than intermediate wave (2). There would be very good proportion between intermediate waves (2) and (4), which would give the wave count the right look. However, two more weeks at this time does not look like it may be long enough for a triangle to complete. It may not exhibit a Fibonacci duration.

There are now a few overshoots of the 200 day moving average. This is entirely acceptable for this wave count; the overshoots do not mean price must now continue lower. The A-C trend line for this wave count should have a slope, so minor wave C should now be over.

Within the zigzag of minor wave D, minute wave b may not move beyond the start of minute wave a below 2,553.80.


S&P 500 Daily 2018
Click chart to enlarge.

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, so it will not be expected. The much more common flat for minor wave Y will be charted and expected.

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

Minute wave b must now reach a minimum 0.90 length of minute wave a. Minute wave b must be a corrective structure. It may be any corrective structure. It may be unfolding as a zigzag. A target is calculated for it to end. Within minuette wave (b), no second wave correction may move beyond its start below 2,586.27.

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 but does have precedent in this bull market.

Minute wave b may make a new high above the start of minute wave a if minor wave Y is an expanded flat. There is no maximum length for minute wave b, but there is a convention within Elliott wave that states when minute wave b is longer than twice the length of minute wave a the idea of a flat correction continuing should be discarded based upon a very low probability. That price point would be at 3,050. However, if price makes a new all time high and upwards movement exhibits strength, then this idea would be discarded at that point. Minute wave b should exhibit obvious internal weakness, not strength.


S&P 500 Daily 2018
Click chart to enlarge.

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. A target is today calculated for minor wave B to end, which would see it end within the common range.

Minor wave B may be a regular flat correction, and within it minute wave a may have been a single zigzag and minute wave b may have been a double zigzag. This has a very good fit.

At its end minor wave B should exhibit obvious weakness. If price makes a new all time high and exhibits strength, then this wave count should be discarded.

This wave count would require a very substantial breach of the 200 day moving average for the end of intermediate wave (4). This is possible but may be less likely than a smaller breach.



S&P 500 weekly 2018
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A classic symmetrical triangle pattern may be forming. These are different to Elliott wave triangles. Symmetrical triangles may be either continuation or reversal patterns, while Elliott wave triangles are always continuation patterns and have stricter rules.

The vertical green lines are 73% to 75% of the length of the triangle from cradle to base, where a breakout most commonly occurs.

From Dhalquist and Kirkpatrick on trading triangles:

“The ideal situation for trading triangles is a definite breakout, a high trading range within the triangle, an upward-sloping volume trend during the formation of the triangle, and especially a gap on the breakout.”

For this example, the breakout has not yet happened. There is a high trading range within the triangle, but volume is declining.

The triangle may yet have another 8 – 9 weeks if it breaks out at the green lines.

Before that happens though On Balance Volume may give a signal. It must give a signal in the next one to very few weeks as the trend lines are converging.


S&P 500 daily 2018
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The gap on yesterday’s open has its lower edge at 2,686.49. The gap may be assumed to be a measuring gap while it remains open and may be used now to pull stops up on any long positions; stops may now be set just below 2,686.49. If this gap is closed, it would be relabelled an exhaustion gap.

The measuring gap yields a target 2,792.

On Balance Volume gives another bullish signal today with a new high above the prior point of the 21st of March. Price has not yet made a corresponding new high. On Balance Volume is interpreted here as a leading indicator. Divergence noted with green trend lines is bullish.

Stochastics may remain overbought for weeks when the S&P has a strong bullish trend. Only when it is overbought and then exhibits divergence with price may it signal a trend change.


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.

Today price moved higher and the balance of volume was upwards, but inverted VIX has moved lower. This divergence is bearish and supports the idea of a small pullback tomorrow.


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. There is no divergence to indicate underlying weakness. The small caps this week are rising faster than mid and large. Small caps made a slight new high today above the prior swing high of the 13th of March. Small caps are very close to a new all time high.

Breadth should be read as a leading indicator.

The AD line has moved very strongly higher during the last three sessions. It has made a new all time high today. This is a very bullish signal, and is the reason for the new wave count expecting new all times from price to follow.


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: 23,360.29.

DJT: 9,806.79.

S&P500: 2,532.69.

Nasdaq: 6,630.67.

At this stage, only DJIA has made a new major swing low. DJT also needs to make a new major swing low for Dow Theory to indicate a switch from a bull market to a bear market. For an extended Dow Theory, which includes the S&P500 and Nasdaq, these two markets also need to make new major swing lows.

Charts showing each prior major swing low used for Dow Theory may be seen at the end of this analysis here.

Published @ 09:55 p.m. EST.