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Last analysis expected upwards movement for Tuesday’s session. Price moved sideways in a small range to complete a doji candlestick, neither confirming nor invalidating yesterday’s analysis.

Summary: A small green doji lacking support from volume does not give convincing upwards movement today.

A new high above 2,744.39 would add confidence that a low is in place. The next wave up may be a third wave that should exhibit strong momentum. The target would be about 2,896 or 2,915.

A new low tomorrow below 2,698.67 would indicate the pullback is not over. The target would be about 2,670.

The invalidation point must remain at 2,594.62.

The mid to longer term target is at 2,922 (Elliott wave) or 3,045 (classic analysis). Another multi week to multi month correction is expected at one of these targets.

The final target for this bull market to end remains at 3,616.

Pullbacks are an opportunity to join the trend.

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.



S&P 500 Weekly 2018
Click chart to enlarge.

Cycle wave V must complete as a five structure, which should look clear at the weekly chart level and also now at the monthly 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: the first trend line from the ends of intermediate waves (2) to (4), then a parallel copy on the end of intermediate wave (3). Intermediate wave (5) may end either midway within the channel, or about the upper edge.

Intermediate wave (4) may now be a complete regular contracting triangle lasting fourteen weeks, one longer than a Fibonacci thirteen. There is perfect alternation and excellent proportion between intermediate waves (2) and (4).

Within intermediate wave (5), no second wave correction may move beyond the start of its first wave below 2,594.62.


S&P 500 Daily 2018
Click chart to enlarge.

It is possible that intermediate wave (4) is a complete regular contracting triangle, the most common type of triangle. Minor wave E may have found support just below the 200 day moving average and ending reasonably short of the A-C trend line. This is the most common look for E waves of triangles.

Intermediate wave (3) exhibits no Fibonacci ratio to intermediate wave (1). It is more likely then that intermediate wave (5) may exhibit a Fibonacci ratio to either of intermediate waves (1) or (3). The most common Fibonacci ratio would be equality in length with intermediate wave (1), but in this instance that would expect a truncation. The next common Fibonacci ratio is used to calculate a target for intermediate wave (5) to end.

Price has clearly broken out above the upper triangle B-D trend line. This indicates that it should now be over if the triangle is correctly labelled.

A trend line in lilac is added to this chart. It is the same line as the upper edge of the symmetrical triangle on the daily technical analysis chart. Price found support about this line.

Minor wave 1 may have been over at the last high. Minor wave 1 will subdivide as a five wave impulse on the hourly chart; the disproportion between minute waves ii and iv gives it a three wave look at the daily chart time frame. The S&P does not always exhibit good proportions; this is an acceptable wave count for this market.

If minor wave 2 is over here, then subsequent corrections along the way up may find support at the lower edge of the base channel. If minor wave 2 moves lower, then the base channel must be redrawn.

A target is calculated for minor wave 3, which fits with the higher target for intermediate wave (5).

Minor wave 2 may not move beyond the start of minor wave 1 below 2,594.62.


S&P 500 Hourly 2018
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The zigzag for minor wave 2 may be complete. There would be a good Fibonacci ratio between minute waves a and c.

A best fit channel is drawn about the downwards zigzag. A breach of the upper edge of this channel would provide earliest confidence that a low is in place. A new high above 2,744.39 would invalidate the alternate idea below and provide further confidence that a low is in place.

The target expects only to see equality in length with minor waves 1 and 3 because this target fits with the higher target on the daily chart for primary wave 3 to end.

Within minor wave 3, no second wave correction may move beyond the start of its first wave below 2,698.67.


S&P 500 Hourly 2018
Click chart to enlarge.

This wave count is identical to the first hourly chart up to the low labelled minuette wave (iii) within minute wave c. Thereafter, it looks at the possibility that minuette wave (iv) is longer lasting as an expanded flat correction. This gives perfect alternation and good proportion between minuette waves (ii) and (iv).

If minor wave 2 is continuing lower, then it may end close to the 0.618 Fibonacci ratio of minor wave 1 about 2,670.

Minor wave 2 may not move beyond the start of minor wave 1 below 2,594.62.

This wave count has a little support today from classic technical analysis. The doji candlestick with a lack of support from volume looks more likely to be a small correction than the start of a third wave up.


S&P 500 Daily 2018
Click chart to enlarge.

Thank you Peter for outlining this idea in comments. When charted it has a good look.

It is possible that minor waves 1 and 2 are already over. The last high may have been minute wave i. Minute wave ii may have ended yesterday, or it may need one more low to be complete (as per the two hourly charts above).

Minute wave ii is a 0.81 depth of minute wave i. If minute wave ii does continue lower, then it may not be by much. Minute wave ii may not move beyond the start of minute wave i below 2,676.81.

This alternate wave count resolves the problem of an odd looking minor wave 1 for the main wave count. The only problem with this alternate wave count is minute wave ii is not contained within a base channel which would be drawn about minor waves 1 and 2. For this reason, I have drawn a best fit channel; its lower edge may provide some support along the way up for future pullbacks.

This wave count is very bullish. It expects to see a very strong upwards movement as the middle of a third wave begins here or within a very few days.



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

Last week’s spinning top candlestick pattern again signals a balance of bulls and bears. With volume not supporting downwards movement, it looks like bears may be tiring.

This chart is very bullish.


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

The symmetrical triangle may now be complete. The base distance is 340.18. Added to the breakout point of 2,704.54 this gives a target at 3,044.72. This is above the Elliott wave target at 2,922, so the Elliott wave target may be inadequate.

Since the low on the 2nd of April, 2018, price has made a series of higher highs and higher lows. This is the definition of an upwards trend. But trends do not move in perfectly straight lines; there are pullbacks and bounces along the way. While price has not made a lower low below the prior swing low of the 29th of May, the view of a possible upwards trend in place should remain.

This last low is right about support at about 2,700. The long lower wick is very bullish, and with a series of long lower wicks within this pullback, together they may be read as a warning sign that on each of those days the bears were not able to hold the lows. This is bullish.

So far this looks like a typical pullback within an ongoing and developing upwards trend.

Today did not complete convincing upwards movement, and the small doji lacks support from volume. It looks like the pullback may not be quite complete.

The last signal from On Balance Volume remains valid and is bullish.


VIX daily 2018
Click chart to enlarge. Chart courtesy of 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.

Inverted VIX has made a new high above the prior swing high of the 9th of March, but price has not made a corresponding new swing high about the same point yet. This divergence is bullish. Inverted VIX is still a little way off making a new all time high.

There is mid term bearish divergence between price and inverted VIX: inverted VIX has made a new swing low below the prior swing low of the 29th of May, but price has not. Downwards movement has strong support from increasing market volatility; this divergence is bearish. However, it must be noted that the last swing low of the 29th of May also came with bearish divergence between price and inverted VIX, yet price went on to make new highs.

This divergence may not be reliable. As it contradicts messages given by On Balance Volume and the AD line, it shall not be given much weight in this analysis.

There is no new divergence today.


AD Line daily 2018
Click chart to enlarge. Chart courtesy of

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. New all time highs from the AD line means that any bear market may now be an absolute minimum of 4 months away. It may of course be a lot longer than that. My next expectation for the end of this bull market may now be October 2019.

Small caps and mid caps have both recently made new all time highs. It is large caps that usually lag in the latter stages of a bull market, so this perfectly fits the Elliott wave count. Expect large caps to follow to new all time highs.

Breadth should be read as a leading indicator.

Both price and the AD line moved higher today. There is no new divergence.

Overall, the AD line still remains mostly bullish as it has made more than one new all time high last week. Price may reasonably be expected to follow through in coming weeks.


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.

Only Nasdaq at this stage is making new all time highs. DJIA and DJT need to make new all time highs for the ongoing bull market to be confirmed.

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

Published @ 08:31 p.m. EST.