A new swing low at the daily chart level indicates the Elliott wave counts should now be swapped over.

Summary: Because of a new swing low, it now looks like there may have been a trend change. Primary wave 4 may now be in its very early stages.

A primary degree correction should last several weeks and should show up on the weekly and monthly charts. Primary wave 4 may total a Fibonacci 8, 13 or 21 weeks. The preferred target for it to end is now about 2,717.

The final target for this bull market to end remains at 3,616, which may be met in October 2019.

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.

MAIN ELLIOTT WAVE COUNT

WEEKLY CHART

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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.

Primary wave 3 may now be complete. Within primary wave 3, there is perfect alternation and excellent proportion between intermediate waves (2) and (4).

The channel is now drawn about primary degree waves. The first trend line is drawn from the ends of primary waves 1 to 3, then a parallel copy is placed upon the low of primary wave 2. Primary wave 4 may find support about the lower edge of this maroon channel.

Fourth waves do not always end within channels drawn using this technique. If primary wave 4 breaks out of the narrow maroon channel, then it may find very strong support about the lower edge of the teal channel. This channel is copied over from the monthly chart and contains the entire bull market since its beginning in March 2009. While Super Cycle wave (V) is incomplete, this channel should not be breached.

Primary wave 4 may not move into primary wave 1 price territory below 2,111.05. However, it is not expected to get anywhere near this invalidation point as it should remain above the lower edge of the teal channel.

When primary wave 4 may be complete, then the final target may be also calculated at primary degree. At that stage, the final target may widen to a small zone, or it may change.

At this stage, the expectation is for the final target to be met in October 2019. If price gets up to this target and either the structure is incomplete or price keeps rising through it, then a new higher target would be calculated.

DAILY CHART

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It is reasonably common for the S&P to exhibit a Fibonacci ratio between two actionary waves within an impulse, and uncommon for it to exhibit Fibonacci ratios between all three actionary waves within an impulse. The lack of a Fibonacci ratio for minor wave 5 within this wave count is not of any concern; this looks typical.

There are two excellent Fibonacci ratios within this wave count. The Fibonacci ratios for this wave count are better than for the alternate wave count.

Primary wave 4 would most likely end somewhere within the price territory of the fourth wave of one lesser degree. Intermediate wave (4) has its price territory from 2,872.87 to 2,532.69. Within this range sit two Fibonacci ratios giving two targets. The upper 0.236 Fibonacci ratio may be more likely as that would see primary wave 4 only slightly overshoot the maroon channel.

Primary wave 2 unfolded as a shallow regular flat correction lasting 10 weeks. Primary wave 4 may exhibit alternation in structure and may most likely unfold as a zigzag, triangle or combination. Primary wave 4 may last a Fibonacci 8 weeks at the earliest, and more likely a Fibonacci 13 or 21 weeks in total. A zigzag would be the most likely structure as these are the most common corrective structures and would provide the best alternation with primary wave 2.

Primary wave 4 may not move into primary wave 1 price territory below 2,111.05. However, the lows in primary wave 4 should not get close to this point. The lower edge of the teal channel on the weekly chart should provide very strong support.

HOURLY CHART

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A movement at primary wave degree should begin with a five wave structure downwards. Today that may now be complete. There is disproportion within minor wave 1 between minute waves ii and iv. This is reasonably acceptable for this market; the S&P does not always exhibit good proportion. In bearish waves it may behave like a commodity, exhibiting strong third waves and brief shallow fourth waves.

Minor wave 2 may now unfold sideways over one to a few days as a shallow zigzag, flat or combination. A zigzag would be the most likely structure. If it finds resistance about the lower edge of the blue channel, then it may be shallow, ending close to the 0.382 Fibonacci ratio of minor wave 1 about 2,892.

Minor wave 2 may not move beyond the start of minor wave 1 above 2,940.91.

ALTERNATE ELLIOTT WAVE COUNT

DAILY CHART

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This was the main wave count up until today; with a new swing low below 2,864.12, it is swapped over to an alternate.

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). Intermediate wave (5) has passed equality in length and 1.618 the length of intermediate wave (1). The next Fibonacci ratio in the sequence is 2.618 giving a target at 3,124. If the target at 3,010 is met and passed, then this would be the next calculated target.

A target for intermediate wave (5) to end is calculated at minor degree.

It is possible now that the pullback of the last three weeks may be minor wave 4, but relabelling intermediate wave (5) in this way loses a good Fibonacci ratio between minor waves 3 and 1; now the Fibonacci ratios for this wave count are not very good.

I have checked on the hourly chart the subdivisions of the middle of the third wave, subminuette wave iii. This wave count will fit, but there is some gross disproportion between corrections within subminuette wave iii for it to work. The S&P500 does not always exhibit good proportion.

The Elliott channel is redrawn. Minor wave 4 may have ended with a slight overshoot of the lower trend line.

Minor wave 4 may not move into minor wave 1 price territory below 2,742.10.

HOURLY CHART

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Minor wave 4 may now be a complete flat correction; this would be a regular flat because minute wave b is longer than 0.9 the length of minute wave a but less than 1.05 the length of minute wave a.

There is no adequate Fibonacci ratio between minute waves a and c.

Minute wave c no longer subdivides well as a five wave impulse.

Within minor wave 5, no second wave correction may move beyond the start of its first wave below 2,862.08.

TECHNICAL ANALYSIS

WEEKLY CHART

Click chart to enlarge. Chart courtesy of StockCharts.com.

The symmetrical triangle base distance is 340.18. Added to the breakout point of 2,704.54 this gives a target at 3,044.72. This target has not yet been met.

Last week completes a Bearish Engulfing candlestick pattern (the strongest candlestick reversal pattern), which also has support from a slight increase in volume. This favours the main Elliott wave count.

DAILY CHART

Click chart to enlarge. Chart courtesy of StockCharts.com.

Today is the first new swing low since the upwards trend began in April. There is no longer a series of continuing higher highs and higher lows. With a lower low, there is now some indication from price of a possible trend change.

With a hammer candlestick pattern about support today, a bounce here may be expected.

VOLATILITY – INVERTED VIX CHART

WEEKLY CHART

Click chart to enlarge. Chart courtesy of StockCharts.com. So that colour blind members are included, bearish signals
will be noted with blue and bullish signals with yellow.

To keep an eye on the all time high for inverted VIX a weekly chart is required at this time.

Notice how inverted VIX has very strong bearish signals four weeks in a row just before the start of the last large fall in price. At the weekly chart level, this indicator may be useful again in warning of the end of primary wave 3.

At this time, there is mid term bearish divergence between price and inverted VIX: price has made another new all time high, but inverted VIX has not. This divergence may persist for some time. It may remain at the end of primary wave 3, and may develop further to the end of primary wave 5.

Both inverted VIX and price have moved lower and neither have made new swing lows. There is no divergence.

DAILY CHART

Click chart to enlarge. Chart courtesy of StockCharts.com. 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.

There is mid term divergence with a new all time high from price not supported by a corresponding new all time high from inverted VIX. This divergence is bearish.

Inverted VIX has made a new low today below the swing low of the 13th / 15th of August, but price has not. This divergence is bearish; it is mid term. This supports the main Elliott wave count.

Mid term bearish divergence between price and inverted VIX can be seen on both daily and weekly charts now. There is now enough mid term bearish divergence to offer reasonable support to the main Elliott wave count.

BREADTH – AD LINE

WEEKLY CHART

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When primary wave 3 comes to an end, it may be valuable to watch the AD line at the weekly time frame as well as the daily.

There is now triple bearish divergence between price and the AD line. The AD line this week has made a new strong swing low, but price has not. This offers reasonable support now to the main Elliott wave count.

DAILY CHART

Click chart to enlarge. Chart courtesy of StockCharts.com.

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 on the 29th of August means that the beginning of any bear market may be at the end of December 2018, but 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.

Breadth should be read as a leading indicator.

There is now a cluster of bearish signals at the daily chart from the AD line; this offers now some reasonable support to the main Elliott wave count.

The AD line has made a new low today below the prior swing low of the 13th / 15th of August, but price has not. This is another instance now of mid term bearish divergence, which supports the main Elliott wave count.

Both small and mid caps are making strong new lows below their respective last swing lows. Large caps have today caught up.

DOW THEORY

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.

All of DJIA, DJT, S&P500 and Nasdaq have made recent new all time highs. This provides Dow Theory confirmation that the bull market continues.

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

ANALYSIS OF THE END OF INTERMEDIATE WAVE (3)

TECHNICAL ANALYSIS

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This chart looked overly bullish at the end of intermediate wave (3). The only warning in hindsight may have been from volume spiking slightly on downwards days. There was no bearish divergence between price and either of RSI or On Balance Volume.

Single bearish divergence between price and Stochastics was weak, which is often an unreliable signal.

VIX

Click chart to enlarge. Chart courtesy of StockCharts.com.

This is a daily chart.

The strongest warning of an approaching intermediate degree correction at the daily chart level came from inverted VIX.

There was strong double bearish divergence at the high of intermediate wave (3), which is noted by the vertical line. There was also a sequence of five days of bearish divergence, days in which price moved higher but inverted VIX moved lower.

AD LINE

Click chart to enlarge. Chart courtesy of StockCharts.com.

This is a daily chart.

There was only single bearish divergence between price and the AD line at the end of intermediate wave (3). Approaching the high, there were no instances of price moving higher and the AD line moving lower.

Conclusion: When studying the behaviour of price and these indicators just before the start of intermediate wave (4), we may see some clues for warning us of primary wave 4. A cluster of bearish signals from VIX along with a bearish divergence from price and the AD line or On Balance Volume may warn of primary wave 4. The next instance will probably not behave the same as the last, but there may be similarities.

At this time, it does not look like primary wave 4 may begin right now, but we need to be aware of its approach.

Published @ 06:36 p.m. EST.

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