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A new low indicated further downwards movement. The target at 2,612 was not met.

Summary: A new high above 2,722.20 and a breakout of the best fit channel would indicate a low is in place. At that stage, a multi week bounce may be expected to continue towards about 2,878 and likely higher.

A new low below 2,629.16 would indicate more downwards movement. The target is now at 2,544.

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. Look for very strong support about the lower edge of the teal trend channel on the monthly chart.

Primary wave 4 should be expected to exhibit reasonable strength. This is the last multi week to multi month consolidation in this ageing bull market, and it may now begin to take on some characteristics of the bear market waiting in the wings.

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 published monthly chart is here, video is here.

ELLIOTT WAVE COUNT

WEEKLY CHART

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. It is clear it is an impulse.

Within cycle wave V, the third waves at all degrees may only subdivide as impulses.

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. The overshoot of the upper edge of this channel by the end of intermediate wave (3) looks typical. For the S&P, its third waves are usually the strongest portion of an impulse; they often exhibit enough strength to overshoot channels.

Primary wave 4 now has an overshoot on the lower edge of the channel. This is acceptable; fourth waves are not always neatly contained within channels drawn using this technique.

Now that primary wave 4 has broken out of the narrow maroon channel, 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.

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

S&P 500 Daily 2018
Click chart to enlarge.

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 the 0.236 Fibonacci ratio at 2,717 and the 0.382 Fibonacci ratio at 2,578.

The 0.382 Fibonacci ratio would expect an overshoot of the teal channel. This may be too low; price may find support at the lower edge of the channel. However, as primary wave 4 should be expected to exhibit reasonable strength, it may be able to overshoot the channel and that would look reasonable. This possibility is now more seriously considered.

Primary wave 2 unfolded as a shallow regular flat correction lasting 10 weeks.

Intermediate wave (A) may now be a complete double zigzag. There is reasonable proportion within this wave count between minor waves W and Y.

Primary wave 4 may be subdividing as a flat or triangle. Because a flat would not offer alternation with the structure of primary wave 2, a triangle may be more likely.

When the first wave within a correction subdivides as a three, then the next wave is usually very deep. Intermediate wave (B) should be expected to be very deep in relation to intermediate wave (A); if primary wave 4 unfolds as an expanded flat or a running triangle, then it may make a new high above the start of intermediate wave (A). There is no upper invalidation point for this reason.

Primary wave 4 may not move into primary wave 1 price territory below 2,111.05.

HOURLY CHART

S&P 500 Hourly 2018
Click chart to enlarge.

A new high above 2,722.70 by any amount at any time frame would be required for confidence that a low is in place. If price breaks out above the upper edge of the blue channel, that would provide additional confidence.

Intermediate wave (B) may be expected to last a few weeks and be very deep. No second wave correction within intermediate wave (B) may move beyond the start of its first wave below 2,628.16.

Intermediate wave (B) may unfold as one of more than 23 possible corrective structures. B waves exhibit the greatest variety in structure and price behaviour. They can be very complicated time consuming sideways corrections, or equally as likely they can be quick sharp zigzags.

ALTERNATE DAILY CHART

S&P 500 Daily 2018
Click chart to enlarge.

It is also possible that intermediate wave (A) may be incomplete. If it is incomplete, then it may be unfolding as a single zigzag. Minor wave C would be likely to move lower in order to have better proportion to minor wave A.

A target is given for minor wave C to end. This target would expect to see an overshoot of the teal channel. If the lower teal trend line is overshot, then it would be most likely to see price move back to within the channel quickly. It would be unlikely to see a full daily candlestick below the channel.

When intermediate wave (A) could be a complete zigzag, then thereafter intermediate wave (B) would be expected to be a very deep multi week correction, which may make a new high above the start of intermediate wave (A).

ALTERNATE HOURLY CHART

S&P 500 Hourly 2018
Click chart to enlarge.

If intermediate wave (A) is unfolding as a single zigzag, then minor wave C within it may be incomplete.

Within minor wave C, minute wave ii may not move beyond the start of minute wave i above 2,722.70.

TECHNICAL ANALYSIS

WEEKLY CHART

S&P 500 weekly 2018
Click chart to enlarge. Chart courtesy of et=”_blank”>StockCharts.com.

Support for On Balance Volume along with a slightly longer candlestick wick looks slightly bullish. A low for the first downwards swing within a consolidation may be found here or very soon next week.

DAILY CHART

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

The Spinning Top candlestick pattern puts the trend from bearish to neutral. On its own, it is not a reversal pattern.

With RSI now exhibiting double bullish divergence while oversold, it looks more likely that a low may now be in place. This offers reasonable support now to the main Elliott wave count.

BREADTH – AD LINE

WEEKLY CHART

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

Falling price again has support from a decline in market breadth. Breadth is falling in line with price. There is no divergence either way.

DAILY CHART

AD Line daily 2018
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.

Price has made a new short term swing low, but the AD line is flat. There may be bullish divergence here, but it is weak.

VOLATILITY – INVERTED VIX CHART

WEEKLY CHART

VIX daily 2018
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.

The fall in price this week comes with a normal corresponding increase in volatility as inverted VIX also declines. There is no new divergence. Last noted mid term bearish divergence has now been resolved.

DAILY CHART

VIX daily 2018
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 now short term bullish divergence between lows in price and inverted VIX. There is also weak bullish single day divergence as price moved lower on Friday but inverted VIX was flat.

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: 23,344.52.
DJT: 9,806.79.
S&P500: 2,532.69.
Nasdaq: 6,630.67.

ANALYSIS OF INTERMEDIATE WAVE (4)

TECHNICAL ANALYSIS

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

Intermediate wave (4) was a large symmetrical triangle. The deepest wave was the first wave. At its low there was a clear candlestick reversal pattern and bullish divergence between price and Stochastics.

RSI barely managed to reach into oversold.

The current correction for primary wave 4 may behave differently, but there should be some similarities.

It is expected that primary wave 4 may be stronger than intermediate wave (4).

VIX

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

This is a daily chart.

At the two major lows within intermediate wave (4), inverted VIX exhibited single short term bullish divergence.

At highs within intermediate wave (4), inverted VIX exhibited one single day bullish divergence with price.

AD LINE

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

This is a daily chart.

At the two major lows within intermediate wave (4), there was bullish divergence between price and the AD line. At the two major highs within intermediate wave (4), there was each one instance of single day bearish divergence.

Published @ 12:41 a.m. EST on 27th October, 2018.


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