Upwards movement continues towards the target as expected. This bullish movement has support from rising market breadth and declining volatility.
Summary: The target is at 2,856. If the target is wrong, it may be too high; there is very strong resistance just above at 2,800 to 2,815.
The upwards trend should be assumed to continue as long as price remains within the blue Elliott channel.
The bigger picture still expects that a low may now be in place.
The final target is at 3,045 with a limit at 3,477.39.
This upwards trend shows increasing internal strength: It began with two 90% upwards days close to the low and now the AD line and On Balance Volume have both made new all time highs.
New updates to this analysis are in bold.
The biggest picture, Grand Super Cycle analysis, is here.
Monthly charts were last updated here, including a very bullish alternate wave count.
ELLIOTT WAVE COUNT
WEEKLY CHART
Click chart to enlarge.
This weekly chart shows all of cycle waves III, IV and V so far.
Cycle wave II fits as a time consuming double combination: flat – X – zigzag. Combinations tend to be more time consuming corrective structures than zigzags. Cycle wave IV has completed as a multiple zigzag that should be expected to be more brief than cycle wave II.
Cycle wave IV may have ended at the lower edge of the Elliott channel.
Within cycle wave V, no second wave correction may move beyond the start of its first wave below 2,346.58.
Although both cycle waves II and IV are labelled W-X-Y, they are different corrective structures. There are two broad groups of Elliott wave corrective structures: the zigzag family, which are sharp corrections, and all the rest, which are sideways corrections. Multiple zigzags belong to the zigzag family and combinations belong to the sideways family. There is perfect alternation between the possible double zigzag of cycle wave IV and the combination of cycle wave II.
Although there is gross disproportion between the duration of cycle waves II and IV, the size of cycle wave IV in terms of price makes these two corrections look like they should be labelled at the same degree. Proportion is a function of either or both of price and time.
Draw the Elliott channel about Super Cycle wave (V) with the first trend line from the end of cycle wave I (at 2,079.46 on the week beginning 30th November 2014) to the high of cycle wave III, then place a parallel copy on the low of cycle wave II. Cycle wave V may find resistance about the upper edge.
It is possible that cycle wave V may end in October 2019. If it does not end there, or if the AD line makes new all time highs during or after June 2019, then the expectation for cycle wave V to end would be pushed out to March 2020 as the next possibility.
DAILY CHART
Click chart to enlarge.
The daily chart will focus on the structure of cycle waves IV and V.
Cycle wave IV now looks like a complete double zigzag. This provides perfect alternation with the combination of cycle wave II. Double zigzags are fairly common corrective structures.
Within Super Cycle wave (V), cycle wave III may not be the shortest actionary wave. Because cycle wave III is shorter than cycle wave I, this limits cycle wave V to no longer than equality in length with cycle wave III at 3,477.39. A target is calculated for cycle wave V to end prior to this point.
Cycle wave V must subdivide as a five wave motive structure, either an impulse or an ending diagonal. An impulse is much more common and that will be how it is labelled. A diagonal would be considered if overlapping suggests it.
Primary wave 1 is labelled as incomplete.
Primary wave 2 may not move beyond the start of primary wave 1 below 2,346.58.
HOURLY CHART
Click chart to enlarge.
If intermediate wave (5) is under way, then within it minor waves 1 through to 3 may be complete.
With this labelling of intermediate wave (5), there is a very close Fibonacci ratio between minor waves 3 and 1. Minor wave 3 shows stronger momentum than minor wave 1.
Minor wave 2 fits as a zigzag. Minor wave 4 fits as a complete double combination: flat – X – zigzag.
The channel is drawn using Elliott’s second technique: the first trend line from the ends of minor waves 2 to 4, then a parallel copy on the end of minor wave 3. The trend channel may show where minor wave 5 ends; it may find resistance about the upper edge of the channel, or it may end about mid way within the channel.
As minor wave 5 continues the lower edge of the channel may provide support.
A breach now of this channel by downwards (not sideways) movement would provide an indication that primary wave 1 may be over and primary wave 2 may be underway.
Minor wave 5 may be extending, and within it the middle third wave of minute wave iii may be complete and extended. A new short-term target is calculated for minute wave v to end.
Within minor wave 5, minute wave iv may not move into minute wave i price territory below 2,748.55.
If price gets to the first target and keeps on rising, then the second target may be used.
TECHNICAL ANALYSIS
WEEKLY CHART
Click chart to enlarge. Chart courtesy of et=”_blank”>StockCharts.com.
Last week completes a very bullish week. The lower wick and shaven head of this green candlestick is bullish. A little support from volume is bullish.
ADX has not yet caught up with the upwards trend. RSI indicates there is room for it to continue for a reasonable distance.
DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
Over a fairly long period of time this ageing bull market has been characterised by upwards movement on light and declining volume and low ATR. For the short to mid term, little concern may be had if price now rises again on declining volume. Current market conditions have allowed for this during a sustained rise in price.
It is also normal for this market to have lower ATR during bullish phases, and strongly increasing ATR during bearish phases. Currently, declining ATR is normal and not of a concern.
Considering the larger picture from the Elliott wave count, some weakness approaching the end of Grand Super Cycle wave I is to be expected.
From Kirkpatrick and Dhalquist, “Technical Analysis” page 152:
“A 90% downside day occurs when on a particular day, the percentage of downside volume exceeds the total of upside and downside volume by 90% and the percentage of downside points exceeds the total of gained points and lost points by 90%. A 90% upside day occurs when both the upside volume and points gained are 90% of their respective totals”…
and “A major reversal is singled when an NPDD is followed by a 90% upside day or two 80% upside days back-to-back”.
The current situation saw two 80% downside days on December 20th and 21st, then a near 90% downside day with 88.97% downside on December 24th. This very heavy selling pressure on three sessions together may be sufficient to exhibit the pressure observed in a 90% downside day.
This has now been followed by two 90% upside days: on December 26th and again on 4th January.
The current situation looks very much like a major low has been found.
This chart is overall very bullish. Only the moving averages are not yet full bore bullish.
Price does not move in straight lines though. There will be small and large pullbacks within the trend. Use them as opportunities.
For the short term, price is now very close to a strong area of resistance at 2,800 to 2,815 and the risk of a pullback about this area is reasonable, so caution is warranted.
BREADTH – AD LINE
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.
Every single bear market from the Great Depression and onwards has been preceded by a minimum of 4-6 months divergence between price and the AD line. With the AD line making a new all time high last week, the end of this bull market and the start of a new bear market must be a minimum of 4 months away, which is mid June 2019 at this time.
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.
Breadth should be read as a leading indicator.
There is now a cluster of bullish signals from the AD line. This supports the Elliott wave count.
The AD line has again made another new high above the high of the 3rd of December, but price has not. This divergence is bullish.
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.
Inverted VIX has made yet another new high above the prior swing high of the weeks beginning 26th of November and 3rd of December 2018, but price has not. This divergence is bullish for the mid term.
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.
Inverted VIX has made another new high above the prior high of the 3rd of December, but price has not. This divergence is bullish. Inverted VIX moved very strongly higher today while price moved a relatively small amount. This is also bullish.
DOW THEORY
Dow Theory confirms a bear market. This does not necessarily mean a bear market at Grand Super Cycle degree though; Dow Theory makes no comment on Elliott wave counts. On the 25th of August 2015 Dow Theory also confirmed a bear market. The Elliott wave count sees that as part of cycle wave II. After Dow Theory confirmation of a bear market in August 2015, price went on to make new all time highs and the bull market continued.
DJIA: 23,344.52 – a close on the 19th of December at 23,284.97 confirms a bear market.
DJT: 9,806.79 – price has closed below this point on the 13th of December.
S&P500: 2,532.69 – a close on the 19th of December at 2,506.96 provides support to a bear market conclusion.
Nasdaq: 6,630.67 – a close on the 19th of December at 6,618.86 provides support to a bear market conclusion.
With all the indices moving now higher, Dow Theory would confirm a bull market if the following highs are made:
DJIA: 26,951.81
DJT: 11,623.58
S&P500: 2,940.91
Nasdaq: 8,133.30.
Published @ 07:57 p.m. EST.
—
Careful risk management protects your trading account(s).
Follow my two Golden Rules:
1. Always trade with stops.
2. Risk only 1-5% of equity on any one trade.
If your looking to be bearish for a clip
Let’s hope this weekly candlestick holds…
What do you think Verne ?
The real set up at hand?
It is still looking like yet another bull trap so far.
As you know my thesis is that a true bankster unwind should bust a few support/reistance levels on the INITIAL wave down and when that does not happen I get a bit suspicious.
I was also a bit stunned that long traders are NOT hedging their positions as we can see from the moribund price action in VIX.
A few of us were speculating over whether the banksters were now targeting the hedge funds by suppressing vol to keep them in risk/parity trades. There are very few retail traders left for them to fleece.
When there is a violent unwind the margin call will force to the longs to sell at the market.
We need to keep a sharp eye out for what happens at OpEx tomorrow.
I personally was expecting one more ramp higher and thought I was wrong after the dive today but as they say, it ain’t over ’till the Fat Lady sings! 🙂
Yes brother
It’s not..:)
I do think we can put a nice window on this 5 wave and looking at a retrace to 2700 min in near term..
So was looking into a selling 2820-2840 call spread for two weeks out
And buying at 2770-2730-2690 butterfly to limit the cost of capturing a downside push
Same time frame 2-3 weeks….
Main aspects of trade is fading this topping process… to capture that profit….
When it pushes down the volume premiums should go up as well… and the butterfly should be profitable on any push below 2760…
The only issue I am seeing is vix not taking 15 back as support
And I’m still in a hedged and slowly turning short term s and p short and vxxb long
And I don’t want to add any more leveraged positions until we do get that final push to 2800
It’s keeping me from pulling the trigger…just in case they want to ramp this sucker right on through ..
But I’m thinking this may be it after today
I just need a close near 276.50 or under 278…
If that happens I think I can just hold what I have….
And not worry about something larger
Take scalps here and there and trade around a core short and vol long …
But when my hedges are the only things making money in my core position…
It kind of forces you into trading the hedges as a core and hedging the other direction
Kind of exactly like you are describing …:)
I am also starting to think the chains are off the metals markets
And buying the dips on any paper gold and silver …
Do you have an opinion on the metals outlook?
Nflx looking wobbly here
Selling 360-367.50 call spread
Buying 355 347.50 335 butterfly put spread for
Next week
The SPX 2766 level I mentioned earlier as key is getting scribbled on, the hourly trend is strong down now, and SPX is in hour 4 of a squeeze. The 38% retrace (2768) of the move from the low a week ago to the high (day session data only) is broken. The 61.8% I have at around 2754.
I think we can tell that most bears have been squeezed and most buyers have loaded if 38 mil shares can take the spy down like this
But the vix needs to reclaim 15 for any serious selling
Selling 278-279 call spreads in spy for .25 for tomorrow
Did a butterfly on the put side
277.5-276.50-275 costs few pennies
Doing a butterfly back the other way now
276.5-277.50-279.. again a few pennies
Hedge my spy shorts and place my mark for additional shorts up above
Tesla looks like it could fall on market weakness a good ways
Sold 300-310 call spread for a couple bucks
Bought 1/2 as many 285-275 put spreads for a little more than 2$
Got the put spreads for a little less than a buck when it approached $292
Had to take a shot
LOL!
I did the DIA 259/260 after the YM retreat from 26K! 🙂
Ok
As a volatility trader that has been feeling a little pain in an early entry last week
And who feels every vix smash
I think people can sell puts in vix futures in another push down if one comes
Or buy some near money call spreads if you don’t want to break the never sell puts in vol rule..:)
Vxxb 31 level in cash… look for good premiums
depending on your risk appetite and price 2-3% away with a one to two week expiration if you want some extra cushion
It’s finding a bottom ….
Covered my NFLX 365-375 short call spread from last week
I decided to trade TVIX instead so I could wait out the head-fakes… 🙂
That’s a good idea…
As I think the arbitrage Trade could switch quickly on vix
From selling short term buying mid term…. to buying short term vol and selling mid term
It just takes a little for that boat to turn around
And unless the vix takes 15 back
They won’t switch and the boot is not coming off the short term neck
But it’s getting close with the time
Left on the March futures contract … and the end to P1 at hand
GM closed its gap from last week and looks like it has formed a double top… is anyone entering short here? Chart posted is a daily chart
Yes brother
I have been building a short since 39.10
I swinged traded the GAP up a couple weeks ago and averaged my price up considerably
I’ll hold it for the ride down
And scalp trade any
Bounces of note
Lol! That puppy is going to zero. It will not pass Go. It will not collect 200.00
One of the safest set-it-and-forget-it shorts out there.
Anybody take a recent look at that balance sheet? Ai! Yi! Yi!
It is really amazing that the thing is still trading with a bid! 🙂
Gooooood morning everybody 🙂
I’m going to still label this little pullback minute wave iv within minor wave 5. Still needing one final new high to complete the structure of primary wave 1.
The S&P just does not alway play nicely with its trend channels. It can break below a channel, only to then turn up and hug the lower edge as it makes new highs. That may be what’s happening here. It does that when it forms rounded tops, which is an occasional feature of this particular market. So I’m not concerned with the trend channel breach.
This tendency does make it rather hard to use trend channels as indication of a trend change though.
The first target is recalculated.
Hi Lara
Great work as always
What do you think about the extension of futures overnight to that level?
Scott, This may not be what you’re asking about but ES did react off of resistance last night.
Thanks brother
Yeah
I noticed the ramp overnight
Can the end of waves happen in futures
I think they can
Look at the down spike on election night
So there are examples on the downside
My analysis is of the cash only market. The EW count may be a little different for futures markets. And so I don’t consider what the futures market does when I do my analysis of the cash market.
I keep them separate.
I know this isn’t a popular approach though. But it makes sense in terms of EW.
Poor thing… can’t sleep again? Or maybe surf’s up this morning?
Whatever… thank you for this update, Lara!
LOL
Lots and lots of work to do today, so I got up early.
No surf, sadly. Onshore.
A move back to ES 2750 would make sense to me. It would find support on the lower trend line.
same chart as above, different look … trying to make something that appears less murky
Thank you, CM. This is much easier to read!
SPX hourly including overnight data.
The key level for me right now is 2766, the prior swing low. Break down through that would be a reasonable indicator price is going down to one of those lower channel lines, or at least towards them.
Without that break, all we have here so far is nominal continued bullish and maybe topping action.
For myself, “wedges” are heads up signals, not “indicators”, because they are rather easy to draw in lots of market conditions. A fairly small break to the upside here and the wedge goes away and the divergences go away quickly. The trigger I’m waiting for indicating something is happening to the down side at least some what is a break of that swing low.
And here it is Kevin
The moment of truth
2767 as I type
Futures hit 279.40 overnight
Don’t know if that counts as a full extension to the 2791-2800 range or not
Vix former support now resistance at 15
Should tell the tale
I’m looking for a reclaim of 15
Another vix smashdown and a bounce in SP
Let’s if we get that slow grind up…
Takes a while to turn a big ship around
And there is the slow grind up and the crushing of vix futures
Man…anyone trying to get long vix or vix futures has a wrecking ball dropped on them
This is old school market manipulation 101…
Someone has the playbook and the “magic wand”
Only thing working is my hedges against my short s and p and long vxxb position
Those are gold…lol
May have to flip my positioning….
The slow grind got met with some selling this time….
The last times it got exponential and then a thrust up…
Definitely feels like we are topping
ari,
Your charts demonstrate very well the precarious situation we find in the US equity markets. Rising wedges with negative divergences. They will break and it should be hard down for a while at least. Thanks for the charts.
🙂
How goes it Verne! I wanted to ask you to see if the following charts below fall into the “coiling” category? These are logarithmic 60 minute charts below of Nasdaq 100 (NQ) and spx futures (ES). As Kevin mentioned yesterday, it seems like we could be very close to the P2 of either the main or the alternative count… with big time resistance approaching in 2800-2820 range…
I’m not sure if any of your other indicators are hinting at a turn coming soon?
ES rising wedge pattern…
NQ rising wedge pattern…
They look like pretty good looking rising wedges to me Ari.
And yes, I’d expect P1 to quite likely end in this strong zone of resistance 2,800 – 2,815. My first target is almost right at 2,800.
Thanks Lara!
Numero Uno! 🙂