Today’s small pullback is analysed for internal strength or weakness. The Elliott wave count is adjusted for the short term while the mid-term target remains the same.
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 black Elliott channel on the daily chart, and above 2,681.43.
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.
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 wave V.
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.
The hourly chart focusses on the whole of intermediate wave (5).
Within intermediate wave (5), minor wave 1 may be over at the last high. Minor wave 2 may have begun today and may move a little lower tomorrow to complete as a double zigzag. These are common structures for second waves.
Minor wave 2 may not move beyond the start of minor wave 1 below 2,681.83.
If the degree of labelling is moved up within intermediate wave (5), it would be possible to see it as over; primary wave 1 may possibly be complete at the last high. However, classic technical analysis at this time does not support the idea of a larger deeper pullback here. Assume the trend remains the same until proven otherwise. Assume the upwards trend remains intact while price remains above 2,681.83 and within the black channel on the daily chart.
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.
The short-term volume profile is bullish. Downwards movement today lacks selling pressure. This looks like another small pullback within an ongoing upwards trend.
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.
Both price and the AD line moved lower today. Downwards movement has support from a corresponding decline in market breadth. There is no new short-term divergence.
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.
There is now a cluster of bullish signals from inverted VIX that support the Elliott wave count.
Both price and inverted VIX moved lower today. Downwards movement comes with a normal corresponding increase in VIX. There is no new short-term divergence.
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 @ 08:18 p.m. EST.
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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.
Thank you to members who have commented with your concerns about the hourly wave count today.
I’m taking blank hourly chart (for intermediate (5) ) and looking at how the last pullback may fit as a fourth wave.
I agree, that idea needs to be very seriously considered.
Lowry’s are still bullish at least for the short term.
Aaaaannnd… the first thing that jumps out when I chart this idea is that the third wave is shorter than the first
That limits the bounce to no higher than 2,823.20.
Yes Maam! 🙂
The blow-up of Kraft-Heinz peeked my interest as these things tend to happen in clusters so I went looking. There was indeed an even bigger blow-up today in case nobody noticed:
STMP. It lost more than half its value today, down about 58% to around 83.5 from a close of 198 yesterday.
Yikes!
Shape of things to come??
Be careful out there….!
Thank you Lara
Minor 2 now looks most likely to be over.
For this wave count because there is such heavy resistance just overhead about 2,800 to 2,815, I wouldn’t be surprised if the target at 2,856 is way too high and minor 3 may be relatively short, then minor 5 shorter still.
If price can close above resistance at 2,815 on an upwards day which has support from volume that would be a classic upwards breakout and then I’d have more confidence in the target at 2,856.
For now, assume the trend remains the same until proven otherwise. There is an upwards trend intact. Assume pullbacks are an opportunity to join the trend. Be prepared to exit longs if there is evidence of a trend change. Today there is zero evidence this trend is over.
And as always, my trading advice comes with strong risk management advice. It is the single most important aspect of trading. Always use stops, invest only 1-5% of equity on any one trade. If newer members learn only this from me that will be a job well done.
Use the lower edge of this base channel as a guide to where pullbacks may find support.
A note about Elliott wave and highs and lows:
I’ve learned the hard way over the years that Elliott wave is often early in expecting a trend change. That is because the structure of a wave may be seen as complete, only for it to extend further. It’s all in the degree of labelling of the subwaves.
And so I’ve learned to counter that tendency by always trying to assume the trend remains the same, until proven otherwise.
When an Elliott wave count is nearing or at a critical juncture which expects to see a trend change, I’ll refer to classic TA. I’ll look for signs of a change in candlestick reversal patterns, breaks of support or resistance, the volume profile, and here for the S&P I’ll also rely heavily on the AD line and Lowry’s data.
Otherwise, I’d be often calling for highs or lows before there is any technical evidence of them, and I’d be wrong too often and you’d lose out $$.
Monsters of tech (equally weighted AMZN, MSFT, GOOGL, AAPL, NFLX) have broken a 61.8%. to the upside, and are in week 2 of weekly squeeze on strongly rising momentum. The hourly has also popped up and out of about a week’s work of squeeze.
This adds a tad of probability for me to the short term bull case. Tech looks like it’s more likely to keep rocking to the upside here than not, maybe 60-40.
Ive been trading around a Netflix short call
Position and escaping …
I put on a short 360-367.50 call spread for next week
And a long put butterfly 355-347.50-335
I got about 1.80 credit on the whole thing
Not loving it…:)
But we will see what next week brings
I have done a lot of work to get my average short s and p to 278
And my average long vxxb to 32
I need a bigger pump for the boat…
I had a feeling when the vix couldn’t hold 15 i May be in trouble….
Did my
Last hedges for next week looking at a high of 2807…
I caught the wrong side of this bull
My hedges have been flowing money ….that was obviously the trade
Sell Puts on dips and buy calls
One of the most extreme bounces I have seen…
I
Normally feel pretty good about positions even when they are going against me…. because I have a decent instinct on they turn
But this one… has me wondering ….
Hang in there…the most aggressive “short shake” I have seen….EVER!
Something wicked this way comes….! 🙂
Me neither brother
Something has changed
I don’t know if you are pay attention to any of the Q stuff
I just started noticing some things on you tube….
This may be a larger struggle between forces…. and the fed and banksters were going to drop the market on Trump
And he knew what was a foot and got control back of the market and is doing they old bang it higher playbook
Pide pipering the large traders with suppressed vol to enter trades like you said
It would make sense with what we have seen… as it seems very violent and unnatural how everything went so bearish to so bullish
And is destroying normality
Vix is in free fall and vix futures now in contango…
They seem cheap with a while to go
But not if vix goes to 12
Will see what holds
https://m.youtube.com/watch?v=6qKrhJjrwjI&fbclid=IwAR1fmHEqVmH4dO87_uNGxru35OXZV80Z4NoCklKyDyihHDJ_iNLyRzjD-Bc
Here’s /ES with overnight data and my time/price target for a significant swing high.
Question is, was the last high (and 3rd touch on the upper trend line) a slightly early arrival of said swing high, and price is now in a “new move” upward? Could be.
The trend is your friend overall and it’s about as strong at the daily price timeframe as it’s ever likely to get. But trend doesn’t predict the future, either, and every trend comes to an end.
Nothing like waxing philosophical on a Friday afternoon (okay late morning here).
Wax on! Wax off! 🙂
Yes Mr. Miyagi!
🙂
AMZN has a very low ADX and is in a weekly squeeze (2 bars) and a daily squeeze (many bars!). Weekly and daily trends are both neutral. I have a bull call spread here, anticipating that this will break to the upside, consistent with the strong bullish trends in the broader markets (NDX specifically is in day 16 of up trend or strong up trend).
Six hours of squeeze with a significant and strong break to the upside. Hourly trend back to neutral, while the daily has been “strong up” for many days. Very bullish indeed.
As proof of the truth that NO equity is “safe”, witness CPB, an absolutely boring stock, on which I had a bull spread playing a turn off the 78.6%. Opened gap down about 3.5%, now down 8% and still falling. A soup company…lol!!! Earnings in 3 days…I guess someone spilled the soup?! Gad.
Kraft Heinz exploded and some of the shrapnel hit Campbell
Omigosh!
More like DETONATED!
The inside story there is after Buffet and his cronies bought it the bean counters destroyed the business model. I have to say this does not surprise me in the least!
Sometimes I think I should put out a warning on any/every position I take, you know, the “I’m in it so it’s going to blow up!” warning. Of course we all feel like that at times, “the market is out to get me!”. No, it’s not. Stuff happens. But this one shocked me this morning! I mean moving against me, sure, even “strongly”, but a frigging explosion to the downside? In Campbells Soup??? Lol!!! That’s just wrong.
How did you “manage” the trade?
Flipped the switch of folded ’em?
Meant to say “or”…
Instant fold.
Yeah, you would think it would behave more like a utility and less like a tech stock. But look on the bright side, at least you’re not Warren Buffett having to answer for KHC.
I am curious about what charting technique could have predicted something like that…! Hmmnnnnnn…!! 🙂
The way I insulate myself from this kind of meltdown in an individual stock is by never owning an individual stock. The only trades I put on are index trades.
It’s too easy for a company to blow up when they have restated yearly earnings, are under investigation by the SEC, lose key personnel in an aircraft crash, commit Enron sized fraud, etc.
Case in point, KHC down 27.5 percent today and the S&P 500 is up 0.64% for today.
If it was possible to see a black swan on a chart, we would all be short KHC since yesterday.
Just one more point in this sermon, with index trades, the risk is layered and with individual stocks you are exposing yourself to all the possible risk there is.
P.S. — I’m well aware of the dramatic losses that a stock can encounter. Ask me how I know.
: )
An interesting question for forum members. We have all noticed how the media seems to read from the same same script when reporting on certain topics, often using the exact same phrases and descriptors , whatever network you happen to be watching. If you have ever heard a medley of such examples it is hysterically funny. Some of you know the reason for that.
Here is my question. Has anybody noticed similar “collusion” in the reporting of financial news? Say for example, the reasons for a market advance or decline.
Absolutely. Most media outlets read the same script / talking points on market issues and all issues for that matter.
Do you think, that they think, that we don’t notice??! 🙂
It doesn’t occur to them that there might be anything to notice. They’re simply regurgitating the spin fed to them each day by the banksters and fraudsters of Wall Street, Washington, London, Brussels, Hong Kong, Tokyo…
Move along, Verne, there’s nothing to see here!
“These are NOT the droids you are looking for. Move along!” 🙂
There are two situations. One of course is when the media companies are all in the same corporate structure and told what to report (even verbatim).
The second is the general practice re: market moves to assign all responsibility for it to whatever headline looms large in the media’s other stories. Self-reinforcement. I’ve read about how these financially ignorant financial reporters are required to “report the reason” so they go find one. Any one really will do. Often even independents reach to the same “big headline”.
So I don’t think it’s all that pernicious, just a result of “how they report”. As we all know, relative to the market, 99% of all media commentary is largely illiterate nonsense anyway. I have a trading friend who is news bound 100% of the time, often starting at 4am. He thinks it helps him. Maybe it does. It would drive me insane.
Ah, yes! The infamous 4:00 a.m. drops! 🙂
caveat: that’s 4am pacific, so really the opening of news time on the east coast.
I hear and understand you mikekramer and arnauddesombre. There was a significant change in the wave count without merely a head’s up in the commentary. However, Lara’s last paragraph under the hourly count explains it. (I don’t mean to speak for Lara, but this is my take on it.)
————————————————————————————————–
If the degree of labelling is moved up within intermediate wave (5), it would be possible to see it as over; primary wave 1 may possibly be complete at the last high. However, classic technical analysis at this time does not support the idea of a larger deeper pullback here. Assume the trend remains the same until proven otherwise. Assume the upwards trend remains intact while price remains above 2,681.83 and within the black channel on the daily chart.
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One difficult challenge of EW analysis is that the wave count can and does change, sometimes in minor ways and other times in significant ways relatively speaking. Lara combines her EW analysis with classical TA and that is what gives her very good clues as to which count is most likely. Note I said “most likely” not certain. For newcomers this reality takes some time to sink in.
Have a good day all. I’m off to see the surgeon 4 hours away hopefully getting a release for the next phase of physical therapy. I think I’ll be done with this confounded sling!
I should have also mentioned as an example of how EW counts can change suddenly, it is possible in the next few days while looking towards 2856, we could see a bearish reversal candlestick and the EW count would be that Intermediate 5 and Primary 1 are completed well short of 2856 on a relative basis.
Rodney, Thanks for the reply, but in the wave counts shown above Primary 1 is still shown as incomplete, and now shown as less complete today than it was yesterday. I understand how and why counts can change but I just don’t get this one. Thanks, Mike
Looking back at yesterday’s hourly vs. today, and INCLUDING today’s data (so far), my view is Lara made a great call. The minor 5 in yesterday’s hourly was “long of tooth” relative to the rest of the minor waves in time and price. Today’s action confirms it wasn’t/isn’t over, and hence…that count just wasn’t right.
I also view this new count as more bullish, not more bearish. And note…price under this count is now in a minor 3 of an intermediate 5, we should be getting a momentum increase here, and that appears to be in process.
So given the strongly confirming action today, I think it was an accurate change.
I still have weekly SPX trend at neutral, which means that at the weekly level +DI > -DI, BUT the weekly ADX is not yet trending (bar to bar) up. Obviously daily trend is up up up, consistently so since 1/15.
Thanks Kevin, SPX looks over bought to me and like yesterday’s more advanced count is more applicable. We’ll know soon which one if correct!
Mike
My opinion is that yesterdays pullback fits best a 4 not a 2 but we shall see
I agree, looks to me like we will have one more short burst to the top and then Primary 1 is done…..but maybe it’s already done at around noon today…..noon EST that is
We are on the same page. The high at noon I believe was end of iii and we are working a iv now and one final push to 2800 for v if this count I’m using is correct
Do you think Monday’s open will exhibit Campbell’s Soup moment? Gotta wonder about the China tariff negotiations….but maybe too soon to tell about that.
Tradeshark: I agree. A good idea. I’ll chart that and see how it looks and check the Fibonacci ratios.
I absolutely agree “overbought”, and the eventually coming 2 down could be brutal. I’m waiting for pragmatic and clear actual price signals to tell me it’s in play though, not wave counts and not derived measures such as overbought indicators. Grabbing a chunk of the middle after high confidence the move is afoot is the lower risk approach to getting short here…as recent experience has taught me!
I believe I’ve read that same play book
Lara,
How can your count change so dramatically overnite? Yesterday afternoon you showed minor wave 5 almost complete….this morning the count I see shows minor wave 2 just completing and minor wave 3 not yet started!
Minor 5 could still be complete.
I’ll assume the trend remains the same, until proven otherwise.
If the black channel on the daily chart is breached, or price makes a new low below 2,681.83, then I’ll label primary 1 over and primary 2 just begun.
The pullback I’m labelling minor 2 is weak to the downside. Selling pressure didn’t increase much, volume declined. That looks more like a small pullback within the upwards trend than a new wave down.
Lara,
Your analysis of today 12:56 pm had an invalidation point of 2748.55 which wasn’t reached.
The “logical” analysis after the close would be that wave IV circle (purple) ended today at 3:30pm and not around 10:10am, and that SPX is in wave V circle (purple) towards 2800+.
By “logical”, I mean “most in line with previous analysis”.
Given that the “logical” analysis is still valid, what made you switch to a more bearish analysis today?
Thank you
The breach of a channel about the prior upwards wave. The downwards movement I’ve labelled minor wave 2 doesn’t look like part of that, and it broke below a support line.