Select Page

Downwards movement continued as the Elliott wave analysis expected.

Summary: Targets for a multi-week pullback are 2,637 or 2,656.

At its end, this pullback may offer an opportunity to join the upwards trend prior to new all time highs.

New updates to this analysis are in bold.

The biggest picture, Grand Super Cycle analysis, is here.

Last published monthly charts are here. Video is here.

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. Thereafter, the next possibility may be October 2020. March and October are considered as likely months for a bull market to end as in the past they have been popular. That does not mean though that this bull market may not end during any other month.

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 complete. Two targets are given for primary wave 2. The higher 0.382 Fibonacci ratio may be preferred in the first instance. If price keeps dropping through this target or if it gets there and the structure of primary wave 2 is incomplete, then the second lower target may be used.

Primary wave 2 may not move beyond the start of primary wave 1 below 2,346.58.

Primary wave 2 would most likely subdivide as a zigzag, but it may subdivide as any corrective structure except a triangle. The focus for the next few weeks will be on identifying when a complete structure for primary wave 2 may be seen.

MAIN HOURLY CHART

Click chart to enlarge.

The most likely structure for primary wave 2 would be a zigzag. The next most likely structure would be a double zigzag.

Within a zigzag, intermediate wave (A) must subdivide as a five wave structure. It is possible again today to see intermediate wave (A) as complete.

Within a zigzag, intermediate wave (B) may not move beyond the start of intermediate wave (A) above 2,816.87.

Intermediate wave (B) may subdivide as any one of more than 23 corrective structures. It may be a quick sharp zigzag, or it may be a time consuming sideways triangle or combination. It is impossible to tell which structure intermediate wave (B) may be unfolding as until it is complete. Flexibility is essential with B waves; they exhibit the greatest variety in terms of structure and price behaviour and they are often complicated. Labelling within intermediate wave (B) is most likely to change as it unfolds.

Primary wave 1 lasted 45 sessions. Primary wave 2 may last a Fibonacci 21, 34 or 55 sessions. It may also be in proportion to primary wave 1 at about 45 sessions.

ALTERNATE HOURLY CHART

Click chart to enlarge.

It is also possible again that a zigzag may be complete at today’s low.

When the first structure in a correction may be complete as a three wave structure, then a flat, combination or double zigzag is indicated. Primary wave 2 may not subdivide as a triangle; triangles may not unfold in second wave positions.

If primary wave 2 unfolds as a flat correction, then within it intermediate wave (A) may be a complete zigzag. Intermediate wave (B) must retrace a minimum 0.9 length of intermediate wave (A) and it may make a new high above the start of intermediate wave (A) as in an expanded flat.

If primary wave 2 unfolds as a double combination, then the first structure in a double may be a complete zigzag labelled intermediate wave (W). Intermediate wave (X) within a double combination has no minimum requirement, but it would most likely be very deep and may make a new high above the start of intermediate wave (W).

If primary wave 2 unfolds as a double zigzag, then the first zigzag in the double may be complete labelled intermediate wave (W). The double may then be joined by a three in the opposite direction labelled intermediate wave (X), which would be incomplete. Intermediate wave (X) within a double zigzag would most likely be shallow and may subdivide as any corrective structure, but would most likely be a single zigzag. Intermediate wave (Y) would then be expected to move reasonably below the end of intermediate wave (W) to achieve its purpose of deepening the correction and giving the double zigzag a strong slope.

TECHNICAL ANALYSIS

WEEKLY CHART

Click chart to enlarge. Chart courtesy of et=”_blank”>StockCharts.com.

This week the strong Bearish Engulfing candlestick pattern supports the Elliott wave count.

DAILY CHART

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

The December 2018 low is expected to remain intact. The two 90% upwards days on 26th December 2018 and 6th January 2019 indicate this upwards trend has internal strength.

On Balance Volume supports the Elliott wave count. Look for next support about 2,625 and then 2,600.

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 again 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 to end June 2019 at this time.

This week the AD line has made a new low below the prior low of the week beginning 11th February, but price has not. This divergence is bearish for the short 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.

Today both price and the AD line moved lower. There is no new divergence. The fall in price today has support from a decline in market breadth.

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 a new low below the prior low of the week beginning 11th of February, but price has not. This divergence is bearish.

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.

On Friday price moved lower, but inverted VIX moved higher. This divergence is bullish for the short term.

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 @ 10:19 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.