Downwards movement remains well above the invalidation point and the lower edge of the channel on the main Elliott wave daily chart.

Summary: A close above resistance at 2,815 (November 2018 highs) on an upwards day with support from volume is a classic upwards breakout.

A third wave up may now gather strength. A new mid term target is at 3,010. The final target remains the same at 3,045.

If price breaks below the adjusted base channel on the main daily chart, then consider the possibility that a deeper pullback may be underway. The first target would be at 2,658. The second target would be at 2,540.

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 COUNTS

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.

MAIN WAVE COUNT

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.

Price has closed above resistance, which was about 2,815, on an upwards day with support from volume. This classic upwards breakout above resistance indicates underlying strength. This may be the early stage of a third wave. Primary waves 1 and 2 may both be over. Primary wave 2 may have been a very brief and shallow expanded flat correction.

Primary wave 3 may now exhibit an increase in upwards momentum. A target is calculated that fits with the higher target for cycle wave V to end.

Within primary wave 3, no second wave correction may move beyond the start of its first wave below 2,722.27.

The lower edge of the adjusted base channel may provide support for pullbacks along the way up. If price breaks below the lower edge of this channel, then the alternate wave count below should be considered.

HOURLY CHART

Click chart to enlarge.

Primary wave 3 may only subdivide as an impulse. Within the impulse, intermediate wave (1) may have been over at yesterday’s high.

It is also possible that intermediate wave (2) is now over as a double zigzag. The subdivisions fit well in the five minute chart and the depth now gives it a reasonable proportion.

This wave count now expects a third wave at three degrees to begin tomorrow.

If intermediate wave (2) continues lower, then it should find strong support about the lower edge of the base channel. A breach of this channel by a full hourly candlestick below and not touching the lower edge may be taken as an indication that this main wave count may be wrong and the alternate below may be right.

Assume the trend remains the same. Assume the upwards trend remains intact until proven otherwise.

ALTERNATE WAVE COUNT

DAILY CHART

Click chart to enlarge.

It is possible that primary wave 1 may have been over at yesterday’s high and that primary wave 2 may have begun.

Two targets are calculated for primary wave 2. If price reaches the first target and the structure of primary wave 2 is incomplete, or if price keeps falling through the first target, then the second target may be used.

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

HOURLY CHART

Click chart to enlarge.

If primary wave 2 has begun, then it should begin with a five down on the hourly chart. Today this is labelled incomplete as minor wave 1. Minor wave 2 may not move beyond the start of minor wave 1 above 2,852.41.

This alternate wave count does not have good support from classic technical analysis. It is presented only as an outside possibility.

TECHNICAL ANALYSIS

WEEKLY CHART

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

Last week has seen a sharp reversal in price. A very strong bullish candlestick has support from volume, and closes above prior resistance at 2,815. This area may now offer support.

Next resistance is 2,875 and then at 2,940.

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.

A close above resistance at 2,815 on an upwards day, which has support from volume, is significant. Look for support now about 2,815; this may force any pullbacks here to be again brief and shallow.

Bearish divergence between price and both of On Balance Volume and RSI remains; however, the divergence between price and RSI is now very weak and has almost disappeared.

Stochastics may remain extreme for long periods of time when markets trend strongly. Stochastics overbought here does not indicate upwards movement should end.

There is still some room above before price finds next resistance about 2,875.

Although volume offers some support today for downwards movement, the range is small and Lowry’s data indicates no change in selling pressure. This indicates any pullbacks here may continue to be relatively brief and shallow. This supports the main Elliott wave count.

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 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.

The AD line makes a new all time high last week. Upwards movement has support from rising market breadth, and breath is rising faster than price. This is longer-term bullish divergence.

Only large caps have made new highs last week above the prior high of the 25th of February. Mid and small caps have not. This indicates some weakness in market breadth. The upwards rise may becoming selective. This would be normal towards the end of a bull market run.

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.

Both price and the AD line have moved lower today. Downwards movement has support from declining breadth, but breadth is not falling any faster than price. There is no 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 a new short-term high and a mid-term high along with price. Upwards movement comes with a decline in VIX. There is no short nor mid-term divergence.

Longer-term divergence between price and inverted VIX at the last all time high in September 2018 remains.

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.

Both price and inverted VIX have moved lower today. Inverted VIX has made a new short-term low below the prior low of 14th of March, but price has not. This divergence is bearish and 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.

For the short term, only the S&P500 and Nasdaq have made new highs above the February 25th highs. DJIA and DJT remain lower. There is some divergence: the rise in price for the S&P500 is not mirrored across the indices.

Published @ 10:10 p.m. EST.

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