A little sideways movement to complete a small range Doji candlestick fits the Elliott wave count. Price remains within the channel and below the invalidation point.

Summary: The low of December 2018 is expected to most likely remain intact, and this pullback is expected to be followed by a strong third wave up to new all time highs.

A pullback may end either this week or next. The first target is now at 2,739, which has a good probability.

The second target is about 2,722 and may be most likely as it may see price find support about the lower edge of the black Elliott channel.

If price keeps falling through these targets, then a classic target calculated from the pennant pattern is about 2,690.

The alternate wave count considers the possibility that a relatively short lived bear market may have begun. The target is at 2,080. This wave count has a fairly low probability, but it is a possibility that must be acknowledged.

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

Monthly charts were last published here, with video here. There are two further alternate monthly charts here, with video here.

ELLIOTT WAVE COUNTS

The first two Elliott wave counts below will be labelled First and Second. They may be about of even probability. When the fifth wave currently unfolding on weekly charts may be complete, then these two wave counts will diverge on the severity of the expected following bear market. To see an illustration of this future divergence monthly charts should be viewed.

The alternate Elliott wave count has a very low probability.

FIRST WAVE COUNT

WEEKLY CHART

Click chart to enlarge.

The basic Elliott wave structure consists of a five wave structure up followed by a three wave structure down (for a bull market). This wave count sees the bull market beginning in March 2009 as an incomplete five wave impulse and now within the last fifth wave, which is labelled cycle wave V. This impulse is best viewed on monthly charts. The weekly chart focusses on the end of it.

Elliott wave is fractal. This fifth wave labelled cycle wave V may end a larger fifth wave labelled Super Cycle wave (V), which may end a larger first wave labelled Grand Super Cycle wave I.

The teal Elliott channel is drawn using Elliott’s first technique about the impulse of Super Cycle wave (V). Draw the first trend line from the end of cycle wave I (off to the left of the chart, the weekly candlestick beginning 30th November 2014) to the end of cycle wave III, then place a parallel copy on the end of cycle wave II. This channel perfectly shows where cycle wave IV ended at support. The strongest portion of cycle wave III, the end of primary wave 3, overshoots the upper edge of the channel. This is a typical look for a third wave and suggests the channel is drawn correctly and the way the impulse is counted is correct.

Within Super Cycle wave (V), cycle wave III is shorter than cycle wave I. A core Elliott wave rule states that a third wave may never be the shortest. For this rule to be met in this instance, cycle wave V may not be longer in length than cycle wave III. This limit is at 3,477.39.

A final target is calculated at cycle degree for the impulse to end.

The structure of cycle wave V is focussed on at the daily chart level below.

Within cycle wave V, primary wave 2 may not move beyond the start of primary wave 1 below 2,346.58.

In historic analysis, two further monthly charts have been published that do not have a limit to upwards movement and are more bullish than this wave count. Members are encouraged to consider those possibilities (links below summary) alongside the wave counts presented on a daily and weekly basis.

DAILY CHART

Click chart to enlarge.

Cycle wave V must subdivide as a five wave motive structure. Within that five wave structure, primary wave 1 may be complete. Primary wave 2 may now continue lower as a zigzag, which may end either this week or maybe next week.

Primary wave 3 must move above the end of primary wave 1.

When primary wave 3 is over, then primary wave 4 may be a shallow sideways consolidation that may not move into primary wave 1 price territory below 2,954.13.

Thereafter, primary wave 5 should move above the end of primary wave 3 to avoid a truncation.

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

Draw a channel about primary wave 2 using Elliott’s technique. Draw the first trend line from the start of intermediate wave (A) to the end of intermediate wave (B), then place a parallel copy on the end of intermediate wave (A). While primary wave 2 continues lower, any bounces should continue to find resistance at the upper edge of this channel. Copy the channel over to the hourly chart.

HOURLY CHART

Click chart to enlarge.

Primary wave 2 may be an incomplete zigzag. This wave count expects downwards movement to complete intermediate wave (C) and in turn complete the zigzag of primary wave 2.

Minor wave 3 may be complete and would be 4.34 points short of 1.618 the length of minor wave 1. Minor wave 4 may not move into minor wave 1 price territory above 2,831.29.

Minor wave 2 fits as a quick sharp zigzag correcting 0.618 of minor wave 1. Minor wave 4 may exhibit alternation as a more shallow sideways correction; the 0.382 Fibonacci ratio is the preferred target. Minor wave 4 may unfold as a combination, flat or triangle.

Intermediate wave (C) may end at support about the lower edge of the black Elliott channel. A new target is calculated using a Fibonacci ratio between intermediate waves (A) and (C). This first target would see price fall short of the black Elliott channel. The second target may be more likely.

SECOND WAVE COUNT

WEEKLY CHART

Click chart to enlarge.

This weekly chart is almost identical to the first weekly chart, with the sole exception being the degree of labelling.

This weekly chart moves the degree of labelling for the impulse beginning in March 2009 all down one degree. This difference is best viewed on monthly charts.

The impulse is still viewed as nearing an end; a fifth wave is still seen as needing to complete higher. This wave count labels it primary wave 5.

ALTERNATE WAVE COUNT

WEEKLY CHART

Click chart to enlarge.

It is possible that for the second wave count cycle wave I could be complete. Primary wave 5 may be seen as a complete five wave impulse on the daily chart.

If cycle wave I is complete, then cycle wave II may meet the definition of a bear market with a 20% drop in price at its end.

Within cycle wave I, primary wave 1 was a very long extension and primary wave 3 was shorter than primary wave 1 and primary wave 5 was shorter than primary wave 3. Because primary wave 1 was a long extension cycle wave II may end within the price range of primary wave 2, which was from 2,132 to 1,810. The 0.382 retracement of cycle wave I is within this range.

Cycle wave II may not move beyond the start of cycle wave I below 666.79.

This wave count does not have support at this time from classic technical analysis.

TECHNICAL ANALYSIS

WEEKLY CHART

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

There is an upwards trend from the low in December 2018, a series of higher highs and higher lows with a new all time high on the 30th of April 2019. While the last swing low at 2,785.02 on the 25th of March remains intact, then this view should remain dominant.

The trend is your friend.

Last week closes red, but price has moved sideways. The balance of volume was downwards and volume is not pushing price lower. Overall, this is neutral.

DAILY CHART

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

A small pennant pattern may be complete and followed by a downwards breakout, which has support from volume. The target is about 2,690.

The short-term volume profile remains bearish. The 200 day moving average may provide a little support here.

Weight should be given to the bearish signal from On Balance Volume. It supports the Elliott wave counts which expect more downwards movement here.

When price is trending, as it is now, Stochastics may remain extreme for a reasonable period of time. Only when Stochastics has been oversold for some time and then exhibits bullish divergence with price shall it be indicating an end to downwards movement.

Selling Pressure has assumed the dominant position over Buying Power in Lowry’s data.

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.

Bear markets from the Great Depression and onwards have been preceded by an average minimum of 4 months divergence between price and the AD line with only two exceptions in 1946 and 1976. With the AD line making a new all time high on the 3rd of May, the end of this bull market and the start of a new bear market is very likely a minimum of 4 months away, which is the beginning of September 2019.

In all bear markets in the last 90 years there is some positive correlation (0.6022) between the length of bearish divergence and the depth of the following bear market. No to little divergence is correlated with more shallow bear markets. Longer divergence is correlated with deeper bear markets.

If a bear market does develop here, it comes after no bearish divergence. It would therefore more likely be shallow. The alternate Elliott wave count outlines this potential scenario.

Last week price has moved sideways and the candlestick has closed red. A decline in breath this week supports downwards movement within the week. There is no short-term divergence.

Last week all of small, mid and large caps moved sideways.

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.

Mid-term bullish divergence remains and supports the view here that a low may be in place.

Today both price and the AD line have moved slightly higher. 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.

Three weeks in a row of weekly bearish divergence has now been followed by two reasonable downwards weeks. It may be resolved here, or it may yet be an indication of further downwards movement in price.

Last week price has completed an inside week. Inverted VIX has moved slightly higher. There is no short-term divergence.

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.

Bullish divergence noted in yesterday’s analysis has now been followed by an upwards day. It may be resolved here, or it may need more upwards movement to be resolved.

Today both inverted VIX and price have moved slightly higher. There is no new short-term divergence.

DOW THEORY

Dow Theory confirmed a bear market in December 2018. 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 – a new all time high has been made on the 29th of April 2019.

Nasdaq: 8,133.30 – a new high has been made on 24th of April 2019.

Published @ 06:33 p.m. EST.

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Follow my two Golden Rules:

1. Always trade with stops.

2. Risk only 1-5% of equity on any one trade.

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New updates to this analysis are in bold.