A continuation of sideways movement overall was expected for this week. A small pattern may be developing on the daily chart, which may provide a classic technical analysis target to supplement the Elliott wave target.
Summary: The low of December 2018 is expected to most likely remain intact.
The current consolidation may end next week and may continue to be very shallow. A third wave up may then continue and may exhibit an increase in strength. The target remains at 3,104.
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 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.
FIRST WAVE COUNT
WEEKLY CHART
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.
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
Cycle wave V must subdivide as a five wave motive structure. Within that five wave structure, primary waves 1 and 2 may be complete.
Primary wave 3 must move above the end of primary wave 1. Primary wave 3 may only subdivide as an impulse. Within the impulse, intermediate wave (2) may not move beyond the start intermediate wave (1) below 2,728.81.
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.
A base channel is drawn about primary waves 1 and 2. The lower edge is drawn from the start of primary wave 1 to the end of primary wave 2, then a parallel copy is placed upon the high of primary wave 1. Along the way up, corrections within primary wave 3 may find support about the lower edge of the base channel. Primary wave 3 may have the power to break above the upper edge of the channel.
Primary wave 1 lasted 86 sessions, 3 short of a Fibonacci 89. Primary wave 2 lasted 22 sessions, 1 longer than a Fibonacci 21. Primary wave 3 may end about a Fibonacci 55 sessions, give or take two or three sessions either side. This is a rough guideline only.
So far primary wave 3 has lasted 9 sessions.
HOURLY CHART
Following a five up, a three back should develop. This will be labelled intermediate wave (2).
Intermediate wave (2) may unfold as any corrective Elliott wave structure except a triangle. Today intermediate wave (2) will be labelled as an incomplete double flat. The first structure in the double may be a complete expanded flat labelled minor wave W. The double may now be joined by a small three in the opposite direction labelled minor wave X, which subdivides as an expanded flat.
The second structure in the double labelled minor wave Y may now unfold as a flat correction to complete a double flat for intermediate wave (2). Within this flat correction, minute wave b must retrace a minimum 0.9 length of minute wave a at 2,892.81. Minute wave b may make a new high above the start of minute wave a at 2,894.25 as in an expanded flat. Minute wave c may then move below the end of minute wave a to avoid a truncation.
Intermediate wave (2) may also be unfolding as a double combination. It may be relabelled: minor wave Y within a double combination may unfold as a zigzag or triangle.
Due to the strong upwards pull of intermediate wave (3) within primary wave 3 just ahead, intermediate wave (2) may be forced to be relatively shallow. If intermediate wave (2) is deeper, then the lower edge of the black Elliott channel may provide final support for a back test.
Intermediate wave (2) may not move beyond the start of intermediate wave (1) below 2,728.81.
SECOND WAVE COUNT
WEEKLY CHART
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.
TECHNICAL ANALYSIS
WEEKLY CHART
Click chart to enlarge. Chart courtesy of et=”_blank”>StockCharts.com.
Weight will be given in this analysis to the strong bullish reversal pattern, which has support from volume. This supports the main Elliott wave counts.
The Doji candlestick this week represents indecision, a balance of bulls and bears. A Doji on its own is not a reversal signal; they can appear within trends as a small pause.
A new support line is drawn on On Balance Volume.
DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
A small pennant may be forming. The trend lines may need to be adjusted for it as it continues. Pennants are reliable continuation patterns. A target from the flag pole is about 3,072.
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 this week, 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 mid October 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.
This week the AD line makes a new all time high, but price has failed to make a corresponding new high. Breadth normally precedes price, so a new all time high from price in coming weeks looks most likely.
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 moved a little lower on Friday. There is no new short-term divergence. Mid-term divergence remains 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.
Bearish divergence noted in last week’s analysis has not been followed by any downwards movement this week.
This week both price and inverted VIX have moved higher. There is no new short-term divergence.
Long-term bearish divergence 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.
Price has moved lower for Friday, but inverted VIX has moved higher. This divergence is bullish for the short term.
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 having moved higher following a Dow Theory bear market confirmation, 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 @ 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.
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New updates to this analysis are in bold.
Hourly chart updated:
Intermediate (2) still fits as an incomplete double flat. A target is now calculated for minor Y to end.
Now I’ll chart an alternate to see if intermediate (2) could be over, would it fit, does it look okay… will publish if it looks okay.
Remember, with a third wave at intermediate degree within a third wave at primary degree waiting in the wings, look out for surprises to the upside. If I’ve got something wrong it may be in expecting intermediate (2) to continue when it could be over.
loaded up short position again, stop at an hourly close above today’s high ….. when the range is so small I just use SPXS so I don’t have to pay for options.
#1
Why you little rascal Curtis. I oughta ……
Tell you to have a great weekend. Monday morning I fly to Chicago. My wife retired yesterday and next week we celebrate by getting some good Chicago pizza. There is no real pizza west of the Mississippi. So every time I make it to Chicagoland, I fill up on pizza. Oh yeah, we will also visit with family.
Oooooh, you’re bringing back sweet memories! I went to college in Chicago, on the near north side. Gino’s East was a short walk away, and a favorite spot for that great deep-dish pizza. Enjoy!