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For the very short term, a small pullback was expected to begin the new trading week, which is what has happened. The Elliott wave count and targets remain the same.

Summary: For the very short term, a little more downwards movement may find support about 2,930 to 2,924.

The low of December 2018 is expected to most likely remain intact.

The next short-term target is at 3,068 (Elliott wave) to 3,079 (classic analysis from the pennant). This next upwards wave may exhibit further strength. Look for corrections to continue to be very shallow and brief.

The mid-term target remains at 3,104 for a more time consuming consolidation or pullback, which may also be shallow.

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

S&P 500 Weekly 2018
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.

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

Within cycle wave V, primary waves 1 and 2 may now be complete. Within primary wave 3, no second wave correction may move beyond its start below 2,728.81.

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

S&P 500 Daily 2018
Click chart to enlarge.

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 (this rule has now been met). Primary wave 3 may only subdivide as an impulse. Within the impulse, intermediate waves (1) and (2) may be complete. Intermediate wave (3) has moved above the end of intermediate wave (1) meeting a core Elliott wave rule. When it arrives, intermediate wave (4) may not move into intermediate wave (1) price territory below 2,910.61.

When primary wave 3 is over, then primary wave 4 may be a shallow sideways consolidation.

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

The best fit channel on the daily and hourly charts in last analysis is removed as it did not show where downwards movement today found support. A narrow acceleration channel is drawn: draw the first trend line from the end of intermediate wave (1) to the end of minor wave 1, then place a parallel copy on the end of intermediate wave (2). The lower edge of this channel may show where minor wave 2 may find support.

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 15 sessions.

HOURLY CHART

S&P 500 Hourly 2018
Click chart to enlarge.

A target is calculated for intermediate wave (3) to end.

Intermediate wave (3) may only subdivide as an impulse. Within intermediate wave (3), minor wave 1 may be complete.

The newly drawn acceleration channel is copied over from the daily chart.

Minor wave 1 fits well as a five wave impulse.

Minor wave 2 may be unfolding as an expanded flat correction. Within the flat, minute wave b subdivides well as a zigzag and is within the most common range of 1 to 1.38 times the length of minute wave a. At 2,924 minute wave c would reach 1.618 the length of minute wave a. This is close to the 0.382 Fibonacci ratio of minor wave 1, giving a 6 point target zone.

Minute wave c must sub divide as a five wave structure, most likely an impulse.

When minor wave 2 may be complete, then there may be a series of three first and second waves complete. This wave count would then expect a strong increase in upwards momentum.

SECOND WAVE COUNT

WEEKLY CHART

S&P 500 Weekly 2018
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.

TECHNICAL ANALYSIS

MONTHLY CHART

S&P 500 Monthly 2018
Click chart to enlarge. Chart courtesy of et=”_blank”>StockCharts.com.

This monthly chart shows the entire bull market from the low in March 2009.

Greatest strength as measured by RSI was in what the Elliott wave count sees as the end of a third wave. This wave count fits with classic technical analysis.

Declining volume persisting for years fits an expectation for a Super Cycle degree fifth wave. This fits the first weekly chart. Although declining volume may also appear within a first wave, this may be less likely.

RSI currently exhibits strong bearish divergence over several months, which is a warning of some underlying weakness developed and persisting. This may continue as a fifth wave comes to an end.

WEEKLY CHART

S&P 500 weekly 2018
Click chart to enlarge. Chart courtesy of et=”_blank”>StockCharts.com.

While price has made a new all time high on Friday, it has not closed at a new all time high. However, a strong bullish candlestick with support from volume suggests more upwards movement overall this week.

DAILY CHART

S&P 500 daily 2018
Click chart to enlarge. Chart courtesy of StockCharts.com.

A target from the flag pole is recalculated about 3,079. This is 11 points above the short-term Elliott wave target at 3,068.

The breakaway gap may offer support at 2,897.27.

For the very short term, a strong decline in volume today shows sellers are no longer actively pushing price lower. Downwards movement may now be limited.

BREADTH – AD LINE

WEEKLY CHART

AD Line daily 2018
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 new all time highs last 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.

Last week large caps have made new all time highs, but mid caps are a little distance off doing so and small caps are lagging far behind. This is normal in the latter stages of an aged bull market.

DAILY CHART

AD Line daily 2018
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.

Short-term bearish divergence noted on Friday has now been followed by a downwards day. It may be resolved here, or it may yet need another downwards session to resolve it.

Today both price and the AD line have moved lower. There is no new divergence.

VOLATILITY – INVERTED VIX CHART

WEEKLY CHART

VIX daily 2018
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.

Long-term bearish divergence remains. It may develop further before the upwards trend ends.

This week price moved higher, but inverted VIX has moved slightly lower. This is a single week of bearish divergence. The divergence may yet develop further before it is followed by reasonable downwards movement.

DAILY CHART

VIX daily 2018
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 at the end of last week has now been followed by a downwards session. It may now be resolved here, or it may yet be followed by another downwards session before it may be resolved.

Today price has moved lower, but inverted VIX has moved slightly 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 @ 07:02 p.m. EST.


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New updates to this analysis are in bold.