For the short term, a little more downwards movement was expected. Another red daily candlestick has printed with a lower low and a lower high, fitting expectations.
Summary: For the very short term, a little more downwards movement may now end about 2,884.
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
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
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 wave (1) may have been over at the last high. Intermediate wave (2) may now be unfolding and may not move beyond the start of intermediate wave (1) below 2,728.81.
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.
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 17 sessions.
MAIN HOURLY CHART
Click chart to enlarge.
This short-term wave count expects that intermediate wave (1) was over at the last high and intermediate wave (2) may be currently unfolding.
Intermediate awe (2) would most likely subdivide as a zigzag. Minor wave A would most likely subdivide as a five wave structure, and it may be a complete impulse. Minor wave B may also be complete, but if it continues higher it may not move beyond the start of minor wave A above 2,964.15.
A target is now calculated for minor wave C to end using the most common Fibonacci ratio of equality in length between minor waves A and C.
The strong upwards pull of intermediate wave (3) within primary wave 3 just ahead may force intermediate wave (2) to be relatively shallow.
With more downwards movement today, the alternate wave count published yesterday now looks very unlikely. It is discarded.
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.
TECHNICAL ANALYSIS
MONTHLY CHART
Click chart to enlarge. Chart courtesy of 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
Click chart to enlarge. Chart courtesy of 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
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. If this gap is closed, then next support may be about 2,875, which is now below the new target on the hourly chart at 2,884.
A slightly long upper wick and a close near the low for the session suggest more downwards movement tomorrow.
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 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
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.
Today price has moved lower, but the AD line has moved higher. Downwards movement today does not have support from declining market breath. This divergence is 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.
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
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 price has moved lower, but inverted VIX has moved higher. Downwards movement does not come with a normal corresponding increase in VIX. This divergence is bullish.
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 @ 06:33 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:
It looks like minor B is not done and may take its time.
The target is removed. If I can’t be confidence of B being over and don’t know where it ends, then I can’t calculate where C may begin and end. The 0.382 Fibonacci ratio is again a possible target, but it may be too low.
I’ve got 2882 as my primary target for end of C, should price break the low of A (likely but never certain).
2882 is the 161% extension of A, and if B makes it up to the 38% retrace of A, then 2882 is also the target if C = A. Not a prediction, just a level I’ll watch intently for a pivot if price gets there.
That looks about right Kevin.
When I can see minor B as complete then I’ll be calculating a target probably somewhere about that.
NICE WORK KEVIN!
Thank you Debbie. Hope it helps in the end!
I’m a bit surprised at how clean the weekly RUT breaks down here into it’s Elliott waves. Or maybe I shouldn’t be because it’s 2000 stocks strong.
This is awfully bullish for RUT. Maybe the intermediate 2 down is going to be a combo though and it’s doing an X wave now. Possible, but it’s time proportion with 1 gets out of wack.
Price breaking above the top of the expanding flat would add loads of probability support to this count, and be very bullish indeed.
RUT the big leader today, too.
Here’s what I suspect would be the most likely alternate for the RUT, on the bearish side. Primary 2 down not complete, but the A and B of a flat correction for primary are complete. The 5 wave C down has done a 1 and 2 (might be complete), with a 3-4-5 down coming as shown.
EEM (emerging markets ETF, huge volume of options on this) is very, very “trendy”, as the weekly chart here shows. And every sign is that a new uptrend is underway, in particular, that polarity break to “up” in early ’19, and now another higher low above the 78% retrace level, and last week a big white soldier bar. The black line is just a projection of the 2017-18 upswing. I’ve let loose a little butterfly at the 61% retrace level as marked with the gray oval, for mid October. It’s broken wing, 45-46-48. I lose money if price goes over 47 (but I don’t intend to let that happen casually). The awesome thing is, I don’t lose any money below that; if EEM goes to 35, I make a few $’s!! And I make quite a bit is price is around 46 in mid October. My up front cost for the ‘fly? With commission…1/2 a cent. Per fly. (the base price was a credit, but commission took it to a very slight debit).
I like this trade. Super low risk, high potential. We’ll see.
thanks for sharing, this trade is right up my alley
BOOM is set up to the long side. Quad chart shows weekly/daily/hourly/5 min, top left then clockwise. Green bars are strong up, blue mild up, purple neutral, orange mild down, red strong down.
Strong bullish action on the weekly, several weeks of pullback but the weekly trend is still mild up. The daily has settled on the 38% retrace level, with steadily declining volume. The hourly is showing a double bottom (and H&S looks on top of that too). Neckline at about 64.9. Breaking that could be a good buy point.
AMD by the way just happens to show very similar attributes.
I spy with my little eye, an inverse head/shoulders pattern very much in development in /ES.
I am considering to chart listed below as a possible count. It produces the same net correction as Lara has charted. But it requires a bit more time and volatility. I will be looking to add to my long positions in my short term account which is 100% cash right now. I will use UPRO. Have a great day all.
that looks very reasonable Rodney. here’s my model of it with price coming up to the 38% level in the B then turning and going down to any number of levels. However, a symmetric move with C = A is show, ending at (surprise!!!) the 162% extension of A. I guess that’s the general set up when a B retraces 38%; the C=A target is always at at the 1.62% extension of A. Fibo magic.
I will stay alert for this pattern, and if I see it starting to break down into a C down…I will put on another short hedge. Thank you for the model!
Foist.
Drat! Missed by a mere hour.
Let’s soon be done with this tiresome (2) wave and get on with a sweet (3) !
Sounds like a job for the G20!