Upwards movement for the week continues as expected, and it has support from rising market breadth and declining volatility. The Elliott wave counts remain the same.
Summary: The next short-term target is at 3,058. Look for corrections to continue to be very shallow and brief. Use the lower edge of the best fit channel as a support guide.
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 waves (1) and (2) may be complete.
Intermediate wave (3) may only subdivide as an impulse. Within intermediate wave (3), no second wave correction may move beyond its start below 2,912.99.
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 23 sessions.
Corrections within primary wave 3 so far have found support at the lower edge of the grey best fit channel. Copy this channel over to the hourly chart.
HOURLY CHART
Click chart to enlarge.
Primary wave 3 may have this week moved through its middle strongest portion as the middle of minor wave 3 within intermediate wave (3) within primary wave 3 may have completed.
Although if the S&P exhibits commodity like behaviour (which it occasionally does), there may be a further increase in strength at the end of one or more of minor wave 3, intermediate wave (3) or primary wave 3.
The target calculated fits with higher targets at higher degrees, and the limit on the weekly chart.
Intermediate wave (3) may only subdivide as an impulse. Within the impulse, minor waves 1 and 2 may be complete. Minor wave 3 may only subdivide as an impulse. Within minor wave 3, minute wave iv may not move into minute wave i price territory below 2,966.35.
It looks like minute wave iv may be complete, ending slightly above the price territory of minute wave i. Minute wave v may now be extending. As soon as minute wave v has moved above the end of minute wave iii at 2,995.82 a truncation would be avoided; it may end at any stage.
The next pullback may be labelled minor wave 4. It may not move into minor wave 1 price territory below 2,977.93. Minor wave 4 may be expected to find support at the lower edge of the grey best fit channel.
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
WEEKLY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
The long lower wick on this weekly candlestick suggests more upwards movement next week.
DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
Rising price on light and declining volume has been a feature of this market now for years at all time frames. While some support from volume is expected as likely for the Elliott wave count which expects the middle of a third wave may be unfolding, it is not necessary to see in current market conditions.
For the short term, there may be a slightly elevated risk of another pullback or consolidation developing: the last gap is now closed (now relabelled an exhaustion gap), volume pushed price lower on Friday, and On Balance Volume turned down from resistance.
However, the long lower wick on Friday’s candlestick is bullish and the trend is not extreme. RSI is back into neutral territory. There is room for the upwards trend to continue further until a more sizeable consolidation or pullback may be expected.
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 again 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 early November 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 both price and the AD line make new all time highs. Upwards movement in price has good support from rising market breadth. This is bullish.
This week only large caps have made new all time highs. Mid caps are a little way off and small caps are lagging. This is normal behaviour in the later stages of a 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.
Both the AD line and price moved a little lower on Friday. There is no 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.
Long-term bearish divergence remains. It may develop further before the upwards trend ends.
This week both price and inverted VIX have moved higher, but price has made new all time highs while inverted VIX has not. There is short, mid and long-term bearish divergence now between price and VIX.
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.
For Friday both price and inverted VIX have moved lower. Inverted VIX has made a new short-term low below the prior low of the 2nd of July, but price has not. This divergence is bearish for the short term, but it will not be given weight in this analysis.
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 – a new all time high has been made on the 3rd of July 2019.
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 @ 01:09 a.m. EST on July 6, 2019.
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New updates to this analysis are in bold.
Good morning everyone!
I’m relabelling intermediate (3). Sideways movement today has broken below what was the best fit channel on my daily and hourly charts. But it’s sideways movement, not downwards. The S&P does this, it doesn’t always fit well into channels. It sometimes breaches support to only continue higher, needing a new support line.
That indicates intermediate (3) could be over. The breach of support could be intermediate (4). So far intermediate (4) remains above intermediate (1) price territory, it has very little room to move for this labelling to remain valid.
Intermediate (4) may be any one of more than 23 possible corrective EW structures, I’m labelling it so far as a possible flat or zigzag with minor B currently unfolding.
Overall I’ll now expect some more sideways movement this week for a few days and possibly the whole week, before a resumption of the upwards trend.
Will also work on an alternate for the hourly chart. I’ll take a blank chart from the start of primary 3 and see how else it may be labelled.
The long tail 5 minute candle that painted over the 61.8% fibo level strikes me as a likely candidate for being “the bottom” of this correction.
My latest RUT count. All the wave counts could be one degree “too low”. Doesn’t matter for my purposes of course. “Should be” getting into some high momentum action soon…
Hey Kevin, not sure I follow – do you mean ‘high momentum action’ as a 3 kicking higher or a continued move lower to your 50%fib retracement?
High momentum kicking higher, specifically (iii) of [iii] of 3 action. Nyet though…and when it comes to EW analysis, I’m a mere amateur, so I’d say “check my work” at the very least!
With the strong selling in RUT so far today, it appears that the minuette (ii) isn’t complete as shown but instead doing an expanded flat. The (ii) low as shown has now been undercut…so that’s clearly incorrect.
This move down here in the over night /ES session just doesn’t look convincing to me. And even if it gets deeper, it’s going to hit the length of the recent symmetric pullbacks, and turn. To my eye. The swing high support line I’ve drawn in looks like an attractive turn level and then there’s the (admittedly weak) trend line. Breaking down beneath last monday’s swing low and filling that big gap would clearly indicate I’m dead wrong and a larger correction is in play.
Zigzag down, C down in progress, currently in the iii down, I expect a iv up/sideways then a v down. Maybe a bottom in the 2970-75 region?
Low at 2975.5 (/ES). And price has penetrated back into the area of the ii of the C down, so overall I think this big zigzag correction is likely over.
well…maybe not………..unless that’s a heck of a i-ii sequence. Anything is possible at this point…but down is looking much more likely every minute.
Ah yes… got it!