A very small range inside day breaches the lower edge of a channel that had previously contained all pullbacks. The short-term Elliott wave count is today changed.
Summary: The bull market is expected to continue and corrections are expected to be shallow.
A more time consuming consolidation or pullback may have just begun. It may continue for another two weeks. The target is 2,933.
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.
The wave count today is changed. Within the impulse of primary wave 3, only intermediate wave (1) may now be complete. Intermediate wave (2) may have just begun. Intermediate wave (2) 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 24 sessions.
Within primary wave 3, intermediate wave (1) lasted 22 sessions, 1 longer than a Fibonacci 21. Intermediate wave (2) may be more brief; it may last a Fibonacci 13 sessions. So far it has lasted 2.
HOURLY CHART
Click chart to enlarge.
If an impulse is complete at the last high, then it should be labelled intermediate wave (1) and not primary wave 3 in its entirety. Primary wave 3 has not yet moved far enough above primary wave 1 price territory at 2,954.13 to allow room for primary wave 4 to unfold.
Intermediate wave (1) may be a long extension. There is a reasonable Fibonacci ratio within it. It fits within a channel drawn using Elliott’s second technique.
Intermediate wave (2) may be expected to be shallow. If the target of the 0.236 Fibonacci ratio at 2,933 is wrong, it may be too low. Intermediate wave (2) may subdivide as any Elliott wave corrective structure except a triangle. It would most likely be a zigzag, but it may also be a flat or combination.
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 the last weekly candlestick suggests more upwards movement this 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.
The Elliott wave count today agrees with this view. Volume is again pushing price lower.
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.
Last 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.
Last 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 Monday. 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.
Last 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 Monday 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.
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 @ 08:23 p.m. EST.
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Follow my two Golden Rules:
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New updates to this analysis are in bold.
Hourly update:
A closer look at how intermediate (2) may be unfolding.
This labelling will probably change as it continues. It’s impossible to tell which one of several structural possibilities this may be.
It may be a choppy overlapping consolidation, with a slight downwards bias, to last a couple of weeks.
SMH set up extremely well here. This is hourly.
Symmetric pullback (to the mid june decline) complete. Turn off overlapped 38% and 50% fibos. Trend line broken. Trend state advanced from strong down to down (and will go neutral/up with much more upward movement). A kind of inverse H&S bottom forming. Breaking 111 breaks the neckline, and should be a strong signal more upward price action coming.
Kevin, you a EEM buyer today?
Not new positions, no. I do have an EEM broken wing butterfly for mid Oct centered, 45-46-48, put on a week or two ago. I don’t trade the EEM etf directly, the (price) volatility is waaaay too low for me, about 0.6%. I like +3% for direct buy/sell trades. My current “hottest” stock holding in this regard is TCDA, bought today, over 6% price volatility. Now that’s leverage on your $! I note that EEM has completed a symmetric down move (to the 6/11-17 down move). But there really isn’t good bottom/turn structure in place quite yet, though it may show soon.
Here are my projected targets for this upward move in /ES. I’ve got three, the blue lines. Well, four: the current high provides a strong fibo fit too, but I’ve not marked that one.
When I make the assumption that what we have is a complete i-ii-iii up, and project the 1.27 and 1.61 of the 1-3 structure (those fibo lines are on the chart)…shock and awe, overlaid with two of my targets. Twilight zone music here…
If anyone tries to tell me “Fibonacci structure isn’t real”, suffice to say I’ll just chuckle and waddle on my way.
I bought some calls near today’s low, area had decent support. Sold half at the 0.382 of the down move (around SPY 296.8)…… holding the rest to stop out at break even
For RUT (5 minute chart) the current low is a strong fibonacci fit (and that fibo structure is on the chart). I find two others lower as shown on the chart (but the fitted structures for those are not on the chart).
I note that there is a good inverse head&shoulders structure forming now, increasing the odds this is the bottom. But waiting for neckline break to confirm.
Good morning to all. Kevin, your new process is interesting. I like what you are doing.
TY Rob! It’s new…and so far, I’m finding it works. I nailed the GLD turn level with it a few weeks ago. My tgt #1 here was “off” by 3 pts, but this isn’t like computing A=C targets, which are “exact”. This is human eye driven “fitting”, and there’s lots of wiggle room. Adjusting the fibo structure exactly to the bottom here and I see that yes, I could have/should have chosen that one, which is to say, I really should be generating a small range for a target, not a precise price point. That would be a more accurate characterization.
The action off the low here looks nicely impulsive so far, with a i, ii, and a iii in progress. Which is consistent with this being a c up of a B up.
When I fit a fibonacci retrace structure over this A wave, I end up with two likely targets based on my two best fits with the structure so far. The best fit structure for the lower of the two targets is on the chart; that should clarify what I’m up to here.
This is for /ES. SPX is about 5 pts less.
Tgt 1: 2961
Tgt 2: 2937
Watch for a possible turn at these levels.
Thanks Kevin. Just trying to see how you got the 2 targets.
I have C=A @2963 and 1.618A @ 2941.52.
Are these what you’re working with?
Oh yea. “The usual targets” all apply, but the usual methods aren’t what I’m doing here. I’m using a “complete” fibo retrace structure of which (in this case for a bear move) the “upper half” is fitted to the price action. Thus revealing the likely concluding bottom. Multiple fits “work”, hence, multiple targets.
I didn’t show the fibo fit for target #1. Here it is on this chart. If I put multiple entire fibo structures on the chart you get an unreadable mess.
Thank you, Lara. Your new labeling today occurred to me as a possibility sometime last week. It’s nice to see I wasn’t completely nuts.
🙂 No, you’re not nuts at all.
When I did this exercise this morning, taking a blank hourly chart, at first I labelled the impulse as primary wave 3 complete.
But then when I looked at it on the daily chart that is way too soon. So I moved the degree of labelling down one.