Analysis of internal strength or weakness of the last few sessions indicates the main Elliott wave count is more likely. Two alternate Elliott wave counts remain valid.
Summary: An upwards breakout above 2,940 with support from volume would add confidence in the main wave count. If this happens, then the next target is 3,120. Classic analysis very strongly supports this main wave count today, so much so that I have considered discarding alternates, but I shall let price confirm it.
A new low below 2,822.12 would indicate a continuing deeper pullback as fairly likely, as outlined by the alternate wave counts. The first target would then be at 2,663.
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 weekly 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.
Cycle wave V may subdivide either as an impulse or an ending diagonal. Impulses are much more common. This main wave count expects that cycle wave V may be unfolding as an impulse.
The daily charts below will now focus on all of cycle wave V.
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.
MAIN DAILY CHART
Click chart to enlarge.
Cycle wave V is seen as an impulse for this wave count.
Within cycle wave V, primary waves 1 and 2 may be complete. Primary wave 3 may have begun.
Primary wave 3 may only subdivide as an impulse. Within primary wave 3, intermediate waves (1) and (2) may be complete.
It is also possible that intermediate wave (2) may be incomplete and sideways movement of the last 18 sessions may be minor wave B within a zigzag for intermediate wave (2). If intermediate wave (2) continues lower, then it may not move beyond the start of intermediate wave (1) below 2,728.81.
Intermediate wave (3) may have begun. Intermediate wave (3) may only subdivide as an impulse.
MAIN HOURLY CHART
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Intermediate wave (3) may only subdivide as a five wave impulse. Within intermediate wave (3), minor waves 1 and 2 may now be complete. Minor wave 3 may only subdivide as a five wave impulse.
Within minor wave 3, minute waves i and ii may be complete. Within minute wave iii, minuette wave (ii) may not move beyond the start of minuette wave (i) below 2,834.97.
Minute wave iii must move beyond the end of minute wave i. Minute wave iii must move far enough above the end of minute wave i to allow room for minute wave iv to unfold and remain above first wave price territory.
The next wave up for this wave count may then exhibit an increase in momentum as a third wave at five degrees unfolds.
ALTERNATE DAILY CHART
Click chart to enlarge.
This first alternate wave count considers the possibility that cycle wave V may be unfolding as an impulse.
Cycle wave V must subdivide as a five wave motive structure. Within that five wave structure, primary wave 1 only may be complete.
Primary wave 2 may be unfolding as an expanded flat correction. These are reasonably common Elliott wave corrective structures. Flat corrections subdivide 3-3-5. Expanded flats have B waves which are 1.05 or more the length of their A waves. In this example for primary wave 2, intermediate wave (B) is a 1.33 length of intermediate wave (A). The target for intermediate wave (C) expects it to exhibit the most common Fibonacci Ratio to intermediate wave (A) within an expanded flat.
If price reaches the target at 2,663 and keeps falling, then the next target would be the 0.618 Fibonacci Ratio of primary wave 1 at 2,578.66.
Primary wave 2 may not move beyond the start of primary wave 1 below 2,346.58.
ALTERNATE HOURLY CHART
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Intermediate wave (C) must subdivide as a five wave motive structure for this wave count. Minor waves 1 and 2 may be complete within intermediate wave (C).
Minor wave 3 may only subdivide as an impulse. Minute waves i and ii may be complete within minor wave 3.
Minute wave iii may only subdivide as an impulse. Minuette wave (ii) may not move into minuette wave (i) price territory above 2,939.08.
Minuette wave (ii) may be complete. This wave count now expects a third wave down at three degrees to begin.
SECOND ALTERNATE DAILY CHART
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This second alternate daily chart considers the other structural possibility for cycle wave V, that of an ending diagonal. Ending diagonals in fifth wave positions are not as common as impulses; for this reason, this wave count will remain an alternate until an impulse for cycle wave V is invalidated.
All sub-waves within an ending diagonal must subdivide as zigzags. Primary wave 1 may have been complete as a zigzag at the last all time high on the 26th of July.
Primary wave 2 may be continuing lower as a zigzag. Within the zigzag, intermediate wave (B) may be completing as a sideways triangle.
Within diagonals, sub-waves 2 and 4 are normally very deep, ending within a range of 0.66 to 0.81 the prior wave. This range for primary wave 2 is from 2,578 to 2,476. Primary wave 2 may possibly come as low as the lower edge of the teal channel, which is copied over from the weekly chart.
Primary wave 2 may not move beyond the start of primary wave 1 below 2,346.58.
SECOND ALTERNATE HOURLY CHART
Click chart to enlarge.
Within the zigzag of primary wave 2, intermediate wave (B) may be subdividing as a regular contracting triangle. Only the final sub-wave of minor wave E may be needed to complete.
Minor wave E should subdivide as a single zigzag and would most likely fall short of the upper A-C trend line. Minor wave E may now be a complete zigzag, falling a little short of the A-C trend line. There is no Fibonacci Ratio between minute waves a and c within it.
If it continues any higher, then minor wave E may not move beyond the end of minor wave C above 2,939.08.
If the triangle is invalidated with a new high by any amount at any time frame above 2,939.08, then intermediate wave (B) may be completing as a double combination: zigzag – X – flat. A new high above 2,939.08 does not invalidate this wave count.
The triangle may now be complete. Intermediate wave (C) downwards should begin.
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.
Currently, price is range bound with resistance about 2,945 and support about 2,920.
The larger trend is up from the low in December 2018, with a series of higher highs and higher lows. This upwards trend should be assumed to remain while the last swing low at 2,728.81 remains intact.
The signal from On Balance Volume favours the alternate daily Elliott wave counts.
DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
The last low of the 15th of August was preceded immediately by a 90% downward day and followed immediately by a 90% OCO (Operating Companies Only) up day. This is a pattern commonly found at major lows, and it indicates a 180 degree shift in sentiment from bearish to bullish. This favours the main Elliott wave count.
Now the next low of the 23rd of August has been followed by two back to back 80% up days. This too is very bullish and favours the main Elliott wave count.
A classic triangle may be completing. Classic triangles have an important difference to Elliott wave triangles. While Elliott wave triangles are always continuation patterns, classic triangles may be either continuation or reversal patterns. A breakout either above or below the triangle trend lines is required before the next direction can be known. At that stage, a target using the triangle width added to the breakout point may be calculated.
The signal from On Balance Volume today is not very clear. If tomorrow sees On Balance Volume move higher, then it shall be a clear bullish signal.
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 recently, 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 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 price moved sideways with a red candlestick and the balance of volume downwards. The AD line has slightly declined. There is no new short-term divergence.
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.
The AD line has made another new high above the prior high of the 13th of August, but price has not. This divergence is bullish and still supports the main Elliott wave count.
Today the AD line makes a new all time high. This is a very bullish signal and strongly favours the main Elliott wave count.
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.
The all time high for inverted VIX (which is the same as the low for VIX) was on 30th October 2017. There is now nearly one year and nine months of bearish divergence between price and inverted VIX.
The rise in price is not coming with a normal corresponding decline in VIX; VIX remains elevated. This long-term divergence is bearish and may yet develop further as the bull market matures.
This divergence may be an early warning, a part of the process of a top developing that may take years. It may not be useful in timing a trend change.
Last week price moved lower within the week. Inverted VIX has made a new swing low below the prior low of the week of the 28th of May, but price has not. This divergence is bearish and supports the alternate Elliott wave counts; but because it is not confirmed by the AD line, it is given little weight in this analysis. Note that this happened recently with prior divergence between swing lows, which was shortly after followed by upwards movement to the last all time high.
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.
Inverted VIX made a new high above the prior high of the 13th of August, but price has not. This divergence is still bullish and confirms the bullish signal from the AD line. This supports the main Elliott wave count.
Bullish divergence noted in last analysis has now been followed by an upwards day. It may now be resolved.
Today both price and inverted VIX have moved higher. There is no new divergence.
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 close above this point has been made on the 3rd of July 2019.
DJT: 11,623.58 – to date DJT has failed to confirm an ongoing bull market.
S&P500: 2,940.91 – a close above this point was made on the 29th of April 2019.
Nasdaq: 8,133.30 – a close above this point was made on the 26th of April 2019.
Published @ 09:15 p.m. EST.
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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.
My apologies everybody for not giving you an update prior to the close today. I’ve not been well over the last couple of days, but I’m almost all better now and working on end of week analysis. It shall be published very soon.
It’s all looking very bullish with two 80% up days back to back and a new ATH for the AD line.
I think that it could have been the green ii down, and if we close near the HoD (ie top of the range) then there is a possibility that the monthly, weekly & daily candles all open gap up above this range & go next Tuesday
And we don’t see this range again for next few weeks / months, if we are in P3 then entirely possible
Triangle is still in play stayed below 2943 working. The triangle count would change so we are working d now and e is to come. Maybe e is on Tuesday.
Gap and crap…
VIX still hovering around 18 after massive 3 day bounce
QQQ/SPY right at their 50 DMA with RUT/DJT not even close after this rally
FAANG in the red
Transports hit its 200 DMA resistance
Oil about to print another week with upper long wick
I’ve gotta short this bounce 🙂
Remember, just 3-4 days ago how bearish we were… and look what happened. And now, look how bullish it feels… its going down… “I think.”
The churn continues…
Not to mention safe haven assets have not been unwinding with this bounce.
As I’m seeing it, short term target is SPX 2880-2882ish
Indeed, this market really demands trading at the 1-5 minute level, or you get steamrolled. Making back some of my early morning losses by going long the moment this bounce started, now can I time the exit well…
In a little bit of hindsight…I think oil being down a few % points at market open this morning was a big red flag that the gap up in the market was headfake and just an opp for the big $ to continue distributing. What I expected today was both oil up and SPX up. I “should be” been on much higher alert when that didn’t happen. Trade and learn…
The low today is right in the 21-23% retrace zone of this last full range low to high. A reasonable place to temporarily stall, and a great place to turn for good in a strong bull market…which this obviously is not.
Remember 2016 when the market stayed in a broad trading range at a high for something like 4-5 months? Hmmm.
Meanwhile, the yield curve has now inverted on a closing basis, not just intra-day, and the inversion is widening.
We’re about to see what this bounce off the 23% is made of. SPX retesting the volume node around 2925 as you mentioned below.
With QQQ and RUT in the red still, me thinks we have more downside.
But lets see how the day closes out. Volume should be light rest of day…
I’ve put on a butterfly on SPY centered right at current price, 292.5, wings at 290.5 and 294.5. Expiring TODAY. Trying to cash a little premium on this range bound market; I don’t expect any real movement out of this range now today.
Great move 🙂
Well thanks but just bailed as the market aggressively approached my lower wing limit. Got out for a $ profit or so. Butterflies are challenging to land in. But…when I put on the ‘fly, I also put on a rather larger bear put spread “just in case” there’s sharp movement back down on this range. Expiry NEXT Friday. That’s looking good…
NOTE THE DAILY CANDLESTICK…big dark cloud cover, one of my “favorites”. Doesn’t always mean bearish action to follow…but often.
The SPY hourly chart with volume profile. Price strongly tends to go back to the high volume nodes. I.e, right now, back down. At the daily level, there is a node up around 300 too (but not nearly as large of course). When price goes into a valley…it tends to move “away” (all the way through to the next node, or back to the node it left).
So both alts are invalidated?
Yes sir. Just like that!
Elliot Wave is versatile enough that you can always find an alternative…
A triangle correction ABCDE can be transformed in a 3 waves correction A-ABC-C
So instead of being an E wave, the recent rallye could be a C wave, and you can expect C to reach equality with A around 2975. Or you can count C finished now since it’s already 5 waves… If you are a bear at heart, you can find an EW wave to support your bearish view while the SPX is below ATH.
Yes indeed, EW doesn’t predict the future, and merely because the alt’s are invalidated doesn’t mean this market can’t/won’t go right back down. And should it, there’ll be a wave count for it. But ya’ll know that. That said, right now, probabilities are heavy on the bull side, as reflected by the “last man standing” wave model we have at the moment, which in turn is based on both count/structure and supporting technicals.
Correct. Any bearish count calls for a 4 wave correction followed by new highs, to maybe 2975. I will buy a 3 wave correction…
Buying the gap and leaning on Lara’s count and bullishness. UPRO not options so I have some time to be wrong for a bit. A go is possible, a fill and sideways before going next week is possible. A/D in SPX at 11-1 at the open…
Suffice to say I took my medicine. That’s a strong reject! I have a short spread on now for next Friday…back down into the range we go it appears.
It’s deja vu all over again. The main count is lined up: 3 of 3 of 3 of 3 of 3 of 5. Are we finally going to have all the boosters on for a few weeks? I will say that I have a RUT count that now completes a long drawn out intermediate 2, and with dropping interest rates and it’s relative under performance until very recent, RUT should likely roar if SPX roars. I’m ready for an easy high momentum upward market at this point!
I also note that I just don’t see external geo-political conditions that can seriously sustain such a rally. But markets climb a wall of worry sometimes.
I saw your bullish points Kevin on yesterday’s comments, thanks for sharing those.
Another one is this: the last time we had 30 year bond yields lower than SPX dividend yeild was March 2009; AKA: the bottom of the financial crisis.
As for now, the churn and daily flip flops in sentiment continues…
Lara is the best there is. She’s doing everything right. But whenever we start piling up more and more potential imbedded 1-2 swings like this, I start getting more and more wary. The breadth numbers are really compelling, but the second alternate has a more plausible “look” to my eye at the moment.
We’ll know soon enough. I’m happy to trade whatever the market gives us.
Good evening, y’all!
Cur(ti)ses Red Baron!!