A little more downwards movement has unfolded as expected.
Summary: For the short term, a small shallow pullback may have ended today. The next larger interruption to the trend may now come before 3,174.78.
Three large pullbacks or consolidations during the next few months are expected: for minor wave 4, then intermediate (4), and then primary 4. Prior to each of these large corrections beginning, some weakness may begin to be evident. At this stage, there is very little underlying weakness in this market.
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. An alternate wave count, which looked at the possibility of a diagonal unfolding, has been invalidated with a new all time high.
The daily chart below will focus on movement from the end of intermediate wave (1) within primary wave 3.
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.
Within cycle wave V, primary waves 1 and 2 may be complete. Within primary wave 3, intermediate waves (1) and (2) may be complete. Within the middle of intermediate wave (3), no second wave correction may move beyond its start below 2,855.96.
DAILY CHART
Click chart to enlarge.
All of primary wave 3, intermediate wave (3) and minor wave 3 may only subdivide as impulses.
Minor wave 3 may be underway and may have passed through its middle. Within minor wave 3, minute wave iv may not move into minute wave i price territory below 3,003.28.
Intermediate wave (3) must move far enough above the end of intermediate wave (1) to then allow intermediate wave (4) to unfold and remain above intermediate wave (1) price territory.
The target for intermediate wave (3) fits with a target calculated for minor wave 3.
When minor wave 3 may be complete, then a multi-week pullback or consolidation for minor wave 4 may begin. Minor wave 4 must remain above minor wave 1 price territory at 3,021.99. Minor wave 2 was a sharp deep pullback, so minor wave 4 may be expected to be a shallow sideways consolidation to exhibit alternation. Minor wave 2 lasted 2 weeks, so minor wave 4 may be about the same duration to have good proportion.
If labelling within minor wave 3 is correct, then minute wave iii is shorter than minute wave i. Minute wave iii may not be the shortest actionary wave within the impulse of minor wave 3, so minute wave v is limited to no longer than equality in length with minute wave iii.
HOURLY CHART
Click chart to enlarge.
There are multiple ways now to label upwards movement from the end of minor wave 2.
Each of the currently unfolding third waves of minute wave iii, minor wave 3, intermediate wave (3) and primary wave 3 may only subdivide as simple impulses.
If minute wave iii is complete, then it would be shorter in length than minute wave i. Minute wave v would be limited to no longer than equality in length with minute wave iii at 3,174.78, so that the core Elliott wave rule stating minute wave iii may not be the shortest actionary wave is met.
Draw an Elliott channel about the impulse of minor wave 3: draw the first trend line from the end of minute wave i to the end of minute wave iii, then place a parallel copy on the end of minute wave ii. Minute wave iv may find support about the lower edge of the channel if it continues further sideways.
At this stage, the proportion between minute waves ii and iv now looks right.
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.
Primary wave 5 may be subdividing as either an impulse, in the same way that cycle wave V is seen for the first weekly chart.
TECHNICAL ANALYSIS
MONTHLY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
This monthly chart shows the entire bull market since its inception in March 2009. Within this bull market, there are so far three large consolidation boxes highlighted. A basic technical analysis concept is the longer price consolidates within a zone, the longer and further price may travel after a breakout. Price can back test support at prior resistance, and sometimes may re-enter the consolidation zone, before moving up and away.
Currently, price may have last week broken out of a large consolidation. It would be reasonable to now expect upwards movement for a reasonable amount of time after this breakout. It is also possible that pullbacks may re-enter the prior consolidation zone which had resistance about 3,027.
Bearish divergence between price and RSI may develop further before the bull market ends. Occasionally divergence can disappear, but for now it is valid. Given the stage that the Elliott wave count is in with a fifth wave unfolding, some developing weakness at this time frame should be expected.
Note that while On Balance Volume exhibits small divergence with price at lower time frames, it does not at the monthly chart level.
WEEKLY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
Last week sees a breakout above resistance.
Some developing bearishness in On Balance Volume last week with divergence and resistance suggests a pullback may develop sooner rather than later here.
However, it is very clear that the S&P is in an upwards trend and the bull market is continuing. Price does not move in straight lines; there will be pullbacks and consolidations along the way.
Now that resistance has been overcome and a new all time high is seen, expect a possible release of energy and any surprises should be to the upside. Corrections are normal and to be expected; they may be more short term in nature at this stage.
DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
The last gap is now closed, so it is renamed an exhaustion gap. This has happened recently yet price continued on upwards.
Today a bullish long lower wick with a decline in volume as price moved downwards suggests a small pullback may be over.
Today volume suggests more downwards movement tomorrow. It may be limited.
There is an upwards trend in place that has quite some distance to run before conditions become extreme. ADX indicates an early stage. RSI is not overbought; when this particular market trends, RSI can reach deeply overbought and remain there for a reasonable time.
There will be consolidations and pullbacks along the way up. These may be taken as opportunities in an upwards trend.
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 continuing 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 beginning March 2020.
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 all of small, mid and large caps have made new swing highs above the prior swing high on the 13th of September, but only large caps have made new all time highs. This upwards movement appears to be mostly driven by large caps, which is a feature of aged bull markets. This bull market at over 10 years duration certainly fits the definition of aged.
Mid caps made a new all time high again today. Small caps today have made a new all time high. There is underlying strength in this upwards 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.
Breadth should be read as a leading indicator.
Both price and the AD line have moved slightly lower again today. Neither have made new short-term lows. 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.
The all time high for inverted VIX (which is the same as the low for VIX) was on 30th October 2017. There is now over two years 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 is clearly not useful in timing a trend change from bull to a fully fledged bear market.
Last week both price and inverted VIX have moved higher. Price has made new short-term swing highs, but inverted VIX has not. This divergence is slight and short term, and it adds to the longer term bearish 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.
Today price has moved lower, but inverted VIX has moved 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 – 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 @ 09:10 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.
AAPL weekly. Awesomely fractal price action! I expect more of the same, hence…high potential pivot high on the weekly here!! And price has moved up to it in a very exponential “blow off top” kind of move. The correction could/should be large.
I’m going to now label minor 3 as complete and expect minor 4 has just begun. It may be very shallow but time consuming. It may last about a week or two. Minor 4 should breach the channel which contains minor 3.
Lara posts and the markets listen! Perfect timing…. thanks
Yep… just like that! I heeded the heads-up, raised my stops and got out with modest gains. Thank you, Lara!
That’s a short minute v. Any particular reason you think that’s more likely than this being a minuette i and minuette ii of minute v?
I am interested as well. This change marks Minor 3 about 90 points below the target for the last several days. Interesting. I am guessing it is to allow Minor 5 to have enough room to complete before the 3302 Intermediate 3 target. I suspect, since I writing after the close, we will have to wait until tonight’s analysis and commentary are posted to have our answer.
The proportion on the hourly and daily charts looks good. Minor 3 is now longer than minor 1 and its moved far enough above minor 1 now to allow some room for a shallow minor 4.
Minute ii lasted 25 hours, minute iv lasted 19 hours. That’s reasonably good for the S&P.
I think I will also need an alternate which moves the degree of labelling in part of minor 3 down one degree.
Regarding your suggestion Kevin to move the degree of labelling within minute v down one: the problem I see there is that minute iii is shorter than minute i, so that indicates minute v is very unlikely to be extended. Minute v has to be shorter than minute iii.
Got it, ty. Now I’ve questions about the placement of minute i but I’ll wait on those until “tomorrow”.
A view of RUT. The minor 1 complete call here could be wrong just as likely as it could be right. The minor 1 could be extending. There is “best” Fibonacci fit if this move ends up at the top of the Fibo structure shown (1650-1655), I projected this same target about a week ago and the action continues to conform to it. Though right here and now as a pivot is “okay” and appropriate for a minor 2 to start, and the next target up at 1620 is “okay” also.
Very nice channel behavior. Should be quite clear if/when the trend changes at this tf.
Notable that RUT A/D staying strong today, 1250/750 right now.
Kevin,
You still short RUT or taken profit?
It still seems unable to breakout, hopefully today it breaks out
My small short on RUT via Dec ITM options I closed soon after I put it on for a tiny loss. I replaced that with a ‘fly for Friday under market which I closed at open this morning for a loss I’m not pleased about. The market gaping so much overnight (note to self: that’s COMMON now fool!) bit me; the trade is predicated on an ability to manage it re: exiting if/as it slips away.
Let’s see, is that Rule #2 or #3, “Don’t counter trend trade” that I violated? Counter trend lowers EV tremendously, because trend is real and the foundation of probabilities of short term moves.
But my 15 or so long positions are doing very nicely, so…let ‘er rip!
I didn’t have time to comment on your counter trend bet, I actually did NOT take one 2/2 all your previous comments over the months. So thank you…
In fact I kept one RUT ‘fly centered at 1570, for tomorrow. A pin would clean things up nicely! Not impossible…
I sound like a broken record. These statements have been made repeatedly.
1) In bull markets, surprises are to the upside.
2) The trend is your friend.
3) Cash on the sidelines will propel us above SPX 3100.
I am going to add a new one: EW traders / investors take positions near the start of 3rd waves of several degrees. Then they ride out successively higher degree 4th wave corrections with trailing stop loss orders until they are eventually stopped out. I will need to work on the words to shorten it to pithy comment.
Have a great day everyone.
Love this one!! Keep the upward surprises coming
It has been a while but hope everyone on here is keeping well
So nice to hear from you Paresh. It has been some time. Hope you are well too.
/ES hourly w/overnight data showing symmetric projections of the prior down swings in this larger impulse up, from the ATH. The shortest has been tagged and has held so far. One of them will hold.
Lara, when you say small caps have today made a new all time high, what index are you referring to? Thanks.
this one
and oh no! my bad! I didn’t go back far enough.
you’re right to question that horrible comment. they haven’t yet made a new ATH
lol!! no problem.
of course, the “big one” will be transports, which I believe will flip the DOW theory switch back to “bull market”. It’s getting closer.
Hmm..pretty quite here…where is that rabbit?
I claim number Uno!
Dos!
I think the bull has the rabbit scared off. But a top of some sort is a-comin’…he might show up yet!