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A new low below 3,027.98 invalidates an impulse unfolding upwards and suggests this big fifth wave may be an ending expanding diagonal. Diagonals are not as common as impulses in fifth wave positions, and so until an impulse is invalidated a diagonal should always be considered a lower probability. Sometimes lower probability outcomes occur, and they will never be the most expected.

Summary: The larger trend is up. Consolidations and pullbacks may last a few weeks but should be viewed in the bigger context of an ongoing bull market. At support they may provide opportunities to join the trend.

This current correction is very deep, but it will now be expected to end below 2,905.99.

The biggest picture, Grand Super Cycle analysis, is here.

Last monthly charts analysis is here with video here.




S&P 500 Weekly 2020
Click chart to enlarge.

Cycle wave V may subdivide either as an impulse or an ending diagonal. Impulses are much more common, but at this stage an impulse is now invalidated and so the only remaining possible structure is a diagonal.

At this stage, cycle wave V may end within this year or possibly into next year.

A channel is drawn about the impulse of Super Cycle wave (V) using Elliott’s first technique. Draw this channel first from the high of 2,079.46 on the 5th of December 2014 to the high of 2,940.91 on the 21st of September 2018, then place a parallel copy on the low at 1,810.10 on the 11th of February 2016. Cycle wave IV found support about the lower edge.

Within Super Cycle wave (V), cycle wave III may not be the shortest actionary wave. Because cycle wave III is shorter than cycle wave I, this limits cycle wave V to no longer than equality in length with cycle wave III at 3,477.39. A new high by any amount at any time frame above this point would invalidate this main wave count in favour of one of the two alternate wave counts in the monthly chart analysis which are much more bullish.

The daily chart below will focus on movement from the end primary wave 2.

Ending diagonals require all sub-waves to subdivide as zigzags. Primary wave 4 of a diagonal must overlap primary wave 2. This rule is now met. Primary wave 4 may not move below the end of primary wave 2 below 2,822.12.

This ending diagonal would be expanding. Primary wave 3 is longer than primary wave 1, and primary wave 4 so far is longer than primary wave 2. Primary wave 5 would need to be longer than primary wave 3 for all rules regarding wave lengths of expanding diagonals to be met.

Fourth and second waves of diagonals most commonly end somewhere between 0.66 to 0.81 of the prior wave. This gives a target zone for primary wave 4 from 3,016.40 to 2,930.69. However, this diagonal is expanding and primary wave 5 needs to be longer in length than primary wave 3, which was 571.40 points for this rule to be met. This rule needs to be met prior to the upper limit for cycle wave V at 3,477.39, so primary wave 5 would need to begin below 2,905.99.


S&P 500 Daily 2020
Click chart to enlarge.

All sub-waves of an ending diagonal must subdivide as zigzags. This is the only Elliott wave structure where a third wave sub-divides as anything other than an impulse.

Primary wave 4 must subdivide as a zigzag. Within the zigzag, there would very likely be a sharp bounce or a time consuming sideways consolidation for intermediate wave (B).

Diagonals normally adhere very well to their trend lines, which may be tested within the sub-waves. The lower 2-4 trend line is drawn to sit across the lows of corrections early within primary wave 3. This lower trend line may be about where primary wave 4 may find eventual support.

Primary wave 4 may not move beyond the end of primary wave 2 below 2,822.12.


S&P 500 Hourly 2020
Click chart to enlarge.

Primary wave 4 within a diagonal must subdivide as a zigzag. Within the zigzag, intermediate wave (B) would very likely show on the daily and weekly chart for primary wave 4 to have the right look. Intermediate wave (B) so far does not show up on the daily chart, so it may not yet have begun.

Intermediate wave (A) may be incomplete.

Intermediate wave (A) must subdivide as a five wave motive structure, most likely an impulse. Within the impulse, minor waves 1 to 4 may be complete and minor wave 5 may be extending. Within minor wave 5, minute wave iv may not move into minute wave i price territory above 3,118.77.

The best fit channel continues to indicate where price is finding resistance, although the strength of downwards movement has broken below support. Assume price may continue to fall while price remains below the upper edge of this channel. When this channel is breached by upwards movement, that may be taken as indication that intermediate wave (A) may be over and intermediate wave (B) may have begun.

Intermediate wave (B) may not move beyond the start of intermediate wave (A) above 3,393.52.



S&P 500 Weekly 2020
Click chart to enlarge.

This second wave count sees all subdivisions from the end of the March 2009 low in almost the same way, with the sole difference being the degree of labelling.

If the degree of labelling for the entirety of this bull market is all moved down one degree, then only a first wave at cycle degree may be nearing an end.

When cycle wave I is complete, then cycle wave II should meet the technical definition of a bear market as it should retrace more than 20% of cycle wave I, but it may end about either the 0.382 or 0.618 Fibonacci Ratios of cycle wave I. Cycle wave II may end close to the low of primary wave II within cycle wave I, which is at 1,810.10. It is also possible that cycle wave II could be fairly shallow and only barely meet the definition of a bear market.

An ending expanding diagonal is still viewed as nearing an end. This wave count labels it primary wave 5. Primary wave 5 may still need another year to two or so to complete, depending upon how time consuming the corrections within it may be.

Primary wave 5 may be subdividing as a diagonal, in the same way that cycle wave V is seen for the first weekly chart.



Weekly 2020
Click chart to enlarge. Chart courtesy of

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.

This chart is overall bullish. There are no signs of weakness in upwards movement.

This bull market beginning in March 2009 has been characterised now for many years by rising price on declining volume. Despite all technical textbooks stating this is unsustainable, it has now been sustained for over a decade. This is concerning for an eventual bearish move as it may mean that support below is thin and weak, but for now the bull market continues. A decline in volume in current market conditions shall not be read necessarily as bearish.

Further pullbacks or consolidations will unfold. Do not expect price to move in a straight line. Pullbacks to support in a bull market may be used as opportunities to join an established trend.

Continued bearish divergence for the short term between price and RSI suggests the risk of a pullback remains high.

Last week sees upwards movement, but this is not confirmed by On Balance Volume.


Daily 2020
Click chart to enlarge. Chart courtesy of

The larger trend, particularly at the monthly time frame, remains up. Expect pullbacks and consolidations to be more short term in nature although they can last a few weeks.

There are now three 90% downwards days in this strong downwards movement.

Following a 90% downwards day, either a 90% upwards day or two back to back 80% upwards days within 3 sessions would be required to indicate a 180°reversal in sentiment and indicate a sustainable low may be in place.

With RSI now deeply oversold today, it would be reasonable to expect a bounce here or very soon. The measuring gap today gives a target at 2,946.25.



AD Line weekly 2020
Click chart to enlarge. Chart courtesy of 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 June 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 price has moved higher, but the AD line has moved lower. This single week instance of bearish divergence supports the main Elliott wave count.

Large caps all time high: 3,393.52 on 19th February 2020.

Mid caps all time high: 2,109.43 on 20th February 2020.

Small caps all time high: 1,100.58 on 27th August 2018.


AD Line daily 2020
Click chart to enlarge. Chart courtesy of 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 made a new low below the prior small swing low of the 3rd of December 2019, but the AD line has not. Price is falling faster than market breadth. This divergence is bullish.



VIX weekly 2020
Click chart to enlarge. Chart courtesy of 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 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 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 lower. There is no new short-term divergence.


VIX daily 2020
Click chart to enlarge. Chart courtesy of So that colour blind members are included, bearish signals
will be noted with blue and bullish signals with yellow.

Today both price and inverted VIX have moved to make new mid-term lows. There is no new divergence.


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 @ 07:37 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.

New updates to this analysis are in bold.