Downwards movement remains above the short-term invalidation point and within the channel.

Summary: The bounce may now end about 3,167 in another few weeks. This target is within a normal range for the first multi-week bounce within a bear market, which is from 3,069 to 3,261.

Thereafter, the downwards trend may resume with strength.

For the short term, if price breaks below the lower edge of the blue best fit channel on the daily charts, then the bounce may be over and the downwards trend may have resumed.

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

Last monthly charts are here. Video is here. Members are encouraged to view all three monthly charts. The third is much more bearish than this main wave count and remains a valid possibility.

ELLIOTT WAVE COUNTS

WEEKLY CHART

Click chart to enlarge.

The channel is now breached by a full weekly candlestick below and not touching the lower edge. Further confidence in this wave count may be had.

Price has reached below the 0.382 Fibonacci ratio of cycle wave I at 2,352 on the last downwards movement. The structure of cycle wave II may need further to go to complete. The next Fibonacci ratio at 0.618 is now a preferred target for cycle wave II to end.

Cycle wave II would most likely subdivide as a zigzag; thus far that looks like what is unfolding. When primary waves A and B may both be complete, then the target may be calculated using a Fibonacci ratio between primary waves A and C. At that stage, the final target may change or widen to a zone.

Cycle wave II may not move beyond the start of cycle wave I below 666.79.

DAILY CHART

Click chart to enlarge.

Draw the wide maroon trend channel carefully: draw the first trend line from the end of primary wave 1 at 2,093.55 (December 26, 2014), to the end of primary wave 3 at 2,940.91 (September 21, 2018), then place a parallel copy on the end of primary wave 2 at 1,810.10 (February 11, 2016). The channel is fully breached indicating a trend change from the multi-year bull trend to a new bear trend. Resistance at the lower edge has been overcome; price has closed above this trend line. A new target is calculated for primary wave B based upon a Fibonacci ratio between intermediate waves (A) and (C) within it. This target would see primary wave B end within a common range for the first major bounce within a bear market.

Cycle wave II may subdivide as any Elliott wave corrective structure except a triangle. It would most likely be a zigzag. Primary wave A may be a complete five wave impulse. Primary wave B may not move beyond the start of primary wave A above 3,393.52.

HOURLY CHART

Click chart to enlarge.

Primary wave B may be subdividing as a zigzag.

Within the zigzag: intermediate waves (A) and (B) may be complete.

Intermediate wave (C) may be unfolding as an impulse. Within the impulse: minor waves 1 and 2 may be complete.

Within minor wave 3: minute waves i and now ii may be complete. Within minute wave iii, minuette waves (i) and (ii) may be complete. If it continues lower, then minuette wave (ii) may not move beyond the start of minuette wave (i) below 2,765.25.

Minor wave 3 may be extending. There may now be a series of three first and second waves complete within intermediate wave (C). If this wave count is correct, then upwards movement may exhibit an increase in momentum.

ALTERNATE DAILY CHART

Click chart to enlarge.

This alternate daily chart follows the Second Alternate Monthly chart published here. Video is here.

By simply moving the degree of labelling in the bull market beginning March 2009 up one degree, it is possible that a Grand Super Cycle trend change occurred on February 19, 2020.

A correction at Grand Super Cycle degree may be expected to last at least a decade, possibly longer. Corrections for this market tend to be much quicker than bullish moves, and so a fair amount of flexibility is required in expectations for duration of the different degrees.

Grand Super Cycle II would most likely subdivide as a zigzag, although it may be any corrective structure except a triangle. It should begin with a five down at the weekly chart time frame, which would be incomplete.

The first wave down on the daily chart is labelled cycle wave I. If this degree of labelling is wrong, it may be too high; it may need to be moved down one degree.

Following cycle wave I, cycle wave II may be continuing higher as a zigzag. Cycle wave II may not move beyond the start of cycle wave I above 3,393.52.

When cycle wave II may again be complete, then a target for cycle wave III may be calculated.

ALTERNATE HOURLY CHART

Click chart to enlarge.

Cycle wave II may be a continuing higher as a single zigzag.

TECHNICAL ANALYSIS

WEEKLY CHART

Click chart to enlarge. Chart courtesy of StockCharts.com.

Last week On Balance Volume, a shaven head, and a long lower wick on the candlestick are all bullish. Expect more upwards movement to follow.

DAILY CHART

Click chart to enlarge. Chart courtesy of StockCharts.com.

There is no bearish candlestick reversal pattern, so it would be reasonable to assume the bounce continues until a bearish pattern is seen.

In the bear market from October 2000 to March 2009, the first multi-day bounce retraced 0.73 of the first wave down. In the bear market from March 2000 to October 2002, the first multi-day bounce retraced 0.89 of the first wave down. So far this current bounce has retraced 0.57 of the first wave down, so it seems reasonable that it could continue higher.

To see what signals may be looked for to identify a high, the two previous large bear markets were analysed in end of week analysis. The DotCom crash was analysed here with video here. The Global Financial Crisis was also analysed here with video here.

There is a great amount of strength off the low of 23rd of March. There are now three 90% up days and two back to back 80% up days. It looks technically possible that the 23rd of March may be a sustainable low and that price could be moving up to new all time highs in a sustainable bull market.

However, as compelling as that technical picture looks at this time, it would mean that the US stock market would be bullish while a pandemic unfolds in the country and over 20 million jobless claims so far in the USA. While this analysis is focussed on technical data, it would be rather obtuse to ignore negative economic data and the normal pattern of pandemics which usually last about two years.

If either price or the AD line make new all time highs, then a bull market would be seriously considered.

For the short term, the breakaway gap may offer support about 2,806.51.

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 no divergence between the AD line and price at the last all time high, this current bear market now makes a third exception.

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.

This bear market comes after no bearish divergence. It would more likely be shallow, but this is a statement of probability and not certainty. So far it is slightly more than the 0.382 Fibonacci ratio of the bull market it is correcting (beginning March 2009).

Last week price has moved higher, but the AD line has slightly declined. Upwards movement this week does not have support from a normal rise in market breadth. This divergence is bearish.

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.

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.

Bearish divergence noted in last analysis has been followed by a downwards day. It may now be resolved.

Today both price and the AD line have moved lower. Neither have made new short-term lows. There is no new 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.

Last week both price and inverted VIX have moved higher. There is no new 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 both price and inverted VIX have moved lower. Inverted VIX has made a new low below the prior low of the 15th of April, but price has not. This divergence is bearish for the short term.

DOW THEORY

Dow Theory has confirmed a bear market with the following lows made on a closing basis:

DJIA: 21,712.53 – a close below this point has been made on the March 12, 2020.

DJT: 8,636.79 – a close below this point has been made on March 9, 2020.

Adding in the S&P and Nasdaq for an extended Dow Theory, a bear market has now been confirmed:

S&P500: 2,346.58 – a close below this point has now been made on March 20, 2020.

Nasdaq: 7,292.22 – a close below this point was made on the March 12, 2020.

Published @ 07:57 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.