S&P 500: Elliott Wave and Technical Analysis | Charts – May 4, 2020
Summary: A downwards or sideways movement may continue here, which may last a few days to a few weeks and may find support about 2,663 to 2,650.
Thereafter, upwards movement to the final target about 3,069 to 3,261 may begin.
Thereafter, the downwards trend may resume with strength.
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
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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
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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. The lower edge of this trend channel may provide support now as primary wave B continues.
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 downwards. Primary wave B may not move beyond the start of primary wave A above 3,393.52.
Draw a channel about intermediate wave (A) using Elliott’s first technique: draw the first trend line from the end of minor waves 1 to 3, then place a parallel copy on the end of minor wave 2. Intermediate wave (B) may breach this channel. Intermediate wave (B) may find support at the lower edge of the wider maroon channel. At this stage, the channel is breached at the hourly chart level but not yet at the daily chart level. A breach may be defined as at least one full candlestick below and not touching the lower trend line.
When intermediate wave (B) may be complete, then a new and wider channel may be drawn to contain all of primary wave B.
HOURLY CHART
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Copy the channel drawn about intermediate wave (A) over to hourly charts. Today the lower edge of the channel is breached at the hourly chart time frame. The lower edge may now provide resistance for a throw back.
If analysis of intermediate wave (A) as a five wave structure is correct, then intermediate wave (B) may not move beyond the start of intermediate wave (A) below 2,191.86.
Intermediate wave (B) may subdivide as any one of more than 23 possible Elliott wave corrective structures. B waves within B waves exhibit great variety, and are fairly often time consuming sideways consolidations.
If intermediate wave (B) subdivides as one of a flat, triangle or combination, then the first wave down within it would most likely unfold as a zigzag. At this stage, minor A within intermediate wave (B) is labelled as a possible zigzag. The labelling within intermediate wave (B) will probably change as it unfolds; multiple wave counts for the different structural possibilities may be required.
At 2,663 intermediate wave (B) would retrace 0.382 of intermediate wave (A). At 2,651 is the 0.382 Fibonacci ratio of primary wave A. This gives a target zone for intermediate wave (B) to find support. If this zone is wrong, then it may be too low. The maroon channel on daily and weekly charts may hold price up above this zone.
The target zone for primary wave B is calculated based upon a normal depth for the first major bounce within a bear market. When intermediate waves (A) and (B) may be complete, then Fibonacci ratios at intermediate wave degree may be used to calculate a target for primary wave B to end. At that stage, the target zone may change.
ALTERNATE DAILY CHART
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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
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Cycle wave II may be a continuing higher as a single zigzag. Primary wave B within the zigzag may now have just begun.
TECHNICAL ANALYSIS
WEEKLY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
The Shooting Star pattern warns of a trend change here to either down or sideways.
DAILY CHART
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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 0.63 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 now a bearish reversal pattern on the weekly chart but not the daily chart. It is now technically possible that the bounce is over, but the Elliott wave count sees the bounce as an incomplete structure.
Despite a green daily candlestick, price has moved lower and down volume dominated the session with 54% of total up/down volume.
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.
Breadth should be read as a leading indicator.
Last week price has moved higher, but the AD line is flat. This divergence is bearish, but it is weak.
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.
Today both price and the AD line have moved lower. There is no new divergence.
All of small, mid and large caps have made new swing highs above the prior highs of 17th and 9th of April.
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.
Two weeks ago this analysis noted bullish divergence between price and inverted VIX. This has been followed by an upwards week, so it is considered to have been predictive.
Last week price has moved higher, but inverted VIX has moved lower. This divergence is bearish and supports the Elliott wave count.
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 but will not be given weight in this analysis as breadth was bearish and so does not agree with VIX.
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 @ 07:52 p.m. EST.
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New updates to this analysis are in bold.