Upwards movement was expected from both short-term Elliott wave counts yesterday, which is how the session has unfolded.

Summary: Upwards movement to a final target at 3,058 or 3,238 may have just begun. Use the lower edge of the redrawn Elliott channel to indicate where support may be found on the way up.

This bounce that began on 23rd of March is still expected to be a counter trend bounce within an ongoing bear market. When the bounce is complete, then the bear market is expected to 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

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.

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 (B) using Elliott’s technique for a correction. Draw the first trend line from the start of minor wave A to the end of minor wave B, then place a parallel copy on the end of minor wave A. Minor wave C may have slightly overshot the lower edge of the channel.

Redraw the channel about primary wave B using Elliott’s technique for a correction. Draw the first trend line from the start of intermediate wave A to the end of intermediate wave B, then place a parallel copy on the end of intermediate wave A. Intermediate wave C may find resistance at the upper edge of the channel. While intermediate wave C unfolds higher, any smaller pullbacks within it may find support at the lower edge of this channel.

FIRST HOURLY CHART

Click chart to enlarge.

A flat correction may now be complete for intermediate wave (B), fitting mostly within a parallel channel, with an overshoot at the end.

Intermediate wave (C) may have begun. It may continue for at least a week or two, and possibly up to four weeks.

Intermediate wave (C) must subdivide as a five wave motive structure, either an impulse or an ending diagonal. An impulse is much more likely, so that is what shall be expected unless overlapping suggests a diagonal. Minor wave 2 within intermediate wave (C) may not move beyond the start of minor wave 1 below 2,766.64.

SECOND HOURLY CHART

Click chart to enlarge.

This hourly chart moves the degree of labelling within intermediate wave (B) down one degree. It is possible that only minor wave A is complete. Minor wave A here is labelled as a zigzag, but it may also be labelled as a flat correction in the same way that the first hourly chart (flat correction) labels this movement.

If minor wave A completes as a zigzag, then intermediate wave (B) may be a flat correction that may be more time consuming. Minor wave B may move higher and must retrace a minimum 0.9 length of minor wave A at 2,936.04. Minor wave B may make a new high above the start of minor wave A at 2,954.86 as in an expanded flat.

If minor wave W completes as a zigzag or flat, then intermediate wave (B) may be a double combination or double flat that may be more time consuming. Minor wave W may now be complete. Minor wave X may now move higher. Minor wave X has no minimum required length to minor wave W, and it may make a new high above the start of minor wave W at 2,954.86. Minor wave Y may then continue sideways as a flat or triangle.

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. Primary wave B within the zigzag may be complete today, or may be about one third complete. Hourly wave counts for the main daily chart work in the same way for this alternate.

TECHNICAL ANALYSIS

WEEKLY CHART

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

A bullish long lower wick suggests upwards movement next week.

DAILY CHART

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

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.

Price remains range bound with resistance about 2,950 and support about 2,800. A breakout from this range is required for confidence in the next direction for price.

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’s bullish divergence has not been followed by upwards movement, so it is considered to have failed. This week price completed an outside week, which has closed red. The AD line has declined. There is no new divergence. 

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.

Last session noted bullish divergence, which has now been followed by upwards movement, so it is considered to have been predictive.

This session both price and the AD line have moved higher.  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’s bullish divergence has not been followed by upwards movement, so it is considered to have failed. This week price completed an outside week, which has closed red. Inverted VIX has declined. 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.

Last session noted bullish divergence, which has now been followed by upwards movement, so it is considered to have been predictive.

This session both price and inverted VIX have moved higher.  There is no new divergence.

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 @ 08:33 p.m. EST.

—
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.

—
New updates to this analysis are in bold.