S&P 500: Elliott Wave and Technical Analysis | Charts – December 10, 2020
Summary: The wave count expects the low of the 30th of October to not be breached for many months or years. A new mid-term target is at 3,785. The next target is at 4,606. The invalidation point is at 3,233.94.
An alternate is considered at the daily chart level. It is judged to have a very low probability. For confidence it requires a new low below 3,644.31 and then below 3,233.94.
The biggest picture, Grand Super Cycle analysis, is here.
Monthly charts are last updated here with video here.
ELLIOTT WAVE COUNT
WEEKLY CHART
Click chart to enlarge.
Cycle wave V may last from one to several years. So far it is in its ninth month.
This wave count may allow time for the AD line to diverge from price as price makes final highs before the end of the bull market. The AD line most commonly diverges a minimum of 4 months prior to the end of a bull market.
Cycle wave V would most likely subdivide as an impulse. But if overlapping develops, then an ending diagonal should be considered. This chart considers the more common impulse.
Primary waves 1 and 2 may be complete.
Primary wave 3 may only subdivide as an impulse.
There is already a Fibonacci ratio between cycle waves I and III within Super Cycle wave (V). The S&P500 often exhibits a Fibonacci ratio between two of its actionary waves but rarely between all three; it is less likely that cycle wave V would exhibit a Fibonacci ratio. The target for Super Cycle wave (V) to end would best be calculated at primary degree, but that cannot be done until all of primary waves 1, 2, 3 and 4 are complete.
DAILY CHART
Click chart to enlarge.
Primary waves 1 and 2 may both be complete. Primary wave 3 may be underway.
Primary wave 3 may only subdivide as an impulse. Within primary wave 3: Intermediate waves (1) and (2) may both be complete, and intermediate wave (3) may be underway and may only subdivide as an impulse. A target is calculated for intermediate wave (3).
No second wave correction within intermediate wave (3) may move beyond the start of its first wave below 3,233.94.
Primary wave 1 looks extended. The target for primary wave 3 expects it to also be extended.
This wave count now expects that a third wave at three large degrees (minor, intermediate and primary) may have just passed through its middle portion. Each successive fourth wave correction must remain above its corresponding first wave price territory.
When third waves extend they do so in price as well as time. Extended waves usually exhibit corrections within them that are more time consuming than those within waves that are not extended.
The trend line in last analysis is removed because it was not showing where price found support. A best fit channel is added about most recent movement. This is the same channel that is shown on the hourly chart.
HOURLY CHART
Click chart to enlarge.
The hourly chart focusses on the middle of the third wave from the high labelled subminuette wave i, which may be seen on the daily chart.
Subminuette waves i through to iv may now be complete. Subminuette wave iii is slightly longer than subminuettte wave i, so there is no limit for subminuette wave v.
If subminuette wave iv continues any lower tomorrow, then it may not move into subminuette wave i price territory below 3,644.31, although subminuette wave iv looks like it should now be over if this wave count is correct.
ALTERNATE DAILY CHART
Click chart to enlarge.
In the interest of always trying to consider all possibilities (so as to not be left without a potential pathway should the main wave count become invalidated) this alternate is considered.
This alternate wave count does not have support from classic technical analysis at this time, so it is judged to have a low probability. However, low probability does not mean no probability. Confidence / invalidation points may be used to judge any change in probability between the two wave counts. The first confidence point is changed to match the new short-term labelling on the main hourly chart.
It is possible that primary wave 2 may be an incomplete expanded flat correction. A target is calculated for intermediate wave (C) that expects a common Fibonacci ratio to intermediate wave (A).
The zigzag within intermediate wave (B) may have just completed, or it may yet move higher.
There is no rule for flat corrections that state a limit for B waves, so it is possible that intermediate wave (B) may extend higher as a double zigzag. If intermediate wave (B) were to reach twice the length of intermediate wave (A) at 3,942.28, then the idea of a flat correction should be discarded based upon a very low probability.
TECHNICAL ANALYSIS
WEEKLY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
This chart is bullish and supports the Elliott wave count. All of volume, On Balance Volume, ADX and MACD are bullish. There is no bearish candlestick reversal pattern. Conditions are not extreme. There is room for this upwards trend to continue.
DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
There is an upwards trend. When this market trends, then Stochastics may remain overbought for extended periods of time while price moves a considerable distance.
Overall, this chart is bullish and still supports the Elliott wave count. There is a series of higher highs and lower lows from the low on the 24th of September.
Neither ADX nor RSI are yet extreme. There is room for this upwards trend to continue.
The bearish reversal pattern has a little support from volume. This offers a very small support to the alternate Elliott wave count, but on balance this chart offers more support to the main Elliott wave count.
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.
Lowry’s Operating Companies Only AD line has made a new all time high on the 24th of November. This is a strong bullish signal and supports the main Elliott wave count.
Large caps all time high: 3,712.39 on December 9, 2020.
Mid caps all time high: 2,264.67 on December 9, 2020.
Small caps all time high: 1,103.95 on December 9 2020.
Last week both price and the AD line have made new all time highs. Upwards movement has support from rising market breadth. This is bullish.
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 the AD line has moved higher to make a new all time high. This divergence is bullish and supports the main Elliott wave count.
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.
Inverted VIX remains well below all time highs. The all time high for inverted VIX was in the week beginning October 30, 2017. There is over 3 years of bearish divergence between price and inverted VIX. There is all of long, mid and short-term bearish divergence. This bearish divergence may develop further before the bull market ends. It may be a very early indicator of an upcoming bear market, but it is not proving to be useful in timing.
Last week price and inverted VIX have both moved higher. There is no new short-term divergence.
Comparing VIX and VVIX: Last week both VIX and VVIX have moved lower. VIX has made another new swing low below the low of the week beginning 21st of September, but VVIX has not. VVIX remains slightly elevated. This divergence is bearish for price as an increase in volatility of VIX is normally associated with bearish movements in price.
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.
Bearish short-term divergence noted in last analysis has been followed by a downwards session, so it may now be resolved. Today both price and inverted VIX have moved lower. There is no new short-term divergence.
Comparing VIX and VVIX at the daily chart level: Both VIX and VVIX have moved higher today. There is no new short-term divergence.
DOW THEORY
Dow Theory confirms a new bull market with new highs made on a closing basis:
DJIA: 29,568.57 – closed above on 16th November 2020.
DJT: 11,623.58 – closed above on 7th October 2020.
Adding in the S&P and Nasdaq for an extended Dow Theory, confirmation of a bull market would require new highs made on a closing basis:
S&P500: 3,393.52 – closed above on 21st August 2020.
Nasdaq: 9,838.37 – closed above on June 8, 2020.
Published @ 06:00 p.m. ET.
—
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.