Upwards movement continues. This analysis has long been very bullish.

The next target is getting closer. Two short-term ideas are outlined on how price may behave along the way up to the target.

Summary: The wave count is now very bullish. It expects a third wave at three large degrees may have moved through its middle and may now be completing.

A new short-term target is at 4,276. At this stage, price may now have an almost straight run up towards this target.

About this short-term target at 4,276 a pullback or consolidation to last about one to two weeks may begin.

The next mid-term target for the upwards trend is at 4,464 or 4,922. About one of these targets another multi-week pullback or consolidation may develop.

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

Monthly charts are last updated here with video here.

MAIN WAVE COUNT

WEEKLY CHART

Click chart to enlarge.

Cycle wave V may last from one to several years. So far it is in its thirteenth 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. A longer divergence is positively correlated with a deeper bear market. A shorter divergence is positively correlated with a more shallow bear market. With zero divergence at this stage, if a surprise bear market does develop here, then it would likely be shallow.

A longer divergence between price and the AD line would be expected towards the end of Grand Super Cycle wave I.

It is possible that cycle wave V may continue until 2029, if the 2020s mirror the 1920s.

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.

Primary wave 3 has now moved well above the end of primary wave 1. Primary wave 4 may not move into primary wave 1 price territory below 3,588.11.

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.

The blue weekly best fit channel is slightly adjusted, so that the lower edge may better show where price may find support. Copy this over to the daily chart. Price has closed above the upper edge of this channel, which is bullish.

An acceleration channel is now drawn about cycle wave V. Draw the first trend line from the end of primary wave 1 to the last high, then place a parallel copy on the end of primary wave 2. Keep redrawing the channel as price continues higher. When primary wave 3 is complete, then this channel would be drawn using Elliott’s first technique and may show were primary wave 4 may find support.

DAILY CHART

Click chart to enlarge.

The daily chart focusses on the unfolding impulse of primary wave 3 from the end of intermediate wave (1) within it.

Intermediate wave (1) within primary wave 3 may be complete.

Intermediate wave (2) may also be complete as a triple zigzag.

Intermediate wave (3) within primary wave 3 may now be underway and may have passed its middle.

Minor waves 1 and 2 within intermediate wave (3) may now be complete. Minor wave 3 may now be underway. When minor wave 3 is complete, then the following pullback or consolidation for minor wave 4 may last about one to two weeks and may not move into minor wave 1 price territory below 3,983.87.

Targets are calculated for intermediate wave (3) and for primary wave 3. As price approaches the first target for intermediate wave (3) and if the structure is complete and technical analysis suggests a pullback may occur, then the target may be useful. But if price moves through the first target or the structure is incomplete, then the second target may be used.

The current upwards wave for this wave count is expected to be a third wave at minor, intermediate and primary degree.

Add a short-term acceleration channel to the middle of this third wave. Draw the first trend line from the end of minor wave 1 to the last high, then place a parallel copy on the end of minor wave 2. Keep redrawing this channel as price continues higher. When minor wave 3 may be complete, then this channel would be drawn using Elliott’s first technique and may show where minor wave 4 may find support.

HOURLY CHART

Click chart to enlarge.

Minute waves i through to iv within minor wave 3 may be complete.

The middle of a large third wave may have passed.

A target is calculated for minor wave 3 that expects a common Fibonacci ratio to minor wave 1.

Minor wave 4, when it arrives, may be a relatively shallow pullback which may last about one to two weeks.

Minuette waves (i) and (ii) within minute wave v may be complete.

Within minuette wave (iii) within minute wave v, subminuette waves i and ii may be complete.

No second wave correction within subminuette wave iii may move beyond its start below 4,170.75.

HOURLY CHART – DETAIL

Click chart to enlarge.

As requested by a member, here is the detail of the main wave count for all of minor wave 3. This also shows how to draw the new best fit channel.

ALTERNATE HOURLY CHART

Click chart to enlarge.

This alternate hourly chart sees the subdivisions within minor wave 3 slightly differently. Full detail in a chart will be provided after publication in comments below this post.

Minute waves i through to iv within minor wave 3 may be complete.

Within minute wave v of minor wave 3: Minuette wave (i) may be almost complete, and minuette wave (ii) may not move beyond the start of minuette wave (i) below 4,170.75.

If the degree of labelling within minute wave v is moved up one degree, then this alternate hourly wave count may see minor wave 3 ending at any hour on Monday. It is possible that minor wave 4 may begin early next week. Minor wave 4 may last about one to two weeks and may not move into minor wave 1 price territory below 3,983.87.

ALTERNATE WAVE COUNT

WEEKLY CHART

Click chart to enlarge.

This wave count sees subdivisions within cycle wave V the same except the degree of labelling is moved down one degree. Primary wave 1 within cycle wave V may be incomplete.

Within primary wave 1: Intermediate waves (1) and (2) may be complete, intermediate wave (3) may be extending, and intermediate wave (4) may not move into intermediate wave (1) price territory below 3,588.11.

When primary wave 1 may be complete (in several months time), then a deeper and longer lasting pullback for primary wave 2 may unfold. Primary wave 2 may not move beyond the start of primary wave 1 below 2,191.86.

TECHNICAL ANALYSIS

WEEKLY CHART

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

A series of higher highs and higher lows off the low of March 2020 continues. The last short-term swing low is now at 3,723.34. While this remains intact, the dominant view should be of an upwards trend. There is a long way for this trend to run before conditions may become extreme.

This chart has the look of a sustainable bull market in a relatively early stage; there is as yet no evidence that a larger correction should begin here. Although RSI has just now reached overbought, this market has a strong bullish bias and RSI can move deeply overbought and remain there for years prior to the bull market ending (for an example see May 1995 to March 2000).

WEEKLY CHART – MAY 1995 to MARCH 2020

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

The chart above covers the period of a strong bull market during May 1995 to March 2000. The last green weekly candlestick includes the high of March 24, 2000; following this was the DotCom crash.

This chart illustrates how this market, with a strong bullish bias, can sustain extreme conditions for a long period of time. Multiple instances of short-term bearish divergence between price and RSI were resolved by short to mid-term pullbacks before the bullish trend resumed. Over years longer term bearish divergence between price and RSI developed before the bullish trend was over.

ADX reached very extreme early on in this trend and was sustained for months while price travelled a considerable distance. Early on in the left hand side of the chart, illustrated by brown trend lines on price and RSI, RSI exhibited reasonably weak short-term bearish divergence and yet price continue higher for months.

Conclusion: It is important to read divergence between price and RSI carefully. For confidence in a signal the divergence should be between swing highs that are reasonably close together (one to three months) but not too close together (days or only a very few weeks), and it should be clear and strong. If this occurs while ADX is also extreme, then the bearish signal is stronger and may result in a more time consuming or deeper pullback.

The current situation with RSI and ADX does not suggest a pullback should begin here.

DAILY CHART

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

The series of higher highs and higher lows from the low of the 30th of October continues.

The last swing low is the 25th of March at 3,853.50. While this remains intact, the upwards trend may be assumed to continue. Pullbacks are a normal and to be expected part of a bullish trend. If a pullback develops here or soon, then it may test support about 3,980 or the round number pivot at 4,000.

ADX is not extreme. There is plenty of room for an upwards trend to continue. This market has a strong bullish bias. RSI may reach deeply overbought and then exhibit divergence between swing highs before a more substantial pullback occurs to relieve extreme conditions. That set up may not come until minor waves 3, 4 and 5 are complete.

The measuring gap gives a target at 4,201.57. This gap may offer support at 4,020.63.

Declining volume has for years been a feature of this bull market. In the long term it may become a problem as when a bear market arrives support below would be thin and price may fall dramatically, but for now the bull market remains healthy and has proven to be able to rise sustainably on light and declining volume. At this stage, it is not of a concern for the Elliott wave count.

Volume and On Balance Volume are both bullish. At this stage, there is no technical evidence that this bull run may end in the immediate future.

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 15th of March. This supports the main Elliott wave count.

Large caps all time high: 4,191.31 on April 16, 2021.

Mid caps all time high: 2,727.46 on April 16, 2021.

Small caps all time high: 1,399.31 on March 12, 2021.

The last new high is found in large and mid caps. With large caps leading and small caps lagging, this last rise is bearish for the short term. This fits with the Elliott wave count that now sees a third wave in its last stages prior to a pullback or consolidation for minor wave 4. Small caps can lag and large caps can lead for some time while price travels a reasonable distance. Lagging small caps at this stage does not necessarily mean price must turn here.

Again, this week both price and the AD line have made new all time highs at the weekly chart level. 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.

Again, price has made a new all time high with support from overall rising breadth as the AD line also makes a new all time high. This is bullish.

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. 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.

Again, this week both price and inverted VIX have moved higher, but only price has made a new all time high. There is now mid and long-term bearish divergence, but there is no short-term bearish divergence.

Comparing VIX and VVIX at the weekly chart level:

This week VIX has moved lower, but VVIX has moved higher. There are now two single week instances of divergence, which is bearish for price for the short term. This may be an early warning of the approaching end of minor wave 3; it may develop further before a consolidation or pullback results.

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.

Again, price and inverted VIX have both made new short and mid-term highs. There is no new short or mid-term divergence.

Comparing VIX and VVIX at the daily chart level:

Both VIX and VVIX have moved lower for Friday. There is still a small cluster of short-term bearish 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.

Most recently, this week both DJIA and DJT have made new all time highs. An ongoing bull market is again confirmed by Dow Theory.

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.

The following major swing lows would need to be seen on a closing basis for Dow Theory to confirm a change from bull to a bear market:

DJIA: 18,213.65

DJT: 6,481.20

Adding in the S&P and Nasdaq for an extended Dow Theory, confirmation of a new bear market would require new lows on a closing basis:

S&P500: 2,191.86

Nasdaq: 6,631.42

Published @ 09:53 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.