The main Elliott wave count yesterday expected more downwards movement today, which is what has happened.

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

For the short term, it is possible that a minor degree correction may may continue for up to two weeks finding support about 4,062.

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

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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 be complete. 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.

Draw an Elliott channel about intermediate wave (3) as shown. Draw the first trend line from the end of minor wave 1 to the end of minor wave 3, then place a parallel copy on the end of minor wave 2. This channel may show where minor wave 4 may find support.

HOURLY CHART

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Minor wave 3 may be complete. If minor wave 3 is complete, then it exhibits no Fibonacci ratio to minor wave 1. Minor wave 3 is longer than minor wave 1.

If minor wave 4 has begun, then it may exhibit close proportion to minor wave 2 so that the wave count has the right look at higher time frames. Minor wave 2 was a shallow 0.50 double zigzag lasting 6 sessions. Minor wave 4 may be more shallow and may last about one to two weeks (possibly three). Minor wave 4 may exhibit alternation as a more time consuming triangle or combination, or it may exhibit alternation as a quicker flat.

So far minor wave 4 is labelled as a possible zigzag, but labelling within it will probably change as it unfolds and alternate wave counts may be required to consider the different structural possibilities for minor wave 4. Focus will be on identifying when minor wave 4 may be complete and minor wave 5 may begin, rather than on trying to identify how each smaller wave within minor wave 4 may move.

Minor wave 4 may not move into minor wave 1 price territory below 3,983.87.

ALTERNATE HOURLY CHART

After more downwards movement today, the alternate wave count is discarded.

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).

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. The current pullback 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 target was not met. This gap may still 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.

Downwards movement was stronger today with an increase in volume, and downwards volume was 76% of total up / down volume. More downwards movement looks like a reasonable expectation here.

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, last 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.

Today price and the AD line have both moved lower. There is no new short-term 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.

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, last 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.

Today price and inverted VIX have both moved lower. Inverted VIX has made a new short-term low below the prior low of the 6th of April, but price has not. This divergence is bearish for the short term and supports the hourly Elliott wave count.

Comparing VIX and VVIX at the daily chart level:

Both VIX and VVIX have moved higher today. VVIX has made a high above the prior high of the 29th of March, but VIX has not. This continues a cluster of short-term bearish divergence for price and supports the hourly Elliott wave count.

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, last 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 @ 06:35 p.m. ET.

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New updates to this analysis are in bold.