Price fails again to make a new all time high.

On Balance Volume has an increasingly technically significant range. The AD line still has a strong cluster of signals that support the Elliott wave count.

Summary: The trend is up. The next target for the next wave up is at 4,900.

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 fifteenth 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. Either March or October 2029 may be likely months for the bull market to end.

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.

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.

Primary wave 1 within cycle wave V may be incomplete. This gives a very bullish wave count, expecting a long duration for cycle wave V which has not yet passed its middle strongest portion.

Within primary wave 1: Intermediate waves (1) and (2) may be complete, and intermediate wave (3) may now be approaching an end.

Within intermediate wave (3): Minor waves 1 and 2 may be complete, and minor wave 3 may be nearing an end.

Intermediate wave (4) may not move into intermediate wave (1) price territory below 3,588.11.

An acceleration channel is drawn about cycle wave V. Draw the first trend line from the end of intermediate wave (1) to the last high, then place a parallel copy on the end of intermediate wave (2). Keep redrawing the channel as price continues higher. When primary wave 1 is complete, then this channel would be drawn using Elliott’s first technique. The channel may then be used to provide confidence that primary wave 1 may be over and primary wave 2 may have arrived; when the channel is breached by downwards movement it would indicate a trend change.

When primary wave 1 may be complete, then a multi-month pullback or consolidation may unfold for primary wave 2. It is possible that primary wave 2 may meet the technical definition of a bear market; it may correct to 20% or more of market value.

Primary wave 2 may not move beyond the start of primary wave 1 below 2,191.86.

DAILY CHART

Click chart to enlarge.

The daily chart focusses on minor wave 3 within intermediate wave (3).

Intermediate wave (3) may be extending. Third waves are most commonly extended for the S&P500, so this wave count follows a common tendency. A target is calculated for minor wave 3, which is also expected to be extending.

No second wave correction within subminuette wave iii may move beyond its start below 4,061.41.

Draw the channel using Elliott’s second technique. Draw the first trend line from the ends of minute waves ii to iv, then place a parallel copy on the end of minute wave iii. This channel may show where minute wave v may end, either mid way within the channel or about the upper edge. It may then be used to confirm a subsequent trend change, when it is breached by downwards movement.

The channel is overshot for the low labelled subminuette wave ii, which for this market is acceptable, and price has moved back within the channel. This market does not always sit neatly within channels as its impulses come to an end. It is possible that as minor wave 3 ends channels may need to be redrawn.

HOURLY CHART

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Micro waves 1 and 2 within subminuette wave iii may be complete.

This wave count now expects that a third wave at four low degrees may continue higher. There will be pullbacks and consolidations along the way, which is normal and to be expected. Sub-micro wave (2) may not move beyond the start of sub-micro wave (1) below 4,167.93.

If sub-micro wave (2) does continue lower, then it may find support at the lower edge of the pink Elliott channel copied over from the daily chart.

ALTERNATE HOURLY CHART

Click chart to enlarge.

In response to a concern expressed by a member in comments, this is how a possible Elliott wave count which sees micro wave 2 continuing lower may look.

Micro wave 2 may continue as an expanded flat. Both sub-micro waves (A) and (B) within the expanded flat subdivide as corrective structures. Sub-micro wave (B) is 1.52 the length of sub-micro wave (A), which is longer than the common range of up to 1.38 but within an allowable guideline of up to 2.

Sub-micro wave (C) would be extremely likely for this wave count to make at least a slight new low below the end of sub-micro wave (A) at 4,167.93 to avoid a truncation and a very rare running flat.

At 4,162 sub-micro wave (C) would reach 1.618 the length of sub-micro wave (A). This would see the pink Elliott channel strongly overshot. The S&P does not always fit neatly within channels, so this is possible.

Micro wave 2 may not move beyond the start of micro wave 1 below 4,061.41.

The breach of the trend channel required for this wave count still does reduce its probability. The main hourly wave count has more support from classic technical analysis.

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 very recently 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.

Now three long lower wicks on two weekly candlesticks are bullish for the short term.

For the short term, price looks to be in a small consolidation with support about 4,057 and resistance at the last all time high about 4,238. With the larger trend upwards, it would be most likely this consolidation may resolve with an upwards breakout.

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.

Pullbacks and consolidations are a normal and to be expected part of a bullish trend.

This chart overall supports a bullish Elliott wave count. The consolidation of the last few weeks has bought ADX down from extreme and RSI back into neutral territory. There is again room for a trend to continue.

Yesterday’s candlestick may now be considered a Hanging Man as it now has bearish confirmation. Although this last candlestick is an upwards session with a higher high and a higher low, the balance of volume is down and it has closed strongly red. This supports the alternate Elliott wave count.

Before having confidence in either a bullish or bearish outlook here, it may pay to wait for a signal now from On Balance Volume. The resistance and support lines now have 4 and 3 tests respectively, so there is some technical significance to them.

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 1st of June. This supports the Elliott wave count.

Large caps all time high: 4,238.04 on May 7, 2021.

Mid caps all time high: 2,778.84 on April 29, 2021.

Small caps all time high: 1,417.45 on June 8, 2021.

Small caps are now leading. This is very bullish.

Again, the AD line has made a new all time high, but price has not. This is a strong bullish signal 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 higher although the candlestick closed strongly red. The AD line has moved lower; this is a single day instance of bearish divergence, but it is weak. This bearish divergence supports the alternate Elliott wave count.

There is still a strong cluster of bullish divergence that supports the 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. 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 both price and inverted VIX have moved higher. Upwards movement in price is coming with a normal corresponding decline in volatility. This supports the Elliott wave count.

Comparing VIX and VVIX at the weekly chart level:

Last week VIX has moved slightly lower, but VVIX has moved higher. Volatility of VIX is elevated. This short-term divergence is bearish for 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.

Today price has moved higher although the candlestick has closed strongly red. Inverted VIX has moved lower. This is an instance of single day bearish divergence, but it is weak.

Comparing VIX and VVIX at the daily chart level:

Today VIX and VVIX have both moved higher. VVIX has made a new short-term swing high above the prior high of the 3rd of June, but VIX has not. Volatility of VIX is elevated. This divergence is bearish for price for the short term and supports the alternate 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, on 10th May 2021 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 @ 07:32 p.m. ET.

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1. Always trade with stops.

2. Risk only 1-5% of equity on any one trade.

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New updates to this analysis are in bold.

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