A sideways day sees small caps lead with new highs, but large caps lag.

Summary: The next target is at 3,238. Use the lower edge of the Elliott channel to indicate where support may be found on the way up.

Price and On Balance Volume have overcome resistance. We should continue to assume the upwards mid-term trend remains the same until proven otherwise.

The following points would provide confidence that the bounce is over:

1. A bearish candlestick reversal pattern.

2. A breach by downwards movement of the black upwards sloping Elliott channel on the main daily chart.

3. A new low below 2,998.61.

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.

Only if the following are seen would a bullish wave count be published:

1. A new all time high from the AD line.

2. Closure of the breakaway gap with a new high above 3,328.45.

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

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This main Elliott wave count expects that the bull market beginning in March 2009 was cycle wave I of Super Cycle wave (V). The trend change in February 2020 may have been only at cycle degree. Cycle wave II may last from one to a few years.

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

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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 (zigzags subdivide 5-3-5). 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 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.

When this channel is breached by downwards movement, it would then indicate the bounce labelled primary wave B may be over and the next large downwards wave labelled primary wave C may then have begun. This is how the channel will be used this week.

FIRST HOURLY CHART

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Intermediate wave (C) may continue into next week.

Intermediate wave (C) must subdivide as a five wave motive structure, either an impulse or an ending diagonal. This first hourly chart considers the more common impulse, so it has a higher probability.

Minor wave 5 within intermediate wave (5) may be extending. Minute waves i and ii within minor wave 5 may be complete. Minute wave iii may only subdivide as an impulse; so far it looks like a normal impulse with the third wave within it extended. Minuette waves (i) through to (iv) within minute wave iii may now be complete.

Draw a small channel about minute wave iii using Elliott’s first technique as shown: draw the  first trend line from the ends of minuette waves (i) to (iii), then place a parallel copy on the end of minuette wave (ii). Look for minuette wave (v) to possibly find resistance and end about the upper edge of the channel.

If it continues lower, then minuette wave (iv) may not move into minuette wave (i) price territory below 3,068.67.

If the first invalidation point is breached, then the degree of labelling within minuette wave (iii) may be moved down one degree. No second wave correction within minuette wave (iii) may move beyond the start of its first wave below 2,998.61.

SECOND HOURLY CHART

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This hourly chart considers the less likely structure of an ending diagonal for minor wave 5.

Both hourly charts are identical up to the end of minor wave 4.

If minor wave 5 subdivides as an ending diagonal, then it may be an expanding ending diagonal as labelled. An ending diagonal requires all sub-waves to subdivide as zigzags, and minute wave iv must overlap minute wave i price territory. Minute v of an expanding diagonal must be longer than minute wave iii, so it must end above 3,097.53. That minimum requirement has been met. The structure meets all Elliott wave rules for an ending expanding diagonal. It is now possible that primary wave B may be over here or at any stage in the next one or two sessions.

ALTERNATE DAILY CHART

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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. The bull market from March 2009 to February 2020 may have been a complete fifth wave labelled Super Cycle wave (V).

A bear market 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

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Cycle wave II may be a continuing higher as a single zigzag. Hourly wave counts for the main daily chart work in the same way for this alternate. The degree of labelling for this alternate is all one degree higher.

TECHNICAL ANALYSIS

WEEKLY CHART

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

Price and On Balance Volume have both broken above resistance. This may release some energy and allow price to move higher.

The breakaway gap has its upper edge at 3,328.45. This may offer strong and final resistance.

If this gap is closed and / or if the AD line makes a new all time high in the next week or two, then a much more bullish wave count would be considered. Until that happens this analysis will continue to expect upwards movement is the first deep counter trend bounce within an ongoing bear market.

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 0.69 of the first wave down and lasted 11 days. In the bear market from March 2000 to October 2002, the first multi-day bounce retraced 0.89 of the first wave down and lasted 97 days. So far this current bounce has retraced 0.78 of the first wave down and has lasted 51 days, so it now seems reasonable to expect it to end soon.

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.

It would be normal to see a bounce end with some strength. A further increase in volume today suggests more upwards movement tomorrow.

The breakaway gap of 24th February has its upper edge at 3,328.45. A bearish analysis remains reasonable while this gap remains open. If this gap is closed, then a more bullish analysis that would expect new all time highs should then be considered.

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 both the AD line and price have moved higher. Upwards movement has support from rising market breadth. 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.

Today both price and the AD line are overall flat. There is no new divergence.

Today small and mid caps showed stronger upwards movement than large caps. With small and mid caps leading for the very short term, this divergence may be bullish, supporting the main Elliott wave count and the first hourly chart.

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 both price and inverted VIX have moved higher. 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.

Today both price and inverted VIX have moved sideways. 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 @ 05:52 p.m. EST.

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Follow my two Golden Rules:

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.