Price has been consolidating for the last few sessions. A breakout may come very soon, possibly tomorrow.

Summary: The bounce may be over. Downwards movement may resume. A mid-term target is at 2,774.

For the long term, a sustainable high may now be in place on June 8th. The main wave count has two final targets at 2,031 and 1,708. The daily alternate wave count has a target at 1,289 for a third wave down.

A new low below 2,954.86 would invalidate the third alternate wave count and provide confidence in downwards targets.

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

Last monthly charts are here. Video is here.

ELLIOTT WAVE COUNTS

MAIN WEEKLY CHART

Click chart to enlarge.

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. Primary waves A and B may both be complete. A second target is calculated at primary degree.

Cycle wave II may not move beyond the start of cycle wave I below 666.79.

MAIN DAILY CHART

Click chart to enlarge.

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). It may now be complete.

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 have ended mid way within the channel. A breach of the channel with a full daily candlestick below that does not touch the lower edge may be an indication that the bounce labelled primary wave B may be over and primary wave C downwards may have begun.

Intermediate wave (2) within primary wave C may not move beyond the start of intermediate wave (1) above 3,233.13.

Two targets are calculated now for primary wave C. If price approaches the first target and either the structure of primary wave C is incomplete or price keeps falling, then attention would turn to the second target.

MAIN HOURLY CHART

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Intermediate wave (1) within primary wave C may be complete. There is disproportion within intermediate wave (1) between minor waves 2 and 4, but there is alternation. The S&P does not always exhibit good proportion.

Intermediate wave (2) may be a complete expanded flat correction. Minor wave B within intermediate wave (2) is a 1.38 length of minor wave A. This is within the most common range for B waves within flats of up to 1.38. Minor wave C exhibits no Fibonacci ratio to minor wave A. The structure of minor wave C may now be complete.

There may now be almost complete three overlapping first and second waves: intermediate waves (1) and (2), minute waves i and ii, and minuette waves (i) and (ii). When minuette wave (ii) may be complete, then a downwards breakout may be expected to come soon.

Subminuette wave c within minuette wave (ii) may move beyond the end of subminuette wave a at 3,120 to avoid a truncation. 

If it continues further, then intermediate wave (2) may not move beyond the start of intermediate wave (1) above 3,233.13.

FIRST ALTERNATE DAILY CHART

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This alternate daily chart follows the First Alternate Monthly chart.

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 a complete zigzag. A target for cycle wave III is now calculated.

Intermediate wave (2) within cycle wave III may not move beyond the start of intermediate wave (1) above 3,233.13.

FIRST ALTERNATE HOURLY CHART

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Cycle wave II may be a complete 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.

THIRD ALTERNATE DAILY CHART

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This alternate daily chart follows the third alternate monthly chart. It will be published daily because the structure of the current upwards wave is different and so the invalidation point is different. This alternate chart labels the subdivisions of the long bull market differently. The channel is a best fit.

The target for the end of this bull market is provisional. It would best be calculated at primary degree, but that cannot be done until all of primary waves 1 through to 4 are complete. At that stage, the target will be recalculated and will very likely change.

Cycle wave V must subdivide as a five wave motive structure, most likely an impulse. Primary wave 1 within cycle wave V may be nearing completion.

Within primary wave 1: intermediate waves (1) through to (3) may be complete and intermediate wave (4) may not move into intermediate wave (1) price territory below 2,954.86.

Use Elliott’s first technique to draw a channel about primary wave 1. Draw the first trend line from the ends of intermediate waves (1) to (3), then place a parallel copy on the end of intermediate wave (2). Intermediate wave (4) remains within the channel and may have found support about the lower edge.

When primary wave 1 may be a complete five wave structure, then primary wave 2 should then unfold as a multi-week pullback and may not move beyond the start of primary wave 1 below 2,191.86.

In the short term, invalidation of this wave count by a new low below 2,954.86 would add confidence to the first two wave counts.

This alternate wave count is bullish.

Cycle wave V may last from one to several years.

TECHNICAL ANALYSIS

WEEKLY CHART

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

Last week completes a bearish candlestick reversal pattern in Dark Cloud Cover. This is a strong example of this pattern with the close this week very near open for the prior week.

DAILY CHART

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

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 would increase in probability.

Towards the high of 8th of June were a 90% and an 80% up day. Those have now been followed by a very strong 90% down day (98.4% of volume was down and 99.6% of points were down) within three sessions. This represents a 180° reversal in sentiment from bullish to bearish, supporting the view of a sustainable high in place.

The island reversal is comprised of an exhaustion gap created on June 5th and now a possible breakaway gap created on June 11th. This breakaway gap may be used as resistance at 3,181.49, as breakaway gaps should not be closed while the resulting trend unfolds.

The breakaway gap of 24th February remains open and may continue to do so while the resulting trend from it continues.

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.

Bullish divergence noted two weeks ago remains.

Last week both price and the AD line moved lower. 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.

Of all large, mid and small caps, it is small caps that are furthest off their all time highs and large caps that are closest. This rise is led by large caps, which is normally a feature of an aged bull market and not a new bull market.

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.

Although the NYSE AD line has made new all time highs, Lowry’s OCO AD line did not. Bullish divergence may still support a bullish wave count.

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

Last week VIX has made a new low below the low five weeks ago, but price has not. This divergence is bearish.

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.

VIX has made a new swing low below the prior swing low of March 13th / 14th, but price has not. This divergence is bearish and supports either the main or first alternate Elliott wave counts.

For the third day in a row price has moved lower (or closed red with downwards volume dominant), but inverted VIX has moved higher. This divergence is bullish and supports the third alternate daily Elliott wave count.

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.

At this time, to shift Dow Theory from viewing a bear market to confirmation of a new bull market would require new highs made on a closing basis:

DJIA – 29,568.57

DJT – 11,623.58

Adding in the S&P and Nasdaq for an extended Dow Theory:

S&P500 – 3,393.52

Nasdaq – 9,838.37 – closed above on June 8, 2020.

Published @ 06:39 p.m..

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New updates to this analysis are in bold.