S&P 500: Elliott Wave and Technical Analysis | Charts – August 18, 2020
Summary: The trend remains upwards.
A trend change may come before 3,432.15. Prior to this point a multi-week pullback or a 180° reversal may occur.
The biggest picture, Grand Super Cycle analysis, is here.
Monthly charts are here, with video here.
ELLIOTT WAVE COUNTS
FIRST WAVE COUNT
WEEKLY CHART
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Confidence in this wave count may now be had as price has made a new all time high above 3,393.52.
Cycle wave V may last from one to several years.
Cycle wave V may be underway and 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 wave 1 may be nearing completion. Primary wave 2 may not move beyond the start of primary wave 1 below 2,191.86.
DAILY CHART
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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 again be incomplete. Look for corrections to find support about the lower edge of the best fit channel while primary wave 1 continues higher. If this channel is breached, then that may provide early indication that primary wave 1 may be over.
When it arrives, primary wave 2 may unfold as a multi-week pullback and may not move beyond the start of primary wave 1 below 2,191.86.
HOURLY CHART
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The hourly chart focusses on the middle of minor wave 3 from the end of minute wave ii within it.
Minor wave 4 may have unfolded as an expanded flat correction. This provides alternation with the zigzag of minor wave 2. There is good proportion between the two corrections, which gives the wave count the right look.
Minor wave 5 must subdivide as a five wave structure. Minute waves i and ii may be complete. Minuette wave (ii) within minute wave iii may not move beyond the start of minuette wave (i) below 3,361.64.
Now that resistance at the prior all time high has been breached, momentum for the middle of a third wave may increase.
SECOND WAVE COUNT
DAILY CHART
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This wave count is the same as the first wave count with the exception of the degree of labelling within cycle wave V. If the degree of labelling is moved up one degree, then it is possible that cycle wave V to end Super cycle wave (V) to end Grand Super Cycle wave I is very close to completion.
Primary waves 1 through to 4 within cycle wave V may be complete. Primary wave 5 may end now at any stage. If it continues further (or if it is yet to unfold), then intermediate wave (4) may not move into intermediate wave (1) price territory below 3,235.32. At this stage, a new low below 3,235.32 could not be part of intermediate wave (4) and would indicate an end to primary wave 5.
A new low below 2,191.86 would invalidate the first wave count and provide full confidence in this second wave count.
Cycle wave V has moved above the end of cycle wave I at 2,940.91, avoiding a truncation. It has now also moved beyond the price territory of cycle wave IV to a new all time high above 3,393.52.
HOURLY CHART
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At the hourly chart level, this wave count is exactly the same as the first wave count with the sole exception being the degree of labelling. Here, the degree of labelling is one degree higher.
THIRD WAVE COUNT
WEEKLY CHART
A new all time high has invalidated this wave count.
FOURTH WAVE COUNT
A new all time high has invalidated this wave count.
TECHNICAL ANALYSIS
WEEKLY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
A decline in range and volume last week indicates weakness. There is strong resistance here at the last all time high at 3,393.52. If this can be overcome, then expect some energy to be released and to see price move up with a little more strength.
RSI is not overbought; there is room for upwards movement to continue.
DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
A target from the flag pole would be at 3,405. This supports the first Elliott wave count.
Resistance at the prior all time high has today been overcome intra-session, but this session has failed to close to a new all time high.
Despite the last two sessions both being upwards sessions, down volume has dominated at 55% yesterday and 63% today. This is bearish for the short term. Upwards movement looks weak.
If price can close above 3,393.52, then that would be further support for a bullish case.
Volume is weak, ATR is now extreme, and RSI exhibits bearish divergence. There is still room for this upwards trend to continue before it ends, but the end looks likely to be close.
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 the NYSE all issues AD line has made another new all time high, although Lowry’s Operating Companies Only AD line still has not. This divergence is bullish and noted on this chart, but failure of the OCO AD line to confirm this divergence reduces the strength of the signal.
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.
All of small, mid and large caps have now made new swing highs above the prior highs of the 8th of June. This last rise was led by large caps, which is a feature of an aged 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.
Today price has moved higher, but the AD line has moved lower. This divergence is bearish for the short term.
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. There remains over two years of strong bearish divergence between price and inverted VIX.
Last week both price and inverted VIX have moved higher. There is no new divergence.
Comparing VIX and VVIX: From weeks beginning 1st June to this last week, VIX has made new lows as price has made new highs, but VVIX has failed to make corresponding new lows with VIX. VVIX remains slightly elevated. This divergence is not strong, but it is bearish for price. VIX has moved slightly lower for last week, but VVIX has moved more sharply higher. This is a week of single instance divergence, which 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, but inverted VIX has moved lower. This divergence is bearish for the short term.
Comparing VIX and VVIX at the daily chart level: VIX is making new lows, but VVIX remains slightly elevated. This divergence is bearish.
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.
All of Nasdaq, S&P500 and now DJT have made new swing highs above prior highs of the 8th of June, but DJIA has not.
Published @ 09:08 p.m. ET
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New updates to this analysis are in bold.