A small range inside day closes as a red doji. The market spent the day essentially consolidating.

Price remains above the short-term Elliott wave invalidation point. The target remains the same.

Summary: For the very short term, price is still at a resistance line (the beige Elliott channel) that was initiated in October 2020 and has initiated multiple pullbacks. VIX has given two bearish signals in a row. There is reasonable risk here of another multi-day pullback while price remains below the resistance line. If price closes above this line on a daily basis, then that would be a bullish signal.

Both main and alternate wave counts expect the low of the 30th of October to not be breached for many months.

The next target zone for the upwards trend is at 4,585 – 4,608. About this target zone another multi-week pullback or consolidation may develop.

An alternate wave count at the weekly chart level has an about even probability with the main weekly chart.

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 tenth 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.

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. The target for primary wave 3 is now calculated at both primary and intermediate degrees, so it widens to a zone.

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.

DAILY CHART

Click chart to enlarge.

The daily chart focusses on the unfolding impulse of primary wave 3.

Primary wave 3 may only subdivide as an impulse.

Intermediate waves (1) through to (4) may be complete. Intermediate wave (5) may be underway.

Intermediate wave (2) was a very deep zigzag lasting 14 sessions. Intermediate wave (4) may be a complete expanded flat lasting 14 sessions. There is alternation and perfect proportion between intermediate waves (4) and (2).

An Elliott channel is added in beige about primary wave 3. The upper edge may provide resistance and initiate pullbacks, which normally occur within an upwards trend.

The first target for primary wave 3 may have a better fit with the target for minor wave 3 on the hourly chart. As price approaches the first target, if the structure is incomplete or price keeps rising, then the second target may be used.

Primary wave 1 looks extended. The second target for primary wave 3 expects it to also be extended.

No second wave correction within intermediate wave (5) may move beyond its start below 3,694.12.

MAIN HOURLY CHART

Click chart to enlarge.

Intermediate wave (5) may subdivide as either an impulse or an ending diagonal. An impulse is much more common, so it is much more likely. An impulse will be expected until and unless overlapping suggests a diagonal should be considered.

Within intermediate wave (5): Minor waves 1 and 2 may be complete, and minor wave 3 may have passed through its middle portion. Momentum (MACD) is now showing some decline, which fits with this wave count.

Within minor wave 3: Minute waves i, ii and iii may be complete, and minute wave iv may be unfolding as a triangle as labelled (it may also morph into a double combination).

Minute wave iv may not move into minute wave i price territory below 3,847.51.

Occasionally, the S&P can behave a little like a commodity for the ends of its third wave impulses. There may be an increase in upwards momentum for the end of minor wave 3, or for the end of minor wave 5 to end intermediate wave (3).

However, prior to any expectation of an increase in upwards momentum the upper edge of the beige Elliott channel may be expected to again provide resistance. Price is still at this trend line, which has initiated at least 7 pullbacks since its inception on October 12, 2020. Price may again react downwards from this trend line. If that trend line is breached by upwards movement, then a release of energy may be seen for the end of minor wave 3.

ALTERNATE HOURLY CHART

Click chart to enlarge.

It is also possible that minor wave 3 may be over and sideways movement of the last two sessions may be minor wave 4.

Minor wave 4 may be unfolding as a triangle as labelled, but it may also yet morph into a double combination. If the triangle is invalidated, then that does not mean this correction is not minor wave 4 but only that minor wave 4 would need to be relabelled as a different Elliott wave corrective structure.

Minor wave 4 may not move into minor wave 1 price territory below 3,843.09.

If minor wave 3 is over at the last high, then it would be shorter in length than minor wave 1. Minor wave 3 would be 114.82 points in length. So that the core Elliott wave rule stating minor wave 3 may not be the shortest wave of minor waves 1, 3 and 5 is met, minor wave 5 may not be longer than minor wave 3. When the end of minor wave 4 and the start of minor wave 5 is known, then the limit may be calculated for this wave count.

Because this wave count sees minor wave 3 as shorter than minor wave 1, it has a lower probability than the main hourly wave count.

ALTERNATE WAVE COUNT

WEEKLY CHART

Click chart to enlarge.

This wave count is the same as the first weekly chart with the exception of the degree of labelling within cycle wave V.

If the degree of labelling within cycle wave V is moved down one degree, then only primary wave 1 may be currently unfolding. When primary wave 1 may be complete, then a multi-week pullback or consolidation may begin for primary wave 2. Primary wave 2 may not move beyond the start of primary wave 1 below 2,191.86.

This wave count is more bullish than the main weekly chart. It expects that cycle wave V may be in an earlier stage and may yet last many more years than the main weekly chart expects it to. These two weekly wave counts are of an even probability. In coming months to years classic technical analysis will be used to judge the probability of these two weekly wave counts.

DAILY CHART

Click chart to enlarge.

This wave count is the same as the first daily chart except the degree of labelling is one degree lower within primary wave 1.

The targets for a third wave up to end is the same.

TECHNICAL ANALYSIS

WEEKLY CHART

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

The Bearish Engulfing candlestick pattern last week is negated by a strong bullish candlestick this week with new all time highs.

ADX indicates the trend is extreme because the ADX line is above both DX lines, but there is a long way to go before ADX reaches 45 and very extreme. This market has a strong bullish bias and extreme conditions can persist for reasonable periods of time while price travels a considerable distance.

DAILY CHART

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

The trend is not extreme at the daily chart level. On Balance Volume is bullish. RSI is still neutral. The series of higher highs and higher lows from the low of the 30th of October continues.

The breakaway gap may provide support for smaller pullbacks at this time. The lower edge of the gap is at 3,872.42.

A very small range inside day closes as a red doji. Doji on their own are not reversal patterns. This represents a pause and may be a normal occurrence within an upwards trend.

Down volume and breadth dominated during the session, but only just. This is not particularly bearish.

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 4th of February. This is a strong bullish signal and supports the main Elliott wave count.

Large caps all time high: 3,931.50 on February 10, 2021.

Mid caps all time high: 2,542.06 on February 11, 2021.

Small caps all time high: 1,305.50 on February 10, 2021.

Last week both price and the AD line have made new all time highs. There is no divergence. Upwards movement has support from rising market breadth. 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 both the AD line and price have moved slightly 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.

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. There is all of long, mid and short-term bearish divergence. 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. Price has made a new high, but inverted VIX has failed by a very small margin to make a new short-term high above the prior high for the week beginning November 30, 2020. There is again all of short, mid and long-term bearish divergence.

Comparing VIX and VVIX: Both VIX and VVIX have moved lower. 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 price completed an inside day, which closed red, and inverted VIX has moved higher. This divergence is bullish for price for the short term.

Comparing VIX and VVIX at the daily chart level: VVIX has made a new high above the high of October 28, 2020, but VIX has not. This divergence is bearish for the mid term. Today VIX has moved lower, but VVIX has moved higher. This divergence is bearish for the short term for price and contradicts bullish divergence from VIX.

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.

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 @ 07:12 p.m. ET.

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New updates to this analysis are in bold.