The alternate Elliott wave count is looking increasingly likely, but it remains unconfirmed.

Summary: The main wave count has further reduced in probability, but the alternate still requires confirmation. This is a big trend change, even for the bull wave count, and for the bear wave count the big trend change calls for a huge market crash. I will assume the trend remains the same until proven otherwise, and will present all information to members to make their own judgements and act accordingly.

To see a weekly chart and how to draw trend lines go here.

Changes to last analysis are italicised.

Bull Wave Count

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The bull wave count sees primary 1-2-3 within an impulse for a cycle degree wave V.

The bear wave count sees primary A-B-C zigzag for a cycle degree B wave.

Minuette wave (b) has not found support at the lower diagonal trend line. Minuette wave (c) must begin from here. At 2,146 now minuette wave (c) would reach equality in length with minuette wave (a).

The diagonal of minor wave 5 is contracting so minute wave v must be shorter than minute wave iii. Minute wave iii may not be the shortest wave. At 2,212.95 minute wave v would reach its maximum length at equality with minute wave iii.

Contracting diagonals most often end with a reasonably strong overshoot of the 1-3 trend line. The target would see this.

The diagonal trend lines are converging, and they are getting to be quite close together. This structure must end before the diagonal trend lines cross over which would be on 3rd August.

Minuette wave (b) may not move beyond the start of minuette wave (a) below 2,067.93.

Diagonals normally adhere well to their trend lines. This one has small overshoots and one small breach at minuette wave (a) within minute wave iii. Monday’s session properly breaches the lower trend line, and also the aqua blue trend line. This reduces the probability of this main wave count today, and now the alternate should be seriously considered.

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Minuette wave (b) may have continued lower, but it should have found support and stopped at the lower diagonal trend line.

At 2,146 now minuette wave (c) would reach equality in length with minuette wave (a).

Only because there is not confirmation of the alternate below, this is still my main wave count. I will approach this market at this time by assuming the trend remains the same (bullish) until a trend change to a bear market is confirmed. That involves some uncomfortable fence sitting for a few days while I wait for confirmation.

Alternate Bull Wave Count

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It is possible that the S&P has seen a primary degree (or for the bear count below a cycle degree) trend change twelve days ago.

This wave count absolutely requires confirmation at the daily chart level before any confidence may be had in a primary (or cycle) degree trend change. Confirmation would come with:

1. A new low below 2,067.93.

2. A clear five down on the hourly chart.

3. A close of 3% or more of market value below the lower aqua blue trend line. If the line was breached at 2,100 then this rule needs a daily close at 2,037 or below.

4. A clear five down on the daily chart.

5. A new low below 1,820.66.

As each condition is met the probability of a substantial trend change would increase.

Primary wave 4 would most likely be a time consuming flat, triangle or combination in order to exhibit structural alternation with the zigzag of primary wave 2. Primary wave 2 lasted 12 weeks. Primary wave 4 is likely to be longer in duration because combinations and triangles particularly are more time consuming than zigzags which tend to be quick corrections. Primary wave 4 may be expected to last more than 12 weeks, and may end with a total Fibonacci 13 or more likely 21 weeks.

For this more bearish wave count to be taken seriously it still requires confirmation at least below 2,067.93.

At this stage, a trend change is looking more likely so I’ll list points in its favour:

1. ADX is rising and above 20, and the -DX line is above the +DX line indicating a new downwards trend.

2. The long held bull market trend line, the strongest piece of technical analysis on ALL charts, is again now breached. But the breach needs to be by a close of 3% or more of market value to be using that trend line correctly.

3. There is quadruple negative divergence between price and MACD on the weekly chart.

4. There is double negative divergence between price and MACD on the daily chart.

5. There is persistent and strong negative divergence between price and RSI on the monthly chart. The last time this happened was October 2007 and we all know what happened after that…

6. A long held bull trend line on On Balance Volume going back to October 2014 has been breached and is no longer providing support.

7. Using Dow Theory, DJT and Nasdaq recently failed to confirm a continuation of the bull market. This does not indicate a bear market and just indicates caution.

While a bear market is unconfirmed I uncomfortably sit on the fence.

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Downwards increase in momentum for Monday’s session is becoming a little more convincing as a third wave.

At 2,069 minute wave iii would reach 1.618 the length of minute wave i.

The channel is today redrawn about the middle of minute wave iii using Elliott’s technique. If subminuette wave iii has ended here, then it would be 2.20 points short of 2.618 the length of subminuette wave i. This would expect some sideways movement for tomorrow as a small fourth wave correction unfolds, most likely as a flat or triangle, but maybe also more quickly as a zigzag so that it has structural alternation with the combination of subminuette wave ii.

There is no upwards movement at the end of Monday’s session, so it is not possible to say that subminuette wave iii is over because it could most certainly continue lower. If this more bearish wave count is correct, then the trend would be down and smaller upwards / sideways movements against that trend should find resistance at the upper orange trend line.

Subminuette wave iv may not move into subminuette wave i price territory above 2,104.89.

Bear Wave Count

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The subdivisions within primary waves A-B-C are seen in absolutely exactly the same way as primary waves 1-2-3 for the bull wave count.

To see the difference at the monthly chart level between the bull and bear ideas look at the last historical analysis here.

At cycle degree wave b is over the maximum common length of 138% the length of cycle wave a, at 170% the length of cycle wave a. At 2,393 cycle wave b would be twice the length of cycle wave a and at that point this bear wave count should be discarded.

While we have no confirmation of this wave count we should assume the trend remains the same, upwards. This wave count requires confirmation before I have confidence in it. Full and final confirmation that the market is crashing would only come with a new low below 1,370.58. However, structure and momentum should tell us long before that point which wave count is correct, bull or bear.

On Balance Volume has very now clearly breached a trend line which began back in October 2014. This may be an early warning of more downwards movement to come.

Technical Analysis

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ADX is rising and above 15. This indicates the potential start of a new trend. The direction would be down.

While price remains above the lower aqua blue trend line a bull market should be assumed to remain intact. Only when this lower aqua blue trend line is breached by a close of 3% or more of market value would a bear market be indicated. That would require a close at 2,037 or below.

That trend line is long held (it began in November 2011), repeatedly tested and reasonably shallow so it is highly technically significant and should be respected. It remains the strongest piece of technical analysis on all charts.

On Balance Volume has turned strongly downwards. This fall in price is now supported by volume and is no longer suspicious.

On Balance Volume is showing negative divergence with price back to February. The recent rise in price to new all time highs is not supported by volume and so is suspicious. This may indicate that when the bear market arrives it may be deeper and more long lasting than recent corrections.

The shorter EMA needs to cross below the longer EMA to provide further confidence in a bear market. If tomorrow continues lower, this condition may be met.

This analysis is published about 09:44 p.m. EST.