Upwards movement continued, fitting the alternate hourly Elliott wave count better than the main Elliott wave count. The target remains the same.
Summary: While upwards movement continues, the next target is at 2,227. A new low below 2,182.30 would indicate the expected pullback has finally arrived, and the target will be support about 2,120 and the lilac trend line.
Last monthly chart for the main wave count is here.
Last weekly chart is here.
New updates to this analysis are in bold.
MAIN WAVE COUNT
DAILY CHART
Click chart to enlarge.
Cycle wave V must subdivide as a five wave structure. At 2,500 it would reach equality in length with cycle wave I. This is the most common Fibonacci ratio for a fifth wave for this market, so this target should have a reasonable probability.
Cycle wave V within Super Cycle wave (V) should exhibit internal weakness. At its end, it should exhibit strong multiple divergence at highs.
Within cycle wave V, primary waves 1 and 2 may be complete. Primary wave 3 may have begun. Primary wave 3 may only subdivide as an impulse. So far within it intermediate wave (1) may be either complete today or very close to it.
Intermediate wave (2) may not move beyond the start of intermediate wave (1) below 2,083.79.
Intermediate wave (2) may find support close to the lilac trend line, which may also be close to the 0.618 Fibonacci ratio of intermediate wave (1).
At 2,473 primary wave 3 would reach equality in length with primary wave 1. This Fibonacci ratio is chosen for this target calculation because it fits with the higher target at 2,500.
The maroon channel is a best fit. The lower edge may provide support.
HOURLY CHART
Click chart to enlarge.
At 2,227 minor wave 3 would reach 1.618 the length of minor wave 1.
This wave count sees the middle of a third wave particularly weak; this is not common. The larger context of a fifth wave at cycle and Super Cycle degrees may see persistent unusual weakness though, so this wave count is possible.
Minute wave iv, when it arrives, may not move into minute wave i price territory below 2,182.30.
Along the way up, this wave count expects two relatively small fourth wave corrections: the first for minute wave iv and the next for minor wave 4. These may show up at the daily chart level as one or more red daily candlesticks or doji.
Price should now find support about the lower green trend line. It is possible that price could again breach support yet turn and continue upwards. If that happens, then another parallel line will be drawn.
The S&P often forms slow rounded tops. When it does this the many subdivisions make analysis difficult. Only when support is breached by movement that is clearly downwards and not sideways would it be an indication of a deeper pullback.
ALTERNATE WAVE COUNT
DAILY CHART
Click chart to enlarge.
There is a wave count that fits for the Dow Industrials that sees an imminent trend change. It relies upon an ending diagonal, but that idea will not fit well for the S&P.
What if an impulse upwards is now complete? The large corrections labelled primary waves 2 and 4 do look like they should be labelled at the same degree as each other, so that gives this wave count the right look.
Primary wave 4 ends within primary wave 2 price territory, but it does not overlap primary wave 1. Primary wave 1 has its high at 2,057 and primary wave 4 has its low at 2,083.79. The rule is met.
There is alternation between the double combination of primary wave 2 and the double zigzag of primary wave 4. Even though both are labelled as multiples W-X-Y, these are different structures belonging to different groups of corrective structures.
Primary wave 3 is shorter than primary wave 1. This limits primary wave 5 to no longer than equality with primary wave 3 at 2,285.53.
The equivalent wave count for DJIA expects an end now to upwards movement and the start of a large bear market. Only for that reason will this alternate for the S&P also expect a reversal here.
This wave count has good proportions. Primary wave 1 lasted a Fibonacci 34 days, primary wave 2 lasted 60 days, primary wave 3 lasted 40 days, and primary wave 4 lasted 52 days. Primary wave 5 may be more brief than primary wave 3. If it exhibits a Fibonacci duration, it may total a Fibonacci 34 days and that would see it end on the 22nd of December. If it is only a Fibonacci 21 days in duration, it may end more quickly on the 2nd of December.
DOW JONES INDUSTRIALS
DAILY CHART
Click chart to enlarge.
An ending contracting diagonal may be completing for the DJIA. This fits into the same picture as the alternate wave count for the S&P; both see a final fifth wave coming to an end very soon.
The 1-3 trend line is now overshot. Contracting diagonals normally end very quickly after this line is overshot, and it can be surprising how small the overshoot is. This wave count expects a very strong reversal on Monday or at the most sometime next week.
The diagonal is contracting, so the final fifth wave is limited to no longer than equality in length with primary wave 3 at 19,488.92.
TECHNICAL ANALYSIS
MONTHLY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
There is strong divergence between the new all time highs for price and RSI. This regular bearish divergence indicates weakness in price.
Volume is still declining as price continues higher. The rise in price is not well supported by volume.
WEEKLY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
Another upwards week comes with an increase in range but a strong decline in volume. This is partly due to the Thanksgiving Day holiday making this week short of one day, so not too much will be read into it.
On Balance Volume is bullish.
There is some mid term divergence between price and RSI: price is making new all time highs, but RSI is not following. This indicates weakness in price. It is not a signal of a trend change, only indication of weakness.
DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
Very light volume for Friday’s session is probably at least partly due to the short trading day for NYSE due to Thanksgiving Day. Not too much will be read into it today.
Overall, volume is still declining as price rises, even without considering Friday’s light volume. The rise in price is not well supported by volume, so it is suspicious.
ATR continues to decline. This does not look like a normal healthy trend.
Bollinger Bands widened though. There is some strength to this trend.
ADX is not yet extreme. This trend may continue for a while yet.
On Balance Volume is bullish at the daily chart level. There is persistent mid and long term divergence between price and OBV, but this is not a signal that upwards movement must end here. It is just a warning of weakness.
RSI is only just for Friday entering overbought. It may remain there for a reasonable time during a trend. If it is extreme and then exhibits divergence while extreme, that shall be read as a warning of a trend change coming up very soon. That is not the case yet. This trend may continue.
MACD is bullish.
This analysis strongly supports the main Elliott wave count.
VOLATILITY – INVERTED VIX CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
There are a few instances of multi day divergence between price and inverted VIX noted here. Bearish divergence is blue. Bullish divergence is yellow. It appears so far that divergence between inverted VIX and price is again working to indicate short term movements spanning one or two days. While this seems to be working more often than not, it is not always working. As with everything in technical analysis, there is nothing that is certain. This is an exercise in probability.
No new short term divergence is noted today between price and inverted VIX. There is longer term divergence, but this has proven more recently to be unreliable and will not be given any weight at this stage.
BREADTH – AD LINE
Click chart to enlarge. Chart courtesy of StockCharts.com.
Short term bullish and bearish divergence is again working between price and the AD line to show the direction for the following one or two days.
There is longer term divergence between price and the AD line, but like inverted VIX this has proven reasonably recently to be unreliable. It will be given no weight here.
There is no short term divergence noted today between price and the AD line.
BREADTH – MCCLELLAN OSCILLATOR
Click chart to enlarge. Chart courtesy of StockCharts.com.
On the 21st August, 2015, the McClellan Oscillator reached -71.56. Price found a low the next session, 104 points below the closing price of the 21st August. This very extreme reading for the 24th August would have been a strong indicator of a low in place.
On the 11th December, 2015, the McClellan Oscillator reached -80.82. It moved lower the next session to -92.65 and price moved 19 points lower. The extreme reading of 11th December might possibly have led to an expectation of a bigger bounce than the one that occurred, and might have misled analysis into missing the strong fall from 29th December to 20th of January.
The next most recent occasion where this oscillator was extreme was the 8th January, 2016. It reached -66.25 on that date. The low was not found for seven sessions though, on the 20th January 2016, almost 110 points below the closing price of the 8th January. At the low of the 11th February, there was strong bullish divergence with price making new lows and the oscillator making substantially higher lows. This may have been a strong warning of a major low in place.
The most recent occasion of an extreme reading was -75.05 on the 2nd of November. The last low came two days later.
As an indicator of a low this is not it. It is a warning of extreme levels. The next thing to look for would be some divergence with price and this oscillator at lows. Divergence is not always seen at lows, but when it is seen it should be taken seriously. Any reading over 100 should also be taken very seriously.
This indicator will be approached with caution. It is one more piece of evidence to take into account.
The McClellan Oscillator has just reached extreme at 60 and now exhibits divergence with price at Friday’s high. This does not mean price must turn here. The last time on this chart this oscillator reached 60 was on the 12th of July and price continued higher to the 15th of August before a reasonable correction began. It looks like this does not work well to indicate or warn of highs.
DOW THEORY
Major lows within the old bull market:
DJIA: 15,855.12 (15th October, 2014) – closed below on 25th August, 2015.
DJT: 7,700.49 (12th October, 2014) – closed below on 24th August, 2015.
S&P500: 1,821.61 (15th October, 2014) – has not closed below this point yet.
Nasdaq: 4,117.84 (15th October, 2014) – has not closed below this point yet.
Major highs within the bear market from November 2014:
DJIA: 17,977.85 (4th November, 2015) – closed above on 18th April, 2016.
DJT: 8,358.20 (20th November, 2015) – closed above this point on the 9th of November, 2016.
S&P500: 2,116.48 (3rd November, 2015) – closed above this point on 8th June, 2016.
Nasdaq: 5,176.77 (2nd December, 2015) – closed above this point on 1st August, 2016.
Dow Theory Conclusion: The transportations indicate an end to the prior bear market. The transportation index confirms a bull market.
This analysis is published @ 09:00 p.m. EST.
I’m going to move the degree of labelling within primary 3 up one degree. It looks more and more like P3 is coming to an end, then P4 must remain above 2,193.42.
Today that means the small red candlestick is minor 4.
Minor 5 up will follow to complete intermediate (3), target the same 2,227.
Then another larger correction for intermediate (4), and a final fifth wave up for intermediate (5) to complete primary 3, target the same 2,473.
Corrections are an opportunity to join the trend.
I’m creating yet another parallel copy of the lower edge of the best fit channel, which really isn’t a good fit anymore. A slow rounding top looks like it’s forming, very typical for this market.
This degree of labelling means that cycle V could be over in a few months, maybe about February / March 2017. That fits neatly with Lowry’s expectations. They see some strength now to this bull market, so don’t expect to see it end for a few months.
Looks good to me. Again RUT may be giving a heads-up regarding an impending reversal. It lead the way down during the last decline and is down well over 1% today. VIX retains open gap from this morning and stayed tapped yesterday’s high at 12.74 but held above it. A full green UVXY candle tomorrow means volatility probably going higher near term. Have a great evening everyone and go finish that left-over turkey! 🙂
I’m doing my best on the turkey. But I told my wife the other day, anything but turkey please!
Tomorrow’s trading will have a huge impact on how yours truly views the remaining intervention prowess of the erstwhile banksters. There have been a few times in the past when every technical indicator I look at suggested that we should see a market decline and we got a melt up instead. If they can once again arrest a market decline tomorrow despite the very extreme readings and other bearish signals we are still seeing in so many indicators, it might be time for us bears to run for the hills! 🙂
Taking another look at the DJI chart it does look as if we have five wave impulse up from the Nov 4 low. I guess this means either the impulse up is done or we are entering an extended fifth wave and in a wave two correction.
Looking like a fourth wave correction, in which case we should see the final spike up for the fifth wave to complete the pattern. We should see at that point one more 52 week low in UVXY and one of the more favorable set-ups for a long volatility trade I have seen in years. I am selling options against my long positions in anticipation of the final move higher and can hopefully add to my long positions with profits from those sales on the last wave up.
I may just get on board with you at the next 52 week UVXY low. If my data is correct that is at 10.41. Look for ten and a quarter?
I am guessing the correction to 2050 – 2020 on the SPX could push UVXY near 15. Is that reasonable?
Sounds just about right. The average cost of my UVXY position is around eleven even as I took assignment on some put options I sold. Also holding quite a few VIX 10 strike calls, some going out to March 2017. I have an open 2.00 point trailing stop on my UVXY positions and will tighten as we approach the 14.00 area and look to re-load on the next 52 week low. I plan on holding my VIX position for the immediate future.
The decline in futures not that convincing. I was actually hoping we would see an exhaustion gap up at the open today so the overnight decline means more slugging upwards probably. I still expect to see a final spike up prior to a close back below the ED 1-3 trendline in DJI. When this final wave completes, the reversal should be sharp with clear, clean impulsive waves down. Any wrangling back and forth means the banksters are still in charge and successfully fighting the impending trend change.
I think the round number pivots will again give us an early clue as to what is ahead. Price action around these round numbers has been remarkably prescient. If the DJI ED is indeed complete, the index should surrender the 19,000.00 pivot today or at the very latest tomorrow after doing so in overnights futures. If it does not I will be personally discarding that scenario in favor of Lara’s main count. The fact that it has not done so in overnight futures has already lessened its probability imo…
I agree Verne. So far today the DJIA has a small red doji forming. That’s not a sharp reversal.
For that extremely bearish wave count to have any weight at all price must behave as it should after an ED.
It’s just not doing that.
I am surprised at how little attention has been paid to the remarkable hubris and idiocy of the Indian government in arbitrarily changing their currency. Make no mistake about it folks, that is just a trial run, and what all bankrupt and corrupt governments will do eventually. People who were hoarding lots of cash in India will have to exchange the bills by December 30 and the process is ludicrous in the extreme, in its complication and time consumption. Some analysts have been opining that the fall in Gold premiums recently was because of slacking demand and a bearish signal but I think it is the exact opposite. Just as increased volume results in lower spreads, I think lots of people with cash are rushing to get rid of their soon to be worthless paper and that the Gold business in India is booming. They backed of their stated intention to limit Gold imports, supposedly to limit the ability of their citizens to turn their paper into a hard asset without the government’s permission, as opposed to exchanging one worthless piece of paper for another equally worthless piece. Fortunately for the Indian people they backed off that threat and presumably there was sufficient physical Gold available to meet the increased demand. You cannot make this stuff up and it would appear that Narendra Modi has taken complete leave of his senses. He seemed a very intelligent man.
Verni,
In fact the stats indicate the 24 hour time period after the demonetization announcement almost ONE year equivalent of GOLD was sold in India. When you read the reports that upto 60% of the GDP is untaxed (black) money circulating, these extreme measures are necessary. Additionally, only 5 to 7% transactions were done in non cash modes before the demonetization. The target is to have all transactions done through legit channels.
Indian government maintains that there are no limits to how much gold someone can buy but the caveat (and rightly so) is that all monies must be accounted for….businesses for generations have not paid any tax as all their dealings were in cash….Indian government introduced GST (VAT equivalent) and as the transactions increase on the legit side, GST revenues will go up for the Indian government.
I think import curbs will be next with Income Tax folks auditing significant holding in gold. Additionally, expect sweeping changes in property ownership as majority of untaxed money was channeled into unnamed properties (bogus untraceable names) by racketeers.
Sweeping changes that will cause short term upheaval before the benefits of a legit system can be reaped…
While I do not advocate tax evasion, the markets you describe (also huge in Spain) are a direct consequence of the confiscatory nature of taxing schemes inflicted on so many economies and the frightfully wasteful nature of the vast majority of government spending. People will continue to find creative ways to hold onto their money, including expanding bartering and moving away from fiat currencies altogether. Nobody uses the Zimbabwe dollar anymore. I don’t share your optimism regarding the ultimate success of attempts to impose capitol controls of any sort. History tells us the ultimate outcome is a slow and painful death of the economies on which they are imposed.
I am not sure how the authorities are going to audit what they cannot find. The vast majority of gold holdings will be in hands of retail purchasers in India.
“History tells us the ultimate outcome is a slow and painful death of the economies on which they are imposed.”
I completely agree.
The other thing I notice is that we are either ignorant of history, or we just don’t learn the lessons it has for us.
We are doomed to repeat our mistakes.
The definition of doing the same thing over and over, and expecting a different outcome is stupidity. I fear our species is remarkably stupid as a group.
As a biologist I also notice we ignore what the science of biology has to tell us. Any species that pollutes it’s environment to an extent that it cannot be cleaned up (by other species, most notably bacteria) will eventually suffer population crash. That’s not pretty. But we refuse to understand that must be where we are headed. Instead we argue and delay, and don’t change behaviour enough to avoid population crash, which makes it inevitable.
Vern,
I respectfully disagree with you and your analysis of India’s demonetization. The black money problem in India is a real serious one. Most bribes take place in cash. Most elections are won by buying votes with cash. Most property transactions are cash (suitcase full of cash). For a while you could buy property in India and only show 25% of its value. 75% of it was cash transferred which was unaccounted ( This process started changing since Modi came into office). Most civil servants, businessman, politicians used that cash to buy more properties, gold, influence etc. The BIGGEST losers from what Modi did are the ones mentioned above. It is after all a country where less than 5% pay any income tax. And common man has to bribe government officials from top to bottom to get anything done. Short term this is a negative for India but longer term this will benefit the country greatly. Remember, civil servants, politicians, etc. have rooms full of cash; mostly ill gotten.
This move is long term bullish for Indian currency too.
Oh I certainly agree the problems that you cite are real.
Here is the critical question – do you think changing the denomination of fiat money is going to change the behavior of the those engaged in the activities you are citing?
The only way you can change the behavior of a society is to change the behavior of its individuals. The people need to change folk, not the currency denomination. Now I am not a complete anti-nomian by any means. I believe laws are necessary to control the conduct of people of criminal proclivity. When it comes to financial misconduct, the way to deal with it most effectively is to remove or diminish the BENEFITS of engaging in that sort of activity. Changing the currency denomination is silly as a solution to what ails India. The same folk currently occupying offices and taking bribes will be there after Dec 30 I am afraid. They will find a way. 🙂
I agree Vern,
But bribery will become harder. The same corrupt officials may still receive bribes but the amount they receive will decline greatly. I am already hearing solid evidence of this from friends and family through out the country. Ultimately, countries like India are entering a long term bull market (after short to medium term issues). I would wager that if you are long term bear on US markets, one good way to hedge that bet is to be long India. Time will tell but since I am long term investor, I am planning on doing so.
Not surprising that the new change will serve as a speed bump for the run-away train of bribery and corruption. I am curious to see if things would have changed permanently for the better in a few months from now. My suspicion is that even as we speak, they are devising new and inventive ways to continue with business as ususal; it’s just the nature of the beast I am afraid…
I do think the future if the country is indeed bright but not because of attempts to deal with bribery by eliminating high denomination notes, but rather because India as a county has one of the world’s very best demographic profiles.
By the way, I have quite a few good Indian friends from graduate school. I still remember how mind boggling it was when they told me that even with a bribe, it used to take five years to get a phone line in India.
you can get a new cell phone in India within 30 minutes or less without any bribes now. Landline, most people don’t use anymore.
Interesting that one count calls for a melt up while the other a massive melt down, both to occur in the intermediate time frame. I’m seeing massive liquidity gaps across many markets; widening bid ask spreads, and terrible execution in individual constituents. Doesn’t seem like conditions warrant a rip fest. Guess it’s time to hit the Caribbean for one of these big cold front swells!
That is a very interesting observation. If the market continues to go higher, it is going to be a lot easier to trade the long side, at least for me as I use option spreads to limit my risk. The low volatility means option prices are cheap and so are premiums but my objective is more about getting positioned for the eventual top. If we are seeing an ED as appears to be the case in DJI, things are going to change in a big hurry and the options for making profitable downside trades may not be at all trivial. It has been the objective of central banksters the last few years to try and punish short sellers. This why there is such a remarkable absence of selling pressure. Even if you were right about market direction but did not understand what the banksters were doing (which required taking profits immediately) you would get whipsawed. What happened on election night was an example of what they have been doing for years, only set forth in very stark relief. I have never ever seen anything like that and I wager no one else ever has. I cannot imagine a more dire warning about how unstable and dangerous a place these markets have become. They are going to attempt the same manipulation when the final wave up completes, and the moves are going to become even more violent. I am making arrangements to expand my after hours trading options in US markets, as well as opening another trading account that allows me to trade more easily on foreign markets. Trading what is coming is going to take a well thought-out strategy to stay ahead of the banksters. Of course if we are seeing a GSC top, one could ignore the sound and fury and theoretically set one’s position and walk away for the next year or so and come back to 10,000.00X gains. One reason I am not going to do that is that I expect the rotten banksters to change the rules of the game once they loose control. The preferred strategy for bear markets in my humble opinion, remains the time honored scalp!
The monthly chart is helpful to put things into perspective. I am thinking we are very, very close to a swing high if not THE top. If we continue higher all the way to 2500 SPX, we will have the constant risk that THE top can come at almost any point.
I am thinking it may be time to try some more long volatility positions. Perhaps Monday. A break of both of the lower channel lines on the hourly chart is not far away and will be our first signal.
Thanks Lara. Have a great remainder of the weekend.
I do think it will become clear next week. I for one will be forced to make some big decisions about my volatility positions which are fully loaded. It is possible that a series of new 52 week lows could be heralding (so to speak 🙂 ) the start of a protracted march higher; it would be quite remarkable if that were to happen from some of most over-bought conditions we have seen for more than five years. Price will tell all!