A small downwards day was not expected for the short term, but overall the wave count remains the same.

Summary: A deeper pullback looks very likely now to have arrived. It may last at least another five days and possibly a few weeks longer. Target zones are either 2,282 – 2,234 or 2,368 – 2,353. A new low below 2,277.53 would indicate the lower target range should be used.

For the very short term, a second wave correction may move higher over the next one to few days. The target is at 2,380 – 2,383.

New updates to this analysis are in bold.

Last monthly and weekly charts are here. Last historic analysis video is here.

MAIN ELLIOTT WAVE COUNT

WEEKLY CHART

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Cycle wave V is an incomplete structure. Within cycle wave V, primary wave 3 may be incomplete or it may be complete (alternate wave count below).

Primary wave 4 may not move into primary wave 1 price territory below 2,111.05.

As price moves lower look for support at each of the longer term trend lines drawn here across previous all time highs. Next support at the cyan line may be met soon.

The main and alternate wave counts in yesterday’s analysis are today swapped over. Price behaviour does not look like a larger primary degree correction. So far it looks more like a shallow minor degree correction.

DAILY CHART

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All subdivisions are seen in exactly the same way for both daily wave counts, only here the degree of labelling within intermediate wave (3) is moved down one degree.

This wave count expects the current correction is minor wave 4, which may not move into minor wave 1 price territory below 2,277.53. A new low below this point would confirm the correction could not be minor wave 4 and that would provide confidence it should be primary wave 4.

Minor wave 4 may last about 26 days if it is even in duration with minor waves 1, 2 and 3. That would give the wave count good proportions and the right look. So far minor wave 4 has lasted only 9 days, so it may continue for another 17 if it is even in duration with minor waves 1, 2 and 3. However, zigzags are usually quicker structures than combinations. If minor wave 4 is unfolding as a zigzag (which looks likely and would give perfect alternation), then it may complete in a total Fibonacci 13 days, so it may end now in another 4 days.

At this stage, it is looking like this wave count may be more likely than the alternate wave count. A correction at minor degree for minor wave 4 should look similar in range and strength to minor wave 2, which so far it does.

Minor wave 4 may end within the price territory of the fourth wave of one lesser degree about 2,368 to 2,353.

This wave count now expects choppy overlapping movement to find support at the wider blue Elliott channel.

HOURLY CHART

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Minor wave 4 may be unfolding as a zigzag. It looks to have begun with a five down for minute wave a. Minute wave b looks like an incomplete zigzag.

The target for minute wave b is adjusted today. The three point target zone is calculated at two degrees.

The risk to this wave count for the short term is that the structure of minute wave b is incorrectly labelled. At this stage, minute wave b is labelled as an incomplete zigzag, but the labelling within it may change again while it is incomplete because it may yet turn out to be any one of more than 23 possible corrective structures. It is difficult to predict with accuracy the small movements within B waves due to the high level of variation they exhibit.

Minute wave b may not move beyond the start of minute wave a above 2,400.98.

Minute wave c may end when price touches the lower edge of the blue channel copied over from the daily chart.

At its end, minute wave b may offer an opportunity to join the downwards trend for minor wave 4. However, this is expected to be a relatively shallow correction while the larger trend remains up. It is not advised to trade against the trend; corrections present an opportunity to join the larger trend. Only the most experienced and nimble traders should consider trading small counter trend movements.

Always remember my two Golden Rules:

1. Always use a stop.

2. Do not invest more than 1-5% of equity on any one trade.

ALTERNATE DAILY CHART

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This was the main wave count yesterday. It is now switched over to an alternate.

Primary wave 2 was a flat correction lasting 47 days (not a Fibonacci number). Primary wave 4 may be expected to most likely be a zigzag, but it may also be a triangle if its structure exhibits alternation. If it is a zigzag, it may be more brief than primary wave 2, so a Fibonacci 21 sessions may be the initial expectation. If it is a triangle, then it may be a Fibonacci 34 or 55 sessions.

Intermediate wave (3) is shorter than intermediate wave (1). One of the core Elliott wave rules states a third wave may never be the shortest wave, so this limits intermediate wave (5) to no longer than equality in length with intermediate wave (3). If intermediate wave (5) is now over, then this rule is met.

Minor wave 3 has no Fibonacci ratio to minor wave 1. If minor wave 5 is now over, then it is 4.14 points longer than equality in length with minor wave 3.

Intermediate wave (5) may have ended in 27 days, just one longer than intermediate waves (3) and (4). This gives the wave count good proportions.

The proportion here between intermediate waves (2) and (4) is acceptable. There is alternation. Both are labelled W-X-Y, but double zigzags are quite different structures to double combinations.

The following correction for primary wave 4 should be a multi week pullback, and it may not move into primary wave 1 price territory below 2,111.05.

TECHNICAL ANALYSIS

WEEKLY CHART

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

Last week completes a red doji, which moved price lower, after nine green weekly candlesticks in a row. The trend has changed from up to neutral. Volume is lighter this week and the fall in price is not supported by volume. This looks like a pause within a trend and not a new trend.

There is a long way for On Balance Volume to go to find support.

RSI may now return from oversold.

ADX did not reach extreme. There is room for the trend to continue further.

DAILY CHART

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

Price is range bound with resistance now about 2,375 and support about 2,350. Within the consolidation, ATR is declining and volume is declining. This looks like a typical consolidation with several doji candlesticks.

On Balance Volume has found support. This is a weak bearish signal.

The consolidation may be expected to continue, so that it brings ADX back down from extreme.

Neither Stochastics nor RSI are oversold. There is room for price to fall.

The only concern here for the new main wave count is ADX. Another few days may not be enough to bring ADX down from extreme; it may need longer, which would tend to indicate the alternate wave count may actually be correct.

VOLATILITY – INVERTED VIX CHART

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Normally, volatility should decline as price moves higher and increase as price moves lower. This means that normally inverted VIX should move in the same direction as price.

Bearish divergence and bullish divergence spanning a few short days used to be a fairly reliable indicator of the next one or two days direction for price; normally, bearish divergence would be followed by one or two days of downwards movement and vice versa for bullish divergence.

However, what once worked does not necessarily have to continue to work. Markets and market conditions change. We have to be flexible and change with them.

Recent unusual, and sometimes very strong, single day divergence between price and inverted VIX is noted with arrows on the price chart. Members can see that this is not proving useful in predicting the next direction for price.

Divergence will be continued to be noted, particularly when it is strong, but at this time it will be given little weight in this analysis. If it proves to again begin to work fairly consistently, then it will again be given weight.

No new divergence is noted today between price and VIX.

BREADTH – AD LINE

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The rise in price has support from a rise in market breadth. Lowry’s OCO AD line also shows new highs along with price. Normally, before the end of a bull market the OCO AD line and the regular AD line should show divergence with price for about 4-6 months. With no divergence, this market has support from breadth.

No new divergence is noted today between price and the AD line.

DOW THEORY

The DJIA, DJT, S&P500 and Nasdaq continue to make new all time highs. This confirms a bull market continues.

This analysis is published @ 11:45 p.m. EST.