The alternate hourly wave count was indicated as correct early in the session when price made a new high above 2,462.59.
Summary: The target for the bounce to end is at 2,480. Single day divergence today between price and the AD line suggests downwards movement tomorrow though.
If price breaks below the upwards sloping green channel on the hourly chart tomorrow, then expect a third wave down has just begun. It may be about 86 points in length.
A deeper pullback may be expected to last at least 8 weeks and may end about 2,320.
New updates to this analysis are in bold.
Last monthly and weekly charts are here. Last historic analysis video is here.
ELLIOTT WAVE COUNT
WEEKLY CHART
Click chart to enlarge.
Primary wave 3 now looks complete. Further and substantial confidence may be had if price makes a new low below 2,405.70. Fibonacci ratios are calculated at primary and intermediate degree. If primary wave 3 is complete, then it still exhibits the most common Fibonacci ratio to primary wave 1.
Primary wave 4 may not move into primary wave 1 price territory below 2,111.05.
Primary wave 4 should last about 8 weeks minimum for it to have reasonable proportion with primary wave 2. It is the proportion between corrective waves which give a wave count the right look. Primary wave 4 may last 13 or even 21 weeks if it is a triangle or combination.
If primary wave 4 reaches down to the lower edge of the Elliott channel, it may end about 2,320. This is very close to the lower range of intermediate wave (4); fourth waves often end within the price territory of the fourth wave of one lesser degree, or very close to it.
The final target for Grand Super Cycle wave I to end is at 2,500 where cycle wave V would reach equality in length with cycle wave I. If price reaches the target at 2,500 and either the structure is incomplete or price keeps rising, then the next target would be the next Fibonacci ratio in the sequence between cycle waves I and V. At 2,926 cycle wave V would reach 1.618 the length of cycle wave I.
DAILY CHART
Click chart to enlarge.
The daily chart shows only the structure of intermediate wave (5); this structure is an impulse.
Primary wave 2 was a regular flat correction lasting 10 weeks. Given the guideline of alternation, primary wave 4 may most likely be a single or double zigzag. Within both of those structures, a five down at the daily chart level should unfold. At this stage, that looks incomplete.
While primary wave 4 would most likely be a single or double zigzag, it does not have to be. It may be a combination or triangle and still exhibit structural alternation with primary wave 2. There are multiple structural options available for primary wave 4, so it is impossible for me to tell you with any confidence which one it will be. It will be essential that flexibility is applied to the wave count while it unfolds. Multiple alternates will be required at times, and members must be ready to switch from bear to bull and back again for short term swings within this correction.
Members with a longer term horizon for their trading may wait for primary wave 4 to be complete to purchase stocks or enter the index long.
HOURLY CHART
Click chart to enlarge.
Minor wave 1 downwards looks very clear as a five wave structure.
Upwards movement for minor wave 2 so far looks like a possible double zigzag. But this upwards movement may also be an incomplete impulse, which may be only minute wave a.
The green best fit channel is adjusted to be less steep. When price breaks below the lower edge, that may be an early indication that the bounce is over and minor wave 3 downwards may have begun.
Minor wave 3 should have the power to break below the lower edge of the blue base channel. Once it has done that, upwards movement should find resistance at the lower edge.
Minor wave 2 may not move beyond the start of minor wave 1 above 2,490.87.
TECHNICAL ANALYSIS
WEEKLY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
This weekly candlestick is very bearish. A Bearish Engulfing pattern is the strongest reversal pattern.
If this week also moves price lower, then On Balance Volume would give an important bearish signal. For now it may offer some support and assist to initiate a bounce here.
RSI, ADX and MACD all remain bearish.
This weekly chart offers good support to the Elliott wave count.
DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
The short term volume profile remains firmly bearish. This supports the Elliott wave count. Price is finding resistance now about 2,470. Next strong resistance would be about 2,485.
On Balance Volume today turned lower, just below resistance. A new support line is added; it has only been tested twice), so it does not have good technical significance. A break below either support line would be a weak bearish signal from On Balance Volume.
While ADX does not indicate a new trend, ATR suggests one may be in the early stages.
VOLATILITY – INVERTED VIX CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
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.
There is longer term divergence between price and inverted VIX, shown in gold lines. However, mid and long term divergence has proven to be reasonably unreliable, so it will be given no weight in this analysis.
Price made a slightly higher high and a higher low today, the definition of upwards movement. However, the candlestick closed red. With volatility declining during the session, there is no divergence today between the direction for price and inverted VIX.
BREADTH – AD LINE
Click chart to enlarge. Chart courtesy of StockCharts.com.
With the last all time high for price, the AD line also made a new all time high. Up to the last high for price there was support from rising market breadth.
There is normally 4-6 months divergence between price and market breadth prior to a full fledged bear market. This has been so for all major bear markets within the last 90 odd years. With no divergence yet at this point, any decline in price should be expected to be a pullback within an ongoing bull market and not necessarily the start of a bear market.
Price moved higher today, but breadth declined. This divergence is interpreted as bearish and indicates weakness today within upwards movement from price.
DOW THEORY
The S&P500, DJIA, DJT and Nasdaq have all made new all time highs within the last month.
Modified Dow Theory (adding in technology as a barometer of our modern economy) sees all indices confirming the ongoing bull market.
The following lows need to be exceeded for Dow Theory to confirm the end of the bull market and a change to a bear market:
DJIA: 17,883.56.
DJT: 7,029.41.
S&P500: 2,083.79.
Nasdaq: 5,034.41.
Charts showing each prior major swing low used for Dow Theory are here.
Published @ 09:55 p.m. EST.
Alternate idea:
It’s entirely possible that minor 2 still isn’t over, an this wave count looks pretty good.
Second waves can be very deep. The first second wave in a new trend is usually very deep indeed.
If price can break below the lower edge of the channel I’d have confidence in the first chart below. If not, then this alternate idea will remain entirely viable.
Since we have a-b-c clearly showing on the minuette level for w & x on the minute level, I expect that minute y will also form with a-b-c clearly shown on the minuette level. Therefore, I am guessing Minor 2 is not yet complete. I like this alternate hourly count. I would expect it to complete tomorrow. Just my thoughts. I like the 2477 target.
Discretion is the better part of valor: considering the not-so-impulsive move down here and a serious EW/Lara warning about a wave count that moves sharply against me tomorrow, I’ve closed my short and will await further developments. I wouldn’t mind getting in at an even higher price…or (and??) short it hard on the break of that uptrend line. Which means its time to go shoot some pool!! Thanks for the timely update Lara and g’luck all. ps: gold is looking strong too…
Hourly chart updated:
But I don’t like how price has bounced up right off the lower edge of the channel. It looks like the channel is now right, and is still providing support.
Here we go – hopefully!
I have the minute y at close to 50% of the minute w, and the turn overall is just below the 76.4 retrace of minor 1. Looking possible. I want to see a bear trend (lower swing highs) on the 15 minute, and then a break below yesterdays low. Then I started adding on pullbacks (already have a base short).
Super proof would be if the action through the rest of today continues to be impulsively down, ala the move down on Aug 8. That would confirm mightily that this is indeed the minute 1 of the minor 3!! If it starts doing highly overlapped action here for the rest of the day, I’m far less convinced. In particular, the congestion zone just below will be a blocker for downward movement I’d expect. But if it blows through it…yeehaw!!!
#1. Take that you silly wabbit!
LOL Nicely done there Rodney 🙂
Welcome back
I travelled from Northland to Gisborne today…. 10 hours. Now to see if Gizzy can give us great waves…
10 hours is a long ride by any means. I hope your surfing needs are met. Be safe and enjoy.
I am looking for different waves. I want to see a minor 2 wave complete so I can catch the bigger minor 3!
Surf’s up! 🙂
Mavericks, that’s a 3 of a 3 of a 3 of a 3 right there!!
I see Gizzy has 1-2 ft with light offshores…hope you have your longboard! SF is horrible now, foggy and windy (onshore) for weeks with little swell. Fall is when it’s best here, cool offshores and strong westerly ground swells. Best of luck!
Yep. Looking good for the next few days in Gizzy. Yes, have longboard. Looking for a barrel at StockRoute… a 1 min walk from my accommodation 🙂
Cold here now, as I imagine SF would be. 4:3, booties and a hat kinda surfing
Just got back from 2 weeks in Costa Rica, and its pretty awesome here in FL. Loads of swell on the horizon too; rare for FL
Beautiful 🙂 I dream of surfing the Caribbean one day.
Am planning a trip to Tonga in October. The South Pacific will have to do for me.
Tonga has very slabby and peaky reef breaks. Not conducive for longboards in my opinion
We have friends who have stayed at Ha’atafu last year. Sarah is an intermediate level surfer and she found it okay. There’s a break right outside the accommodation.
I think I’ll be fine 🙂
Care for some tasty carrot Doc?
sure,,, needed for wabbit stew,,, Doc