A very small doji for an inside day sees the Elliott wave counts remain the same. The AD line as a measure of market breadth today gives another signal.
Summary: Assume the trend remains upwards while price remains above 2,480.38. The very clear and strong bullish signal from On Balance Volume supports this view, as does rising market breadth. The next target for profit taking is 2,531.
However, stay nimble and keep stops tight. This trend is extreme and over stretched. There is reasonable downside risk.
Always trade with stops and invest only 1-5% of equity on any one trade.
Last monthly and weekly charts are here. Last historic analysis video is here.
I am very reluctant at this time to pick one wave count over the other, between these two wave counts. At this time, classic analysis still favours the second wave count. But I would rather label these as “first” and “second”, rather than “main” and “alternate”. I will lay out the arguments for and against each wave count in terms of Elliott wave and classic analysis, and let members make their own judgements.
FIRST ELLIOTT WAVE COUNT
WEEKLY CHART
Click chart to enlarge.
Primary wave 3 may be complete. Further and substantial confidence may be had if price makes a new low below 2,480.38 now. That would invalidate the second wave count published below. 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. So far it may have completed its fifth week.
If primary wave 4 unfolds as a single or double zigzag, then it may find support about the lower edge of the maroon Elliott channel. If it is a triangle or combination, it may be more shallow, ending about mid way within the channel. At this stage, a single zigzag has been invalidated and a double zigzag is discarded based upon a very low probability. It looks like primary wave 4 is to be a very shallow sideways consolidation rather than a deeper pullback.
Only two daily charts are now published for primary wave 4: a triangle and a combination. It is impossible still for me to tell you with any confidence which of these two structures it may be. The labelling within each idea may still change as the structure unfolds.
The daily charts are presented below in order of probability based upon my judgement.
The final target for Grand Super Cycle wave I to end is at 2,926 where cycle wave V would reach 1.618 the length of cycle wave I.
DAILY CHART – TRIANGLE
Click chart to enlarge.
This first daily chart will illustrate how price might move if primary wave 4 unfolds as a triangle.
Intermediate wave (B) may be continuing higher as a double zigzag. One of the five sub-waves of a triangle should be a more complicated multiple; most commonly that is wave C, but it may be any sub-wave. Intermediate wave (B) has made a new all time high, so it may be a running triangle.
The triangle may still last a total of at least eight weeks, but so far it has lasted five weeks and may only be completing wave B. It now looks like it will need to take longer. If longer, then a Fibonacci 13 or 21 weeks may be expected.
Both intermediate waves (A) and (B) look like three wave structures.
Intermediate wave (C) may not move beyond the end of intermediate wave (A).
HOURLY CHART – TRIANGLE
Click chart to enlarge.
A double zigzag may be almost complete for intermediate wave (B).
Use the black best fit channel. If price breaks below the lower edge, then expect the upwards swing is over and the next swing down has begun. While price remains within this channel, then it is entirely possible price may continue higher; minute wave c may not be complete.
There is still zero evidence of a trend change. A new low below 2,480.38 is required for any confidence that a high is in place.
Minute wave c looks now to be incomplete. A final fifth wave upwards looks like it is required.
The smaller pink best fit channel in yesterday’s analysis is removed because it did not show where price found support or resistance.
We should assume that the trend remains up while price remains within the black channel and above 2,480.38.
DAILY CHART – COMBINATION
Click chart to enlarge.
A combination for primary wave 4 would still offer some alternation with the regular flat of primary wave 2. Whenever a triangle is considered, always consider a combination alongside it. Very often what looks like a triangle may be unfolding or may even look complete, only for the correction to morph into a combination.
There may only be one zigzag within W, Y and Z of a combination (otherwise the structure is a double or triple zigzag, which is very different and is now discarded). At this stage, that would be intermediate wave (W), which is complete.
Combinations are big sideways movements. To achieve a sideways look their X waves are usually deep (and often also time consuming) and the Y wave ends close to the same level as wave W.
This wave count today is changed to see upwards movement continuing as intermediate wave (X). Unfortunately, there is no Elliott wave rule regarding the length of X waves, so they may make new price extremes. I am applying the convention within Elliott wave regarding B waves within flats here to this X wave within a combination: When it reaches more than twice the length of intermediate wave (W), then the idea of a combination continuing should be discarded based upon a very low probability.
With intermediate wave (W) a zigzag, intermediate wave (Y) would most likely be a flat correction but may also be a triangle. Because a triangle for intermediate wave (Y) would essentially be the same wave count as the triangle for the whole of primary wave 4, only a flat correction will be considered.
But first, an indication would be needed that the upwards wave of intermediate wave (X) is over. As yet there is no evidence of this.
SECOND WAVE COUNT
WEEKLY CHART
Click chart to enlarge.
This second wave count has strong support from a clear and strong bullish signal from On Balance Volume. If asked to pick a winner, this would be the wave count I would favour because of OBV’s signal. But I am concerned that indicators are so extreme.
If primary wave 3 isn’t over, then how would the subdivisions fit? Would it fit with MACD? What would be the invalidation point and would the Fibonacci ratios be adequate?
Of several ideas I have tried, this one has the best fit in terms of subdivisions and meets all Elliott wave rules.
Despite this wave count appearing forced and manufactured, and despite persistent weakness in volume and momentum for this third wave, On Balance Volume does now strongly favour it. It may be that as a Grand Super Cycle wave comes to an end, that weakness may develop and persist for very long periods of time (up to three years is warned as possible by Lowry’s for the end of a bull market), so this weakness may be viewed in that larger context.
Within minute wave v, no second wave correction may move beyond the start of its first wave below 2,417.35.
DAILY CHART
Click chart to enlarge.
To see details of the whole of primary wave 3 so far and compare and contrast with the main wave count, see the analysis here.
Minute wave v to complete minor wave 3 must subdivide as a five wave structure. It looks like an incomplete impulse. Within the impulse, subminuette wave iv may not move into subminuette wave i price territory below 2,480.38.
HOURLY CHART
Click chart to enlarge.
At the hourly chart level, this wave count now still has a better look over the first wave count. Subminuette wave iii looks so far like a typical unfolding impulse and its second and fourth wave corrections for micro waves 2 and 4 both look to be in proportion.
A short term target is provided. Because there is such an excellent Fibonacci ratio already between micro waves 1 and 3, micro wave 5 may not exhibit a Fibonacci ratio to either of micro waves 3 or 1. The target is best calculated only at subminuette degree.
When subminuette wave iii is over, then subminuette wave iv should be a shallow correction lasting about one to three days.
TECHNICAL ANALYSIS
WEEKLY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
A strong weekly candlestick gaps higher and has support from volume. This looks like a classic upwards breakout after a small consolidation, and there may have been a small flag pattern in it. This supports the second Elliott wave count.
If the flag pole is taken from 2,405.70 to 2,490.87, then a target for the next wave up may be about 2,527.
On Balance Volume looks like it may be breaking above the resistance line. However, the break is very small and so is unclear. One more upwards week would make it much clearer and then confidence may be had in the signal.
ADX is extreme and RSI now exhibits double bearish divergence. This trend is very extreme; beware that the first wave count may still be correct.
DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
Although volume today showed a slight decline, this was an inside day and so no conclusion, bullish or bearish, can be drawn from it.
However, On Balance Volume does continue higher and is now very bullish.
Support for the second Elliott wave count comes from: On Balance Volume, MACD and Bollinger Bands widening.
RSI is not yet extreme, so there is a little room for price to rise.
A small warning today is sounded by Stochastics exhibiting divergence, but this can develop further (or just disappear). As it is only single divergence and not multiple, it is a small warning. Wait for RSI to do the same; if that happens, the warning would be stronger.
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 still mid and longer term bearish divergence, but it has been noted in the past that divergence over a longer term does not seem to work as well for VIX. Short term bearish divergence has disappeared.
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.
There is again no new divergence today between price and the AD line. The new high today for price has support from rising market breadth. This is bullish.
The AD line made a new all time high today. Market breadth continues to be very bullish supporting the second wave count.
DOW THEORY
The S&P’s new all time high last week is confirmed by DJIA and Nasdaq also making new all time highs. However, DJT has not yet made a new all time high, so the continuation of the bull market at this stage lacks confirmation.
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 @ 07:13 p.m. EST.
I’m going now to label subminuette iii over, falling well short of the target. It’s managed to get longer than subminuette i, so there is no limit now to subminuette v.
It looks like today’s candlestick will close red. Subminuette ii is one red daily candlestick, now subminuette iv is also so at that time frame they look right. But at the hourly chart level they don’t, subminuette iv is too brief. So for alternation and proportion I’ll expect it to move sideways. A flat, triangle or combination. A shallow sideways chop before the upwards trend resumes.
Second preferred hourly chart updated:
I think that’s a wrap….! 🙂
Have a great evening everybody!
indeed it is!
gotta post this updated chart, I just love it when I draw my arrows for expectations and then candlesticks fill them in neatly like this
so satisfying
If we initially go higher tomorrow it could turn into an expander flat.
yes indeed
and they’re very common!
My expectation that we would not get a turn during the regular session apparently remains valid. I am so bemused by the the ferocious BTFD mentality. I am curious to see if they are going to continue to pump for a few more days or we see some serious droopage in futures overnight….
I maintain that the announcement of any unwinding of their balance sheet is B.S., and meant only for public consumption by the gullible. They have to keep juicing the market, albeit surreptitiously. What we want to see is continued market weakness in the face of their lying pretension that they are not up to their old tricks! 🙂
Not True… they will reduce the balance sheet as laid out in their plan…
$10 Billion per month… increasing $10 Billion per Quarter to a Max of $50 Billion per month… This is actually more than I expected.
This will happen! Quite frankly I hope nobody believes them and I hope they all buy into what the experts say… that It’s too small to have an effect.
My educated and experienced view is that… no matter what the size, reductions in the Balance Sheet will have an impact! It’s just a matter of time now… TICK…TICK…TICK…
If they do as they say they will, because the amounts are so huge, it’s going to affect the markets. So we shall know in coming weeks if they indeed are unwinding.
If they don’t do it, then we shall know because the markets will probably keep limping along higher. With small shallow corrections.
I’m leaning towards thinking Verne’s right here, I think they’l be lying. Only because they know it’ll cause damage if they do unwind. And they don’t want to be held accountable for that, they’re probably fearful of it.
But when their duplicity is uncovered they’ll be forced to unwind, then markets will be affected.
Or I’m wrong, and the top is closer than we think Joseph. And you could be right.
They are not accountable…. They all will be out of their jobs end of January 2018.
A whole new Fed will be entering.
BS Reduction starts October 1st!
Well… from a technical POV which of course is the one I must have….
In Lowry’s 92 year history every market top prior to a bear market has been preceded by months of rising supply and decreasing demand, they use their own measures of Selling Pressure and Buying Power to track this. This can persist for 2-3 years before a market top.
Also, every single market top in their 92 year history has been preceded by minimum 4-6 months of divergence between price and market breadth, they measure breadth by their Operating Companies Only Advance Decline Line.
At this time there is absolutely zero divergence. So I’ll be expecting this bull market to continue for minimum 4-6 months, and likely another 1-2 years.
Now, it may be different this time. But that would be the first time in 92 years of measuring markets. While that may happen we would be best to be on the side of highest probability. That it won’t.
Another island reversal on KSS today. A mirror image of the island reversal on August 7
The trip to the lower B band should take it down to around 36…. 🙂 🙂 🙂
BTFD Crew right on schedule!
Let’s see how long they can keep this up.
Yellen… “Again NO adjustments at all will be made to they Balance Sheet Plan no matter what!
“Only the Fed Funds Rate tool will be used as long as FF rate is not at ZERO!”
Possibly one more wave up, but after that they’re done…. 🙂
Vol positions have sprinted nice into green acres! 🙂 🙂 🙂
Now that what I’m talkin’ ’bout!!
She heard you Verne, : no green VOLs allowed….:)
He! He! I was expecting one more wave up…. 🙂
(I do so like provoking the Frau!)
My goodness, I blinked and those volatility levels went shooting right back down, I didn’t even have time to seriously consider an XIV buy, and wham!!! Back up to where it was this morning. Okay, I will admit it, I’ve bought a few dips in equity prices here myself!!! AVGO, ITW, FSLR (already out)…
$600 Billion Reduction in Balance Sheet over the next 12 months!
$10 Billion per month… increasing $10 Billion per Quarter to a Max of $50 Billion per month
This is larger than what I was expecting.
Do you believe them?! 🙂
Yes I do! They will reduce the balance sheet!
I thought they would just run it off at $10 Billion per month… But they will increase that by $10 Billion per quarter.
Remember, I said and firmly believe that the size no matter how small will have an effect!
It’s delusional to think that reductions won’t have any effect.
It will be interesting to see which tried an true indicators or well know trading factors will start working again.
Thinking out of the Box… this is another way for the deep State to try and damage President Trump! Because nothing else has or will work! Will taking the market be their Ace in the Hole?
That is Will Tanking the market be their Ace in the Hole?
Yellen… “Market conditions will NOT effect the balance sheet run off as planned!” No matter what the planned BS run off will NOT be adjusted!
With all this news the 30 Year Treasury is basically FLAT today!
What does that tell ya? 🙂
The 1.27% extension is hit per the ES (SPX futures). Right on top of it are other swing extensions. And today is the 21st day of a SPX upmove…3 of the last 4 such upmoves measured in a 21 days (the fourth, at 27 days). This all from carolyn boroden’s free video last night. And we now have 3 rejections of the SPX pushing above and beyond that 1.27% extension area. “Moves tend to terminate at extensions”, how many times have I heard it! This one might. (Note: “terminate” means some kind of non-trivial pullback, not necessary any major trend change.) Today’s low and yesterday’s low are critical levels for me. I’ve already taken a very small short via DOG in DJI, as it broke it’s uptrend 40 minutes ago on the 5 minute. We’ll see if we get more downward momentum, or if it’s all just a little market skittishness during the Fed pow-wow.
This fifth wave is difficult to sort out! ? ending contracting diagonal. I’m watching for a breach on trend channel to look for a confirmation of a break to downside.
It’s not behaving like it should, given it’s supposed to be in a 3 of a 5 (of a 5 of a 3). Not at all. Does Primary 4 still live?? We were just about to take out the corpse, too…
It will fit rather nicely as an ending contracting diagonal.
Yes, P4 still lives. But it requires resuscitation. Doc?
the only thing I don’t like about this diagonal is it doesn’t have the usual small overshoot of the 1-3 trend line.
DJI less than 100 points away from what I expect to be a very significant top….
SPX waiting for DJI to hit fib number a bit higher methinks….
Continues to appear to be a barrier triangle in SPX, and I can count an a, b, c, d and e now. In theory, time to pop the top and run up…lol!!! As if anything in this market behaves per theory! SPX is in a 3 of a 5 of a 5 of a 3 (of yet more 3’s and 5’s) per alternative #2. Or is it….??? If micro 2’s start getting broken to the downside here (2503.45, then 2500 exactly), alt #2 gets suspect very, very quickly. If price starts moving up to new highs, then a key decision point is around 2515 where the 5 is the price length of the corresponding 1.
? large doji on the hourly. When is a doji not valuable as a price action indicator? I think everything below 4 hour chart not effective.
I think we need one more wave up so this should be a shallow move down….
I have to say I continue to be amused at how everyone waits with bated breath to see what the clueless FED is or is not going to do, as if they really made any difference to the ultimate outcome. They have quite a challenge before them. It is quite clear that they have embarked on a course to try and arrest each and every market decline for fear of what it could lead to. It is unprecedented that we have not had a single correction in this market all year! They are literally “all in”. I suspect that size of this cycle top is masking a tremendous amount of financial malfeasance that an unraveling market will quickly expose. I mentioned the so-called BIS discovery of some 14 trillion of derivative liability that no one seems to be responsible for in off-shore accounts; they are trapped.
At the same time, the FED is in business to make money. Their capital ratio is stretched to the point of their being technically insolvent in my opinion, therefore they really have to unload those assets before the great deflation sets in with the inevitable capital erosion that will accompany it. The unloading of that better than 4 trillion balance sheet however, is going to be tantamount to some very serious tightening policy, and we know global markets have remained viable only because of the CB provided non-stop liquidity. A tightening CB policy could well hasten the onset of the deflationary depression looming in the wings.
I expect them to continue the charade while they try and figure out what to do and announce a delay in the unwinding of the balance sheet.
I do not expect them to change course until some exogenous shock, like an outbreak of war, jolts the sleeping financial world awake to the harsh realities of its precarious financial position. I think most are not going to be prepared, having bought into the notion of the omnipotent central bankser. After all, the BTFD crowd so far has been right! Let’s see just how long they can hold onto those historic gains…. 🙂
I’m trying to read up on this, since it is a HUGE financial operation that will be taking place. It should drive some very large (“huuuuge!!!”) macro trends. One area identified is CURRENCIES (already a very trendy area). So…what would we expect??? Yet more collapsing $? Will gold soar? Or the euro? Inquiring (and mildly greedy) minds really want to know! What assets are going to go to the moon over the next few years as all this debt gets sold off.
I think as they unwind the debt, that money will effectively cease to exist. AFAIK the $$ was created with debt, and so when the debt is paid the $$ no longer exist.
And so… thinking this through… it would be my expectation that would be deflationary. Less $$ in circulation would mean less purchasing power, prices would have to fall. Of everything.
If price is falling due to a lack of activity of buyers, because less $$ then maybe at the start of the crash we shall see strongly falling price on light volume. Maybe that’s what I should be looking out for.
I agree with Verne on the idea though that the CBs are going to keep pumping $$ into the system surreptitiously. I don’t believe them when they say they’re going to stop. I think they know that would be a disaster.
They’ve created a monster, and they have to keep feeding it or it’s gonna eat us all.
The upper B band DJI pin looks like it will probably last until next Monday. It is playing out exactly as the last extended pin did from the July 26 to Augutst 8 did….
upwards momentum looking very tired here and a case for a 5 down on the 15 min chart.
Foist!
HEY WABBIT
Eeeh…What’s up Doc? 🙂