Downwards movement continues as expected.
A new alternate idea is published today.
Summary: Look for a slight new low which may begin tomorrow’s session, and then look out for a bounce. Downwards movement is weakening and inverted VIX today gives a bullish signal.
Always practice good risk management. Always trade with stops and invest only 1-5% of equity on any one trade.
The biggest picture, Grand Super Cycle analysis, is here.
Last historic analysis with monthly charts is here. Video is here.
An alternate idea at the monthly chart level is given here at the end of this analysis.
An historic example of a cycle degree fifth wave is given at the end of the analysis here.
MAIN ELLIOTT WAVE COUNT
WEEKLY CHART
Click chart to enlarge.
Cycle wave V must complete as a five structure, which should look clear at the weekly chart level. It may only be an impulse or ending diagonal. At this stage, it is clear it is an impulse.
Within cycle wave V, the third waves at all degrees may only subdivide as impulses.
Intermediate wave (4) has breached an Elliott channel drawn using Elliott’s first technique. The channel is redrawn using Elliott’s second technique as if intermediate wave (4) was over at the last low. If intermediate wave (4) continues sideways, then the channel may be redrawn when it is over. The upper edge may provide resistance for intermediate wave (5).
Intermediate wave (4) may not move into intermediate wave (1) price territory below 2,193.81. At this stage, it now looks like intermediate wave (4) may be continuing further sideways as a combination, triangle or flat. These three ideas are separated into separate daily charts. All three ideas would see intermediate wave (4) exhibit alternation in structure with the double zigzag of intermediate wave (2).
A double zigzag would also be possible for intermediate wave (4), but because intermediate wave (2) was a double zigzag this is the least likely structure for intermediate wave (4) to be. Alternation should be expected until price proves otherwise.
DAILY CHART – TRIANGLE
Click chart to enlarge.
This first daily chart outlines how intermediate wave (4) may now continue further sideways as a contracting or barrier triangle. It is possible that minor wave B within the triangle was over at the last high, which would mean the triangle would be a regular triangle. Minor wave C downwards may now be underway and may be a single or double zigzag. One of the five sub-waves of a triangle is usually a more complicated multiple, and the most common sub-wave to do this is wave C.
Minor wave C may not make a new low below the end of minor wave A at 2,532.69.
Intermediate wave 2 lasted 11 weeks. If intermediate wave (4) is incomplete, then it would have so far lasted only six weeks. Triangles tend to be very time consuming structures, so intermediate wave (4) may total a Fibonacci 13 or even 21 weeks at its conclusion.
Because this is the only daily chart which expects price to continue to find support at the 200 day moving average, it is presented first; it may have a slightly higher probability than the next two daily charts.
DAILY CHART – COMBINATION
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Double combinations are very common structures. The first structure in a possible double combination for intermediate wave (4) would be a complete zigzag labelled minor wave W. The double should be joined by a three in the opposite direction labelled minor wave X, which may be a complete zigzag. X waves within combinations are typically very deep; if minor wave X is over at the last high, then it would be a 0.79 length of minor wave W, which is fairly deep giving it a normal look. There is no minimum nor maximum requirement for X waves within combinations.
The second structure in the double would most likely be a flat correction labelled minor wave Y. It may also be a triangle, but in my experience this is very rare.
A flat correction would subdivide 3-3-5. Minute wave a must be a three wave structure, most likely a zigzag.
The purpose of combinations is to take up time and move price sideways. To achieve this purpose the second structure in the double usually ends close to the same level as the first. Minor wave Y would be expected to end about the same level as minor wave W at 2,532.69. This would require a strong overshoot or breach of the 200 day moving average, which looks unlikely.
HOURLY CHART
Click chart to enlarge.
If minor wave B or X is complete for a triangle or combination, then minor wave C or Y downwards should be underway.
Minor wave C may be a single or double zigzag for a triangle. Minor wave Y may be a flat or triangle for a combination. The first piece of downwards movement within a wave at minor degree should be a five on the hourly chart. The first five down may today be very close to completion. When it is complete, then the following bounce for minute wave b may not move beyond its start above 2,801.90.
A best fit channel is now drawn about downwards movement. Expect price to keep falling while it remains within this channel. If price breaks above the upper edge of the channel with upwards (not sideways) movement, then expect the first five down is complete and a three up has begun.
DAILY CHART – FLAT
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Flat corrections are very common. The most common type of flat is an expanded flat. This would see minor wave B move above the start of minor wave A at 2,872.87.
Within a flat correction, minor wave B must retrace a minimum 0.9 length of minor wave A at 2,838.85. The most common length for minor wave B within a flat correction would be 1 to 1.38 times the length of minor wave A at 2,872.87 to 3,002.15. An expanded flat would see minor wave B 1.05 times the length of minor wave A or longer, at 2,889.89 or above.
When minor wave B is a complete corrective structure ending at or above the minimum requirement, then minor wave C downwards would be expected to make a new low below the end of minor wave A at 2,532.69 to avoid a truncation.
This wave count would require a very substantial breach of the 200 day moving average for the end of intermediate wave (4). This looks unlikely.
HOURLY CHART – FLAT
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It is also possible that upwards movement is not over and minute wave c is incomplete. At this stage, minuette wave (iv) now looks grossly disproportionate to minuette wave (ii), so this wave count no longer has the right look.
If intermediate wave (4) is unfolding as a flat correction, then within it minor wave B has not yet met the minimum requirement of 0.9 the length of minor wave A at 2,838.85.
Within minute wave c, the correction of minuette wave (iv) may not move into minuette wave (i) price territory below 2,732.08.
Minuette wave (iv) has breached a channel drawn using Elliott’s first technique, so the channel is redrawn using the second technique. Draw the first trend line from the ends of minuette waves (ii) to (iv), then place a parallel copy on the end of minuette wave (iii). Minuette wave (v) may end either mid way within this channel, or about the upper edge.
A target for minute wave c to end is today re-calculated at minuette degree. This would see the minimum requirement for minor wave B just met.
DAILY CHART – ALTERNATE
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It is possible still that intermediate wave (4) was complete as a relatively brief and shallow single zigzag.
A new all time high with support from volume and any one of a bullish signal from On Balance Volume or the AD line would see this alternate wave count become the main wave count.
Within minor wave 3, minute wave ii may not move beyond the start of minute wave i below 2,647.32.
This first alternate expects minor wave 1 was an impulse. This is the most common structure for a first wave, so this is the more likely of two alternates presented today.
DAILY CHART – SECOND ALTERNATE
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It is also possible that minor wave 1 is an incomplete leading contracting diagonal. This is a less common structure for a first wave, so this is the least likely wave count published today.
The diagonal would be contracting because minute wave iii is shorter than minute wave i. Within a contracting diagonal, minute wave iv must be shorter than minute wave ii. Therefore, minute wave iv may not be equal or longer in length than minute wave ii, so it may not reach 2,660.07 or below.
Leading diagonals most often end with a small overshoot of the 1-3 trend line. As soon as price makes a small overshoot here of the upper pink i-iii trend line, if it quickly reverses and moves strongly lower, then this wave count would be indicated as more likely.
Leading diagonals in first wave positions are very commonly followed by very deep second wave corrections. If what looks like a diagonal upwards completes and price quickly reverses, then a Fibonacci retracement would be drawn along the length of the diagonal. Minor wave 2 would be expected to be deeper than the 0.618 Fibonacci ratio of minor wave 1.
Minor wave 2 may not move beyond the start of minor wave 1 below 2,532.69. Minor wave 2 may find support about the 200 day moving average.
TECHNICAL ANALYSIS
WEEKLY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
The volume profile is bearish for the short term, but this has been the case for a long time in this market. Price has been rising on light and declining volume for years now. At this time, it will not be given much weight in this analysis.
The pullback has brought ADX down from very extreme and RSI down from extremely overbought. There is again room for a new trend to develop.
DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
The last gap is now closed, so it is now relabelled as an exhaustion gap.
Price continues to fall of its own weight. The smaller real body indicates downwards movement is weakening. Today’s bullish signal from inverted VIX indicates we may see a bounce here or very soon indeed.
VOLATILITY – INVERTED VIX CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
So that colour blind members are included, bearish signals will be noted with blue and bullish signals with yellow.
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 has been followed by another downwards day. It may be resolved here.
Price today moved lower, but inverted VIX moved higher. The fall in price has not come with a normal corresponding increase in market volatility; volatility has declined. This divergence is interpreted as bullish because inverted VIX is read as a leading indicator.
BREADTH – AD LINE
Click chart to enlarge. Chart courtesy of StockCharts.com.
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 longer term 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.
All of small, mid and large caps last week completed an outside week. All sectors of the market at this time appear to be in a consolidation.
Breadth should be read as a leading indicator.
Bearish divergence noted two days ago has now been followed by two downwards days. It may be resolved here.
Price and the AD line both moved lower today, so there is no new divergence. The fall in price has support today from declining market breadth, which is bearish.
DOW THEORY
All indices have made new all time highs as recently as seven weeks ago, 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: 7,039.41.
S&P500: 2,083.79.
Nasdaq: 5,034.41.
Charts showing each prior major swing low used for Dow Theory are here.
Published @ 08:45 p.m. EST.
A lot of the FANG or momentum stocks have lost their mo…Perhaps profit taking for taxes.
This has been a really weak rally this afternoon.
Maybe you will see your rally on Monday or not.
Maybe people are waiting until next week when the federal reserve decides on interest rates.
If could be calm until then.
I expect price to tap the the lower trend line on the “leading diagonal” (second hourly alternate) real early on Monday (maybe even in pre-market) to complete the D wave, then push up early next week in the E wave. Or do the same but it’s the start of new 3’s in the bullish daily chart. The strength in RUT, if it continues, may indicate the way forward for SPX over time. If on the other hand RUT double tops at the ATH and starts falling…all I’ll say is, keep your eye on RUT as a leading indicator of which EW model we are in.
Kevin
What price are you anticipating for Wave D to be complete.
Thank You
Updated hourly chart:
A five down may be complete. Today’s movement has breached the best fit channel indicating it’s a new wave. The 0.618 Fibonacci ratio here may be a reasonable expectation for a bounce to reach.
Today might be one of the smallest day ranges for the SPX so far this year.
RUT bouncing off 38% fibo at 1582 and I kind of like it.
Would anyone have a Elliot wave count chart done on the NDX that they wouldn’t mind sharing?
The chart below shows a potential bear flag. If correct, the downside breakout should take us to 2680.
The last few days action / consolidation looks quite similar to the action on Jan 30th through Feb 1st including the action of MACD. This is a set up for a waterfall decline which is in line with Lara’s bearish triangle count or combination count.
SPX will breakout of the recent consolidation. But which way is the $64M question.
An opportunity to “turn off” that bear flag is coming right up; can SPX push through the top line? It might…but probably not today? If it does turn there, nice high reward/low risk short spot!!
And my ES algo just sold …. when you dip, I dip, we dip?
I’ll be looking for a market low today in the 1-2:30pm range (time cycle projections). Whethers its “back down there” or just a pullback in a day long bull trend remains to be seen.
NDX divergence from SPX, RUT and INDU here rather noticeable. Hard to believe a bull run is going to go with NDX moving down, not up.
NDX about 20-30 minutes from entering “low” zone per micro-timing cycles. Meanwhile, other markets up/sideways. If/when NDX reverses, and the other markets haven’t gone into selloff mode…there could be a synchronized bull run. Nothing is certain in this market! It’s a little mixed today.
Hi kevin
What kind of program tells you all of this.
It seems like your right most of the time here.
Thank You
No “program” Eric. I use “everything”, EW, fibo retrace/projections, peak-peak cycle measures/projections, macd, stochastics, emas (8/21/34), 21 period bollinger bands and keltner channels (I paint the average of the two and also look at squeezes where the BB’s are inside the KC), trend data based on ADX and CCI, parabolic SAR, volume, and most importantly, I try to always look at and consider 4 timeframes: week, day, hour, 5 minute. I used thinkorswim to paint all that on my screen, some of it color encoded using a bit of my own software (such as 5 different levels of “trend” painted into the bars via different colors). The “program” that makes decisions based on that is in my head. Though I strive the have the latest key decision making rules written down.
FWIW, here’s my SPX charts, a 5 minute and an hourly. I also keep up with these a daily and weekly. Trend is via color of bar, bright green strong up, dark green mild up, gray neutral, dark red mild down, bright red strong down. The colored dots on bars encoded certain state info: white is a squeeze (bollinger bands inside keltner channel, all at 21 period), blue is a volume spike, and red dot in the bar is both squeeze and volume spike. The red dots above/below bars are the parabolic SAR. The emas are 8, 21, 34. The banding (purple) is an average of 21 period keltner and bollinger. The lower levels are macd (unusual settings) and slow stochastics (8, 3). I don’t do fibo work or time projection work in thinkorswim, I find the tools for that much more crafty and quick in TraderWorkStation (interactive brokers), which is the platform I actually managed trades from. Hope this informs, g’luck!!
here’s a 5 minute chart of spx
Just to clarify, this is New York time?
Yes, sorry should have said Eastern time.
FIRST!!
And first to comment on the pattern on the daily chart of about 4 down days, followed by strong upward price movement, on the daily. It’s happened twice now, and it’s all set up to repeat a 3rd time, tomorrow and/or Monday. We’ll see.
If price pushes up strongly and blows away the 2nd alternate…we’re left with only the ultra bullish 1st alternate. In which case, I start raising my long bet sizes, a lot.
I wound not be surprised if these crooks close the SPX today around 2760 on expiration day.
we shall see