Further upwards movement continues as expected with a higher high and a higher low for the session.
The AD line continues to provide reliable signals.
Summary: The short term target is at 2,824 or 2,915. The mid to longer term target is at 2,922 (Elliott wave) or 3,045 (classic analysis). The final target for this bull market to end remains at 3,616.
The Elliott wave count has good support from classic technical analysis. Price has support from rising market breadth and declining volatility and rising volume.
Pullbacks are an opportunity to join the trend. An upwards trend is expected to be developing. It is possible that upwards movement may show a further increase in momentum over the next several days.
Always practice good risk management. Always trade with stops and invest only 1-5% of equity on any one trade.
New updates to this analysis are in bold.
The biggest picture, Grand Super Cycle analysis, is here.
Last historic analysis with monthly charts is here, video is here.
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 and also now at the monthly 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: the first trend line from the ends of intermediate waves (2) to (4), then a parallel copy on the end of intermediate wave (3). Intermediate wave (5) may end either midway within the channel, or about the upper edge.
Intermediate wave (4) may now be a complete regular contracting triangle lasting fourteen weeks, one longer than a Fibonacci thirteen. There is perfect alternation and excellent proportion between intermediate waves (2) and (4).
If intermediate wave (4) were to continue further as either a flat or combination, both possibilities would require another deep pullback to end at or below 2,532.69. With both On Balance Volume and the AD line making new all time highs, that possibility looks extremely unlikely.
If intermediate wave (4) were to continue further, it would now be grossly disproportionate to intermediate wave (2). Both classic technical analysis and Elliott wave analysis now suggest these alternate ideas should be discarded based upon a very low probability.
Within intermediate wave (5), no second wave correction may move beyond the start of its first wave below 2,594.62.
DAILY CHART
Click chart to enlarge.
It is possible that intermediate wave (4) is a complete regular contracting triangle, the most common type of triangle. Minor wave E may have found support just below the 200 day moving average and ending reasonably short of the A-C trend line. This is the most common look for E waves of triangles.
Intermediate wave (3) exhibits no Fibonacci ratio to intermediate wave (1). It is more likely then that intermediate wave (5) may exhibit a Fibonacci ratio to either of intermediate waves (1) or (3). The most common Fibonacci ratio would be equality in length with intermediate wave (1), but in this instance that would expect a truncation. The next common Fibonacci ratio is used to calculate a target for intermediate wave (5) to end.
Price has clearly broken out above the upper triangle B-D trend line. This indicates that it should now be over if the triangle is correctly labelled.
A trend line in lilac is added to this chart. It is the same line as the upper edge of the symmetrical triangle on the daily technical analysis chart. Price has found support about this line at the last two small swing lows. The suppport at this line has reasonable technical significance now that it has been tested twice, and this line should be assumed to continue to provide support until proven otherwise.
Sometimes the point at which the triangle trend lines cross over sees a trend change. A trend change at that point may be a minor one or a major one. That point is now about the 12th of June.
Minor wave 3 may only subdivide as an impulse, and within it the subdivisions of minute waves ii and iv may show up as one or more red daily candlesticks or doji.
Within minor wave 3, no second wave correction may move beyond the start of its first wave below 2,676.81. Along the way up, any deeper corrections may now find support at the lower edge of the base channel drawn about minor waves 1 and 2. Minor wave 3 may have the power to break above the upper edge of the base channel. If it does, then that upper edge may then provide support.
HOURLY CHART
Click chart to enlarge.
Minor wave 3 looks to have begun. It may only subdivide as an impulse.
Within minor wave 3, minute waves i and ii look likely to be complete. Minute wave iii may only subdivide as an impulse.
Within minute wave iii, minuette waves (i) to (iv) may be complete. If minuette wave (iii) is over at today’s high, then it is shorter than minuette wave (i) by 11.54 points. Minuette wave (iii) may not be the shortest actionary wave within the impulse of minute wave iii, so this limits minuette wave (v) to no longer than equality in length than minuette wave (iii) at 2,800.55.
Minuette wave (iv) may not move into minuette wave (i) price territory below 2,752.61.
Only one more high for a final fifth wave may be required to complete minute wave iii. As soon as price makes a new high, then the invalidation point for this wave count must move down to the high of minute wave i at 2,729.34. Minute wave iv may not move into minute wave i price territory.
ALTERNATE HOURLY CHART
Click chart to enlarge.
This wave count is labelled as an alternate, but it may have about an even probability with the main hourly chart.
Both wave counts are identical up to the low labelled minuette wave (ii). Thereafter, for this alternate, the degree of labelling within minuette wave (iii) is moved down one. Within minuette wave (iii), only subminuette waves i and ii may be complete.
This wave count now sees four first and second waves complete. A strong increase in upwards momentum may begin about here as the middle of a third wave unfolds higher.
Subminuette wave ii may not move beyond the start of subminuette wave i below 2,739.51.
TECHNICAL ANALYSIS
WEEKLY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
From Dhalquist and Kirkpatrick on trading triangles:
“The ideal situation for trading triangles is a definite breakout, a high trading range within the triangle, an upward-sloping volume trend during the formation of the triangle, and especially a gap on the breakout.”
For this example, the breakout may have now happened. There was a high trading range within the triangle, but volume declined. Last week may be the end of the pullback, with a long lower wick slightly overshooting the triangle trend line.
The bullish signal from On Balance Volume Last week is reasonable, but really does need to be clearer for confidence. If this week continues upwards, it would be clear and then should be given reasonable weight.
DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
The symmetrical triangle may now be complete, and price has completed an upwards breakout. There may be some small cause for concern that the upwards breakout does not have support from volume. However, in current market conditions only some small concern is had here. Rising price on light and declining volume has been a feature of this market for years, yet price continues to rise.
After an upwards breakout, pullbacks occur 59% of the time. The pullback looks typical. With price now moving up and away from the line, it does look like the pullback may have been over last week.
On Balance Volume made a new all time high on the 14th of May at the daily chart level. This signal remains overall very bullish.
The base distance is 340.18. Added to the breakout point of 2,704.54 this gives a target at 3,044.72. This is above the Elliott wave target at 2,922, so the Elliott wave target may be inadequate.
The short term volume profile remains bullish. On Balance Volume remains slightly bearish for the short term as it still has not made a new high above the prior swing high of the 14th of May while price has, but the difference for On Balance Volume is so very slight no weight will be given to this in today’s analysis.
Stochastics may remain overbought for a reasonable period of time during a bull trend for this market.
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.
Inverted VIX has made a new high above the prior swing high of the 9th of March, but price has not made a corresponding new swing high about the same point yet. This divergence is bullish. Inverted VIX is still a little way off making a new all time high.
There is no new divergence today.
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. New all time highs from the AD line means that any bear market may now be an absolute minimum of 4 months away. It may of course be a lot longer than that. My next expectation for the end of this bull market may now be October 2019.
Small caps have made another new all time high, but mid and large caps have yet to do so. This divergence may be interpreted as bullish. Small caps may now be leading the market.
Breadth should be read as a leading indicator.
The AD line is daily making new all time highs. This is a very bullish signal and will be given the most weight in today’s analysis. Price is likely to follow within days or a very few weeks.
DOW THEORY
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: 23,360.29.
DJT: 9,806.79.
S&P500: 2,532.69.
Nasdaq: 6,630.67.
At this stage, only DJIA has made a new major swing low. DJT also needs to make a new major swing low for Dow Theory to indicate a switch from a bull market to a bear market. For an extended Dow Theory, which includes the S&P500 and Nasdaq, these two markets also need to make new major swing lows.
Charts showing each prior major swing low used for Dow Theory may be seen at the end of this analysis here.
Published @ 06:50 p.m. EST.
Hi Chris;
Don’t miss that last missive from Francesco in your inbox. Good read, as usual.
Also take a look at a multi-year chart of VXN. Very interesting!
Yup, read it first thing this morning. Great analytics, but the central banksters are continuing to prove their control of the capital markets, which is has even jaded me the past few weeks. To some degree, we have to be making new history here. Yes, the NASDAQ vol. move really tried to get going/flash crash up then down.
The down move I was expected happened…overnight. And the range day has evolved into an uptrend day, not too surprisingly given the weekly and daily trends. Should be more upside before the next iv (minute or minor as the case may be) early next week. But the resistance around 2800 definitely large up there, and I strongly suspect that area will initiate a larger iv in time and price.
Worth noting that SPX is doing this on a day when the “monsters of Tech” (fb, aapl, amzn, nflx, googl, msft) are collectively flat. My “monsters” synthetic ticker is exactly at 0.0%.
Well Verne, I’m now reloading 50% in both Futures, and Calls. They want to keep giving, I’m a gonna keep swinging. (not trading advice)
Same here. Selling a few remaining SPXL calls.
Loading bear call spreads two weeks out.
Plan is to exit short calls on next pull back and get positioned for the snappy run higher ahead.
Now do we get a down trending day, or do we get a ranging day? I suspect ranging, and who knows, the bull could start roaring again before the day’s over if that’s the case.
The put/call ratio ($PCALL) is at 0.89, very high. That’s lots of “wood on the fire” in the way of stops above market on all those puts. A touch of buying wind could whip this market into an upside conflagration a bit later.
Kevin, I’m showing the put/call ratio at .53 based on CBOE data, almost making a new yearly low, which highlights the misplaced complacency here. What data are you grabbing the .89 from?
Geez, they are incessant. Kevin did you grab PM the other day? It’s starting to get moving.
got a debit call spread, Sept expiry, should pay, ty Chris!
Sweet!! I grabbed half position in the underlying and half bull July Put Spread, which I’m exiting today. Will add to underlying on breakout above $85.
Is it possible trumps tariffs are being utilized to generate inflation to try to hyperinflate our way out of this 21 trillion plus noose ?
The bottom graph blue line is the LaGuerreRSI. It’s pegged. Look what happens the last several times it pegged: a major swing high starts immediately or within another bar Look at what happens every time price tags that upper band line. A swing high arrives within 1-3 bars. The energy/chop reading is reaching an extreme low, indicating exhaustion in the move. One the second chart you’ll see that the daily is in a squeeze, and this price run up has been relatively weak: price has been riding the slowest historic speed line up. Then there’s the multiple pivots right above along with the 78% fibo of the Jan-Feb 11% down move.
Lastly, the hourly shows a push back up that is extremely weak, and appears “X-ish” to me.
I’m thinking one of those bear credit spreads someone here is occasionally promoting…
Another daily view with key fibo’s, pivots and symmetric projections/speed lines.
And lastly a dense 5 minute showing price already starting to fade here overnight. So we’ll see how far it goes, and I won’t let myself be surprised by a sharp sell off to below the lows of yesterday (6/6).
Welcome aboard! 🙂
I should have listened to Chris and held onto those VIX calls. Rats!! 😀
:), pretty serious bankster ramp since 6am, I expect 2750 to be blasted through today.
Yikes! That was fast! Thank you, Lara, for your excellent work. I sure do appreciate it!
IKR! I’m super organised today…. maybe it was the second coffee?