A small pullback remains above the short term invalidation point.
The AD line gives a signal today.
Summary: Overall, expect upwards movement to continue. On Balance Volume remains very bullish, and there is bullish divergence today between price and the AD line.
The next short term target is about 2,878; a consolidation lasting about one to two weeks may be expected at about this target. Following that, another consolidation lasting about two weeks may be expected about 2,915.
The invalidation point may now be moved up to the last swing low at 2,691.99.
The mid to longer term target is at 2,922 (Elliott wave) or 3,045 (classic analysis). Another multi week to multi month correction is expected at one of these targets.
The final target for this bull market to end remains at 3,616.
Pullbacks are an opportunity to join the trend.
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).
Within intermediate wave (5), no second wave correction may move beyond the start of its first wave below 2,594.62.
At this stage, the expectation is for the final target to me met in October 2019.
A multi week to multi month consolidation for primary wave 4 is expected on the way up to the final target.
The last bullish fifth wave of minor wave 5 to end intermediate wave (3) exhibited commodity like behaviour. It was strong and sustained. It is possible that the upcoming wave of minor wave 5 to end intermediate wave (5) to end primary wave 3 may exhibit similar behaviour, so we should be on the lookout for this possibility.
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 found support about this line.
A target is now calculated for minute wave iii to end, which expects to see the most common Fibonacci ratio to minute wave i. Minute wave iii may last a few weeks. When it is complete, then minute wave iv may last about one to two weeks in order for it to exhibit reasonable proportion to minute wave ii. Minute wave iv must remain above minute wave i price territory.
Minute wave iii may have passed its middle strongest portion a few days ago. Although the structure could possibly be seen as complete at yesterday’s high, it has still not moved far enough above the end of minute wave i yet to allow room for minute wave iv to unfold and remain above minute wave i price territory. For that to happen it looks like minuette wave (v) may be a relatively long extension, so that minute wave iii moves higher.
A target is calculated for minor wave 3 to end, which expects to see the most common Fibonacci ratio to minor wave 1. Minor wave 3 may last several weeks in total and should look like an impulse at the daily chart level. When it is complete, then minor wave 4 may last about one to two weeks in order for it to exhibit reasonable proportion to minor wave 2. Minor wave 4 must remain above minor wave 1 price territory.
HOURLY CHART
Click chart to enlarge.
The target for minute wave iii to end is now widened to a rather large 6 point zone, now calculated at two degrees. Favour the lower edge of the target zone as it is calculated at a lower degree.
The target for minute wave iii to end would see it move far enough above the end of minute wave i to allow room for minute wave iv to unfold and remain above minute wave i price territory.
Minuette wave (v) may end about the upper edge of the green Elliott channel. If it behaves like a commodity, then it is possible it could overshoot the upper edge of the channel.
Within minuette wave (v), subminuette wave ii may not move beyond the start subminuette wave i below 2,789.24.
Downwards movement today may have been an expanded flat correction for subminuette wave ii. Within this expanded flat, micro wave B is a 1.31 length of micro wave A, which is within the common range of up to 1.38. If subminuette wave ii continues further, it may complete as a double combination.
This wave count so far still fits with MACD: the strongest middle portion has the strongest momentum.
TECHNICAL ANALYSIS
WEEKLY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
Because the week before last moved price higher but had lighter volume due to the 4th of July holiday, this may affect On Balance Volume. The short term bearish divergence between price and On Balance Volume noted on the chart may not be very significant for this reason.
What may be more significant is another strong upwards week and a gap that may be a breakaway gap. This gap may offer support; breakaway gaps remain open.
DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
The symmetrical triangle may now be complete. 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.
Since the low on the 2nd of April, 2018, price has made a series of higher highs and higher lows. This is the definition of an upwards trend. But trends do not move in perfectly straight lines; there are pullbacks and bounces along the way. A higher high at the end of last week adds some confidence to this trend.
The measuring gap gives a short term target at 2,838. The gap has offered support. It remains open, and the target remains valid.
There is room still for price to continue higher: On Balance Volume remains extremely bullish, and RSI is not yet oversold. When On Balance Volume makes new all time highs before price, expect it is very likely that price shall follow through.
A slight increase in volume for a downwards day is only slightly bearish. This market has been rising on light and declining volume for years now at all time frames; a lack of support from volume for upwards movement in current market conditions does not mean that price cannot drift higher. The very small real body of today’s downwards day is not very convincing as a trend change. Price found support today about 2,800.
Stochastics may remain overbought for long periods of time when this market has a strong bullish trend. Only when it reaches overbought and then exhibits clear divergence with price, then it may be useful as an indicator of a possible high in place. That is not the case yet.
VOLATILITY – INVERTED VIX CHART
WEEKLY 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.
To keep an eye on the all time high for inverted VIX a weekly chart is required at this time.
Notice how inverted VIX has very strong bearish signals four weeks in a row just before the start of the last large fall in price. At the weekly chart level, this indicator may be useful again in timing the end of primary wave 3.
There is now short term bearish divergence between price and inverted VIX. This divergence is seen on both weekly and daily time frames. It is not very strong.
DAILY 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.
A downwards day may now resolve the last bearish divergence noted in yesterday’s analysis. Inverted VIX today has made a slight new low below the prior small swing low of two to three sessions higher, but price has not. This divergence is bearish, but it is weak.
BREADTH – AD LINE
WEEKLY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
When primary wave 3 comes to an end, it may be valuable to watch the AD line at the weekly time frame as well as the daily.
At this stage, there is very strong bullish divergence between price and the AD line at the weekly time frame. With the AD line making new all time highs, expect price to follow through with new all time highs in coming weeks.
DAILY CHART
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.
Breadth should be read as a leading indicator.
Overall, recent new all time highs from the AD line remain extremely bullish for the longer term trend.
Price may reasonably be expected to follow through in coming weeks.
A downwards day today may resolve the last bearish divergence noted in yesterday’s analysis. Price moved lower today, but the AD line moved clearly higher. The fall in price today does not have support from declining market breadth. This divergence is bullish and reasonably strong for the short term.
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.
Only Nasdaq at this stage is making new all time highs. DJIA and DJT need to make new all time highs for the ongoing bull market to be confirmed.
Charts showing each prior major swing low used for Dow Theory may be seen at the end of this analysis here.
Published @ 06:33 p.m. EST.
I am not sure how many members are as active vol traders as Chris and I am but it is currently a very reliable trade and it is really surprising how few traders take advantage.
Every move of VIX below 12 has been a one-way bet. It seems vol is being aggressively accumulated, making 12 strike call 30 days out on sub-12 skirmishes free money.
Kevin can do the math on 1000 compounded at an average of 30% ( or better)per month for six straight months. 🙂
Earlier today, Curtis mentioned Nate’s Market Analysis and his bearish EW count. When I observe such analysis it also causes me to think about the “what if scenarios”. That is a good thing.
There are a couple of others who have such counts as Nate, notably Danneric. However, Danneric has recently changed his count to a longer term bullish count. He did this after being so certain the top was in place. All through the Intermediate IV triangle, he was looking for a crash. I know of a couple of other paid subscriptions analysts who are similar to Nate’s. Even Glenn Nealy of Neowave has turned bullish. But I greatly discount all the others because Lara’s EW analysis and counts have proven over and over (for the last 6 1/2 years I’ve been following her) to be the most accurate, reasoned and reliable counts available. Combined with her EW alternates and TA, she is without a doubt the very best EW technician.
I also follow Chris Ciovacco. He is one of the very best longer term classical technical analysis technicians and asset managers. Over the past several months his analysis continues to point to high probability of good / bullish outcomes in the US equity markets. I encourage all to check him out especially those who are somewhat new to investing and trading the markets.
Well, that is my two cents on the matter FWIW. Have a great weekend all.
I should have mentioned, if and when we make a new ATH, all the counts that say we have a 1-2 down since January 2018 will be invalidated, including Nate’s. That is why the 2870 level is so very important.
Great observations Rod, and I am in general agreement with your viewpoint.
There are lots of conflicting signals in the market right not but ultimately you simply cannot argue with price. Some larger cautionary tales are the persistent massive outflow from equities by insiders and institutions, ongoing QT, and persistent negative momentum divergences at several recent index highs. Another hidden danger is the narrowness of market breadth despite the A/D signals.
An astonishing 70% of S&P 500 gains this year was delivered by THREE stocks!
That is downright scary. A brief search will reveal those particular names and they are all in tech.
I am finding quite a few market signals to be ambiguous at best, and outright unreliable at worst, and have been supplementing Lara’s analysis with a few indicators that I watch. Every trader should have a trading approach that goes along with Lara’s work imho.
I have been paying particular attention to battles around price pivots and how they resolve. I mentioned the last one around 2750 and how I thought the bulls prevailing there made a strong bullish case for the near term and that, in addition to Lara’s count proved to be right.
It now appears that battle around 2800 will also go to bulls. The banksters have made their determination to defend it quite clear, and the long shadow on Friday has to be viewed as bullish near term.
Having said all that, this market remains in my view, a very dangerous place to be right now. VIX has been violently suppressed, and in my opinion bears absolutely no resemblance to the true risks now extant in equities markets.
I plan to maintain a very short trading horizon as things certainly may not all be what they seem. It continues to be a scalper’s market.
thank you Verne for your input.
I would expect that in the final months approaching a Grand Super Cycle trend change, that we may see once in a generation market conditions. because it’s a once in a generation event.
And so, if my Grand Super Cycle analysis is correct, then we should be seeing developing bearishness which does not fit what all the textbooks say.
For example: Every textbook I have on my shelf tells me that if price rises with declining volume, it is unsustainable. Yet looking at a monthly chart from March 2009, this rise has been on declining volume. For years.
You are intimately acquainted with volatility. What you are seeing now may also be a once in a generation condition. And so it may appear broken, unsustainable, strange. Which would fit with the larger picture.
IF my Grand Super Cycle wave count is right, that is.
*blushing furiously*
thank you so very much Rodney for the kind words
this makes me want to work even harder for you all
I take my work VERY seriously. Thank you!
I’m just a newcomer, but I’ll second Rodney’s motion. Your thoroughness and ability to more quickly zero in on the proper count is what I value; the former provides confidence and the latter provides edge. Having experience with some of the weaker EW practitioners out there, I can understand why over time it gets a bad name. Knowing some of the “masters” get big picture things wrong just confirms how hard it is to get right. I feel sad for those who don’t get on board with your work as as the premier market roadmap available, not to mention those who dis EW right out (I hear it a lot). It’s where da gold at!!!
We closed last week at 2801. We opened this week at 2801. We closed this week at 2801.
As they say, thanks for showing up.
Remind me to sell straddles for next July’s opex, lol.
Note: July’s monthly candlestick, not yet complete, is a strong bullish candle. But note Verne’s comments regarding positive first halves of months followed by negative second halves since March 2018. Most importantly to me, however, is the monthly chart is also showing the monthly MACD has turned up / positive without a bearish crossover. That is quite bullish longer term.
Despite prognostication of TLT going to the moon by some, the battle at the 122.50 level has finally been resolved…to the downside. Looks to me like TLT is headed to the 116 area next. Meaning, rising interest rates, meaning, good news for banks, meaning, should help lift the market. We’ll see!
Head-fake from Powell propaganda. The trend is up and will remain so for some time. Take another look in a month.
I will let you know how my TBT August 31 36 strike puts are doing.
I grabbed a bunch for 0.65 cents on Powell’s bombast. FED jawboning works every single time….in the short term that is… 🙂
Hourly chart updated:
Subminuette ii now looks like a double combination; flat – X – zigzag.
Price remains within the channel. Downwards movement still is unconvincing as a new downwards trend, it looks like a consolidation within an ongoing upwards trend. This fits the wave count.
Hmmm….so tempted to load up more on the long…but I’m gonna wait for the first signs of the next wave up to show themselves. Pigs get slaughtered!!
I agree. Long DIA 251 calls and SPX 281 strikes that I rolled out three weeks.
As long as we are above DIA 25K and SPX 2800 we are headed higher. The bears lost that tussle…for now….
It’s options expiration, on a Friday in July, and volume is clustered in the 2790-2810 zone. A lot of people at the beginning of the week were saying it was unlikely we finish outside that zone. I’m not convinced this week means anything for the overall wave count. Response to big tech earnings might be interesting the next two weeks though.
The wave structure up is technically complete and there’s “no problem” with price dropping under the invalidation at 2789 to initiate some kind of ABC correction. I know the larger count indicates “there’s not enough room” but I’m on my guard here. This is how and where nice bull runs end, by breaking the first key invalidation point.
The overall move up has the absolute classic “S” type structure, not that that means too much except that it’s likely you can find a complete five wave structure in it.
I vote with my heart for an extended v wave here. I vote with my head that I’ll be quick on the short trigger to capture downside movement profit should it materialize. It could come quite quickly.
Meanwhile, at the weekly level, this week is turning into a spinning top doji. Not a reversal candle, but certainly a “pause” and “possible top” type candle.
Interesting chart Kevin!
VIX acting strange for middle of an impulse up.
Recent history says we go down the rest of the month.
Market of late throwing off traders with false signals. It really is uncanny.
I agree a time to be extremely wary.
For a seriously bearish view, check out Nate’s Market Analysis (linked by Lara in the side bar). I’m confident in Lara’s count, but… what if? If this really is the middle of a third wave, it just isn’t feeling like it. But then, it would be the third wave of a fifth wave, so…
Very strange goings on with some of the indices. DJI is the only one showing a clear hammer on the 30 minute chart. None of the other indices or associated ETFs show a hammer. They all seem to be in some sort of sideways triangle formation, but that would be negated for DJI because of that huge spike down in the middle of the possible triangle.
It looks to me like we are in some some sort of penultimate wave. If that is the case, I think the move up out of it is going to be sharp, sudden but also relatively short. I am not sure how that is going to affect the wave count but these sideways coils have a very distinct personality in how they resolve. I think it is a foregone conclusion that the defence of the important pivots and that hammer in DJI points to an upwards break from here.
I also expect we could see a very swift and brutal reversal after the move up.
I will be deploying bull put spreads two weeks out after taking a gander at the various option chains to see which offer the biggest bang for the buck.
I shoulda sold those SPY 281 calls when I had the chance. Maybe we get a pop into the close…?
Have a great week-end everyone!
Taking the money and running on NFLX 400 strike puts.
Not as fat as post earnings but 50% ain’t too shabby!
Mr. Market giveth, and he taketh away, mostly the latter! 🙂
Can someone clarify if the A-D indicators are stocks only or contain other instruments trading in the market? I am just trying to understand if the weight to A-D to predict indexes might be tad too much if A-D is diluted.
Also, noting that high yield corp bonds are not supportive of the market rally since May-June, perhaps canary in coal mine..
Corp High Yield Junks provide Liquidity for market and that might be concerning if it drops off.
AFAIK the AD line for the NYSE includes all individual equities on the NYSE.
This is My last post on AG for a while… I know nobody here cares about fundamentals but it’s important information anyway.
AG Earnings Estimate Update: FY2018 at +$0.02 & EPS FY2019 +$0.36 EPS this is Way HIGHER than previously expected from these guys and I am sure others will also update. Why the big upgrade in numbers? It all has to do with the new San Dimas mine that is now owned 100% by AG since May 2018.
I will post the link in a separate post next… because I am not sure if will go into moderation or not.
Here is that link… https://www.equitiesfocus.com/2018/07/20/first-majestic-silver-corp-forecasted-to-post-q2-2018-earnings-of-0-01-per-share-ag.html
Thanks Joe. Gold showing positive divergence at deeply oversold levels. At the very least a decent bounce here is historically a high probability.
Some others are predicting Gold at $2,000 plus in two years while stocks take a dive.
Dollar has topped. Weekly shooting star!
Waiting for a turn at the hourly tf. Below the 50% now and still dropping. Free fall continues. The 61.8% at 6.29 is extremely likely now.
After all the analysis was published today we went surfing. Our home break. Glassy, clean, super fun little waves, only 1.5 to maybe 2ft on the sets, but the banks were working and they were peeling all the way into the beach. Sunshine and friends. Surfing.
And I am so stoked I can hardly contain it. The dolphins came to play and I had my new GoPro on me, charged and filming! Tried to catch a wave with a dolphin, but missed it. Did film them underwater and playing around us.
They don’t come by very often here. Not like in warmer waters.
Oh yeah, it’s FREEZING cold in the water. But we managed 2.5 hours. Until our feet went numb and blue. So happy!
That sounds awesome!
Would be very fun to see that video of the dolphins 🙂
Yes it does! 🙂
Here you go.
It’s not as good as I hoped, the water was a bit murky
Well, well,well It would appear they will not go gentle into that good night. I am reaching out to my friends at Artemis to try and get some insight as to why they are so ferociously trying to hold onto these pivots. I suspect it has a lot to do with leverage. The market is now being sold with authority, so either some heavy hitters are taking on the banksters, or massively leveraged positions are being unwound.
Was that the reason for the panic spikes down in VIX yesterday? Should be an interesting day. Have a great trading day!
Haha! The guys at Aretemis are a riot!
They say no one is more leveraged than the banksters, and that they are covering their own ASSETS!
VERY funny! 🙂
Verne,
How can I contact you offline, please advise?
Lara can send you my e-mail.
Hi Verne, I’d also like to contact you… Its been great reading your posts here the last few years 🙂
Lara,
Can I request you please send me Verne’s contact info as per his note above?
Will do guys
Come on, you weren’t surprised by that. Even Donald’s trying to push them out now. The wicks down on VIX from 6am-9am are just frightening. Audit then end the FED!!!
Yep! The threw in a few more Benjamins! No surprise. Felt silly about dumping VIX calls after futures tanked. Now not so much.
This is a strange market. The sharp reversal off the morning’s low and hammer, as well as intact pivots is clearly bullish. Why do I feel like we are being set up?! Watching VIX closely. 🙂
Good for you, Lara. Dolphins are amazing creatures. What a thrill.
It may be cold by you but we are having tremendous heat. Last week when I was in the mountains just over 8000 feet elevation, the temperature in the shade was 85 F and in the sun it was 115 F. At a mile and a half above sea level, the sun can be so very powerful. It was somewhat exhausting.
I leave Monday for the Pacific coast (NW USA) with my wife and two granddaughters for two weeks of frolicking and fun. The temps will be in the high 60’s F. Much more tolerable to me. I’ll remember the boogie / body boards you and Kevin mentioned to me earlier. It is good to get away knowing the market is on track to hit your series of targets.
SPX hourly in 3 hours of squeeze. Last one ended with a very strong move up. Waiting…
Right on! Hope you got some 3’s of 3’s!!
Interesting market psychology in play. It would appear the bears were quite content to let them burn a ton of cash trying to close the gaps and reclaim the pivots and then whack ’em in futures overnight. Very interesting! To make this convincing they will now have to gap price down past the pivots at the start of the cash session. If I know the banksters, they are not going down without a fight…hell no!
We will know they are in trouble if we see DOW futures down triple digits all evening.
At the same time, I would not be in the slightest surprised to see them bid this thing back into the green! A triple digit DOW futures decline could be the first sign that they are starting to loose it. The were trashing around like a hooked bass trying to smash VIX this morning and got slammed! Then again, the whole thing could be one big con to keep us traders off balance…lol!
Futures pointing to a loss of key pivots tomorrow. They had to make it difficult by keeping prices propped above them during the cash session. We could be headed much lower unless they throw another couple billion at futures overnight. Strap in! 🙂
As Rafiki says: “WRONG again!” 🙂
If you are interested in why I think we only completed the initial phase of the volatility crisis, here is good article pointing out the last time we had a similar low vol high skew ratio as we do now.
https://www.zerohedge.com/news/2018-07-18/if-everythings-so-awesome-why-are-investors-paying-so-much-crash-protection