Price remains range bound. A breakout is expected tomorrow or within the next very few days.

Summary: At this stage, it would be best to let price tell us if primary wave 3 is over or not.

While price remains above 2,864.12, then this may still be another pullback within an ongoing upwards trend. The target is now at 3,012.

If price makes a new low by any amount at any time frame below 2,864.12, then some confidence that primary wave 4 has begun may be had. Targets are either 2,716.89 or 2,578.30. There is now enough bearishness from the AD line to take this possibility fairly seriously. Primary wave 4 is expected to be a large choppy consolidation, which may last about a Fibonacci 13 weeks.

The final target for this bull market to end remains at 3,616, which may be met in October 2019.

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.

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 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.

There is perfect alternation and excellent proportion between intermediate waves (2) and (4).

At this stage, the expectation is for the final target to me met in October 2019. If price gets up to this target and either the structure is incomplete or price keeps rising through it, then a new higher target would be calculated.

DAILY CHART

Click chart to enlarge.

Intermediate wave (5) avoided a truncation now that it has a new high above the end of intermediate wave (3) at 2,872.87.

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). Intermediate wave (5) has passed equality in length and 1.618 the length of intermediate wave (1). The next Fibonacci ratio in the sequence is 2.618 giving a target at 3,124. If the target at 3,012 is met and passed, then this would be the next calculated target.

A target for intermediate wave (5) to end is calculated at minor degree.

Intermediate wave (5) is unfolding as an impulse, and within it minor waves 1 through to 4 may now all be complete.

Within intermediate wave (5), minor wave 3 was extended. Minor wave 5 may also extend.

Minute wave ii may not move beyond the start of minute wave i below 2,864.12.

HOURLY CHART

Click chart to enlarge.

If minor wave 5 extends, then it may have begun with a leading expanding diagonal for minute wave i.

Minute wave ii may be a complete zigzag. Minute wave iii may have begun. This hourly wave count has good proportion at the daily chart level, and for this reason it is the main hourly wave count.

This wave count now sees a series of four overlapping first and second waves complete. If this wave count is correct, then an upwards breakout to new all time highs should happen very soon; the breakout should have support from volume and exhibit an increase in upwards momentum.

Within the middle of the third wave, if subminuette waves i and ii are incomplete, then subminuette wave ii may not move beyond the start of subminuette wave i below 2,907.50.

If this first hourly chart is invalidated with a new low by any amount at any time frame, then the second hourly chart below may be used.

HOURLY CHART II

Click chart to enlarge.

It is also possible that minute wave ii may not be over and may continue sideways as a double combination.

The first structure in a double may be a complete zigzag labelled minuette wave (w). The double may be joined by a three in the opposite direction, a zigzag labelled minuette wave (x). X waves within combinations are usually very deep, where X waves within double zigzags are usually more shallow. Here, minuette wave (x) is a 89.7 depth of minuette wave (w), which is very deep, so a double combination would be more likely.

Minute wave ii may not be unfolding as a flat correction if upwards movement ends here for the short term, because then minuette wave (b) would be 0.03 less than a 0.9 length of minuette wave (a); the minimum requirement for B waves within flats at 0.9 would not be met.

The second structure in a double combination is most commonly a flat correction, although occasionally it may be a triangle. Minuette wave (y) would most likely unfold as a flat correction. It would most likely end about the same level as minuette wave (w) at 2,903.28, so that the whole structure takes up time and moves price sideways, which is the purpose of the second structure within a combination.

Minute wave ii may not move beyond the start of minute wave i below 2,864.12.

ALTERNATE ELLIOTT WAVE COUNT

DAILY CHART

Click chart to enlarge.

It is possible to see now that primary wave 3 could be over at the last high by simply moving the degree of labelling within minor wave 5 up one degree.

It is reasonably common for the S&P to exhibit a Fibonacci ratio between two actionary waves within an impulse, and uncommon for it to exhibit Fibonacci ratios between all three actionary waves within an impulse. The lack of a Fibonacci ratio for minor wave 5 within this wave count is not of any concern; this looks typical.

Primary wave 4 would most likely end somewhere within the price territory of the fourth wave of one lesser degree. Intermediate wave (4) has its price territory from 2,872.87 to 2,532.69. Within this range sit two Fibonacci ratios giving two targets. The lower 0.382 Fibonacci ratio may be more likely.

Primary wave 2 unfolded as a shallow regular flat correction lasting 10 weeks. Primary wave 4 may exhibit alternation in structure and may most likely unfold as a zigzag, triangle or combination. A zigzag would be the most likely structure as these are the most common corrective structures and would provide the best alternation with primary wave 2.

Primary wave 4 may not move into primary wave 1 price territory below 2,111.05. However, the lows in primary wave 4 should not get close to this point. The lower edge of the teal channel on the weekly chart should provide very strong support.

HOURLY CHART

Click chart to enlarge.

A movement at primary wave degree should begin with a five wave structure downwards. So far that would be incomplete.

The first five down may be labelled minor wave 1. So far only minute waves i and ii may be complete. If it continues further, then minute wave ii may not move beyond the start of minute wave i above 2,940.91.

Minute wave iii should exhibit an increase in downwards momentum.

TECHNICAL ANALYSIS

WEEKLY CHART

Click chart to enlarge. Chart courtesy of StockCharts.com.

The symmetrical triangle base distance is 340.18. Added to the breakout point of 2,704.54 this gives a target at 3,044.72. This target has not yet been met.

Last week completed an inside week with the balance of volume downwards and the candlestick closing red. Downwards movement within last week does not have support from volume. At this time frame, this week looks like a small pause within an ongoing upwards trend.

DAILY CHART

Click chart to enlarge. Chart courtesy of StockCharts.com.

Closure of the last gap is bearish. The gap is now labelled an exhaustion gap.

Today completes an upwards day with a higher high and a higher low, and the balance of volume is upwards. Volume did not support upwards movement within this session. The long legged doji indicates indecision; a balance of bulls and bears today. So far this looks like a continuation of a small consolidation, within an ongoing upwards trend.

The bottom line remains that an upwards trend remains intact until price makes a new swing low. Look now for strong support about 2,875 – 2,865. If price makes a new swing low below 2,864.12, that would indicate a change from an upwards trend to either a larger sideways consolidation or a new downwards trend.

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 warning of the end of primary wave 3.

At this time, there is mid term bearish divergence between price and inverted VIX: price has made another new all time high, but inverted VIX has not. This divergence may persist for some time. It may remain at the end of primary wave 3, and may develop further to the end of primary wave 5.

Downwards movement within last week has support from a normal increase in market volatility. There is no new short term divergence.

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.

There is mid term divergence with a new all time high from price not supported by a corresponding new all time high from inverted VIX. This divergence is bearish.

Short term bullish divergence noted in last analysis has now been followed by an upwards day. It may be resolved here, or it may be followed by another upwards day before it is resolved.

Upwards movement today has support from a normal decline in VIX. There is no new divergence.

Mid term bearish divergence between price and inverted VIX can be seen on both daily and weekly charts now. However, this may not be a good timing tool in identifying the end of primary wave 3; divergence may develop further before primary wave 3 ends.

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.

There is still short term bearish divergence at the weekly chart level between price and the AD line. It is possible now that the end of primary wave 3 is quite close.

For the last completed week, price moved sideways. Downwards movement within the week has support from an increase in breadth.

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 on the 29th of August means that the beginning of any bear market may be at the end of December 2018, but 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.

Price has moved higher today, but the AD line has declined. Upwards movement during this session does not have support from rising market breadth. This divergence is bearish for the short term.

There is now a cluster of bearish signals at the daily chart from the AD line; this offers now some reasonable support to the new alternate Elliott wave count.

All of small, mid and large caps made new all time highs on the 27th of August. There is a little divergence here in breadth with large caps continuing to make new all time today and small and mid caps lagging.

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.

All of DJIA, DJT, S&P500 and Nasdaq have made recent new all time highs. This provides Dow Theory confirmation that the bull market continues.

Charts showing each prior major swing low used for Dow Theory may be seen at the end of this analysis here.

ANALYSIS OF THE END OF INTERMEDIATE WAVE (3)

TECHNICAL ANALYSIS

Click chart to enlarge. Chart courtesy of StockCharts.com.

This chart looked overly bullish at the end of intermediate wave (3). The only warning in hindsight may have been from volume spiking slightly on downwards days. There was no bearish divergence between price and either of RSI or On Balance Volume.

Single bearish divergence between price and Stochastics was weak, which is often an unreliable signal.

VIX

Click chart to enlarge. Chart courtesy of StockCharts.com.

This is a daily chart.

The strongest warning of an approaching intermediate degree correction at the daily chart level came from inverted VIX.

There was strong double bearish divergence at the high of intermediate wave (3), which is noted by the vertical line. There was also a sequence of five days of bearish divergence, days in which price moved higher but inverted VIX moved lower.

AD LINE

Click chart to enlarge. Chart courtesy of StockCharts.com.

This is a daily chart.

There was only single bearish divergence between price and the AD line at the end of intermediate wave (3). Approaching the high, there were no instances of price moving higher and the AD line moving lower.

Conclusion: When studying the behaviour of price and these indicators just before the start of intermediate wave (4), we may see some clues for warning us of primary wave 4. A cluster of bearish signals from VIX along with a bearish divergence from price and the AD line or On Balance Volume may warn of primary wave 4. The next instance will probably not behave the same as the last, but there may be similarities.

At this time, it does not look like primary wave 4 may begin right now, but we need to be aware of its approach.

Published @ 07:58 p.m. EST.

—
Careful risk management protects your trading account(s).
Follow my two Golden Rules:

1. Always trade with stops.

2. Risk only 1-5% of equity on any one trade.