More downwards movement was expected for the short term.
Summary: A short-term target for downwards movement to end is about 2,672.
Five daily charts today look at five different structures for primary wave 4, in order of probability (roughly): triangle, combination, zigzag, double zigzag, and flat.
New updates to this analysis are in bold.
The biggest picture, Grand Super Cycle analysis, is here.
Last published monthly chart 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. It is clear it is an impulse.
Cycle wave V has passed equality in length with cycle wave I, and 1.618 the length of cycle wave I. The next Fibonacci ratio is used to calculate a target. When primary wave 4 is complete and the starting point for primary wave 5 is known, then the final target may also be calculated at primary degree. At that stage, there may be two targets, or the final target may widen to a small zone.
Within cycle wave V, the third waves at all degrees may only subdivide as impulses.
Within primary wave 3, there is perfect alternation and excellent proportion between intermediate waves (2) and (4).
The maroon channel is drawn about primary degree waves. The first trend line is drawn from the ends of primary waves 1 to 3, then a parallel copy is placed upon the low of primary wave 2. The overshoot of the upper edge of this channel by the end of intermediate wave (3) looks typical. For the S&P, its third waves are usually the strongest portion of an impulse; they often exhibit enough strength to overshoot channels.
Primary wave 4 now has an overshoot on the lower edge of the channel. This is acceptable; fourth waves are not always neatly contained within channels drawn using this technique.
Primary wave 4 may find very strong support about the lower edge of the teal channel, and it looks like this is from where price may be bouncing. This channel is copied over from the monthly chart and contains the entire bull market since its beginning in March 2009. While Super Cycle wave (V) is incomplete, this channel should not be breached at the weekly chart level.
Primary wave 4 may not move into primary wave 1 price territory below 2,111.05.
At this stage, the expectation is for the final target to be 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.
At this stage, the various possible structures for primary wave 4 will be published as separate daily charts, presented in order of probability.
DAILY CHART – TRIANGLE
Click chart to enlarge.
If primary wave 4 unfolds as a triangle, it would have perfect alternation with the regular flat correction of primary wave 2. It would also continue to find support about the lower edge of the teal trend channel. Triangles are fairly common structures for fourth waves. For these reasons this wave count may have a slightly higher probability than the other daily charts.
If primary wave 4 is unfolding as a triangle, then within it intermediate wave (B) would most likely be incomplete. To label intermediate wave (B) over at the last swing high is possible, but it would look too shallow for a normal looking Elliott wave triangle.
Triangle sub-waves are often about 0.8 to 0.85 the length of the prior wave. This gives a target range for intermediate wave (B).
One triangle sub-wave may subdivide as a multiple; this is most often wave C, but it may also be wave B. Intermediate wave (B) may be unfolding higher as a double zigzag.
There is no upper invalidation point for this wave count. Intermediate wave (B) may make a new high above the start of intermediate wave (A) as in a running triangle.
Within the triangle, intermediate wave (C) may not move beyond the end of intermediate wave (A) below 2,603.54.
HOURLY CHART – TRIANGLE
Click chart to enlarge.
Intermediate wave (C) may not move beyond the end of intermediate wave (A). Now that intermediate wave (A) is over, price may not make a new low below its end at 2,604.04.
Intermediate wave (B) may be an incomplete double zigzag. Within the double zigzag, minor wave X may be an incomplete single zigzag. The target for minor wave X today is recalculated using the most common Fibonacci ratio between minute waves a and c.
The best fit channel is adjusted so that it contains all of minor wave X so far. Minute wave c may find support about the lower edge. If this channel is breached by upwards movement, that shall be an indication that minor wave X may be over and minor wave Y may have begun.
DAILY CHART – COMBINATION
Click chart to enlarge.
This wave count is judged to have only a very slightly lower probability than the triangle.
Primary wave 4 may be unfolding as a double combination. The first structure in the double may be a complete zigzag labelled intermediate wave (W). The double may be joined by a three in the opposite direction labelled intermediate wave (X). Intermediate wave (X) may be complete as a single zigzag; it is deep at 0.63 the length of intermediate wave (W), which looks reasonable.
Intermediate wave (Y) would most likely be a flat correction, which should subdivide 3-3-5. At its end, it may still find strong support about the lower edge of the teal trend channel.
At the hourly chart level, minor wave A would be subdividing as a zigzag, in exactly the same way as minor wave X does on the hourly chart published above. The subdivisions, target and channel would all be the same.
DAILY CHART – ZIGZAG
Click chart to enlarge.
Primary wave 4 may be unfolding as a single zigzag, which is the most common type of corrective structure.
Within the zigzag, intermediate wave (B) may now be a complete structure, ending close to the 0.618 Fibonacci ratio of intermediate wave (A).
Intermediate wave (C) may now unfold lower as a five wave structure. Intermediate wave (C) would be very likely to end at least slightly below the end of intermediate wave (A) at 2,603.54 to avoid a truncation. It may end about support at 2,600.
This wave count would expect a fairly large overshoot of the teal trend channel. This reduces the probability of this wave count.
DAILY CHART – DOUBLE ZIGZAG
Click chart to enlarge.
Primary wave 4 may also be unfolding as a double zigzag.
The first zigzag in the double may be complete, labelled intermediate wave (W). The double may joined by a complete three in the opposite direction, a zigzag labelled intermediate wave (X).
The second zigzag in the double may have begun. It is labelled intermediate wave (Y). Within intermediate wave (Y), minor wave B may not move beyond the start of minor wave A above 2,815.15.
The purpose of a second zigzag in a double is to deepen the correction when the first zigzag does not move price deep enough. To achieve this purpose intermediate wave (Y) should be expected to end reasonably below the end of intermediate wave (W) at 2,603.54. This would expect a very large overshoot of the teal trend channel; for this reason, this wave count is judged to have the lowest probability.
DAILY CHART – FLAT
Click chart to enlarge.
Primary wave 2 was a regular flat correction. If primary wave 4 unfolds as a flat correction, then there would be no alternation in structure between the two corrections; for this reason, this wave count is judged to have a low probability.
However, alternation is a guideline, not a rule, and it is not always seen. This wave count is possible.
If primary wave 4 is a flat correction, then within it intermediate wave (B) must move higher to retrace a minimum 0.9 length of intermediate wave (A).
When intermediate wave (B) is complete, then intermediate wave (C) should move below the end of intermediate wave (A) at 2,603.54 to avoid a truncation. This would expect a reasonable overshoot of the teal trend line, which further reduces the probability of this wave count.
TECHNICAL ANALYSIS
WEEKLY CHART
Click chart to enlarge. Chart courtesy of et=”_blank”>StockCharts.com.
Weakness in volume and a long upper wick suggest this upwards week may be a counter trend bounce. Overall, this supports the Elliott wave count.
DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
The last gap is now closed, so it should correctly be now labelled an exhaustion gap.
The gap below is still open and may provide support. There is still strong support about 2,700.
If price can break below 2,700, then next support is about 2,600.
Price is now moving lower but slightly declining, and now steady ATR with steady Bollinger Bands indicate a little weakness. At this stage, this offers a little support to the idea that this fall in price may be a B wave.
Today the long upper wick suggests another downwards day tomorrow.
BREADTH – AD LINE
WEEKLY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
Last week price moved higher, but the AD line moved lower. This divergence is bearish and supports the second alternate Elliott wave count.
However, noted on this chart, there is one other instance of the same single week bearish divergence that was not followed by a downwards week.
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.
Downwards movement today has support from falling market breadth. There is no short-term divergence.
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.
Last week price moved higher with inverted VIX. The rise in price last week comes with a normal corresponding decline in VIX.
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.
Today inverted VIX moved higher, but price moved lower. This divergence is bullish for the short term; it may offer a little support to the Elliott wave count which sees this downwards movement as a B wave.
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: 23,344.52.
DJT: 9,806.79.
S&P500: 2,532.69.
Nasdaq: 6,630.67.
Published @ 08:07 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.
Look at VIX.
That is not the way it is going to trade at the end of a primary degree correction.
Take care everyone!
Wow. Well, as I said, I thought a long tail reversal bar today was very possible. I didn’t call the low right, I thought 2700, it’s 2686. But one heck of a reversal day now!!!
+35 in less than an hour. Wowee
anddd promptly lost much of that.
Is there still a chance of ED to Lara’s target?
No. An ending diagonal would be expanding, so the final fifth wave would need to be longer than the third. It would need to end below 2,661
SPX (SPY shown here to get volume data) went down into a giant volume hole…and the decision time, to the lower node or back up? Back up obviously, racing up to the “point of control” high volume node around 2721. This volume data is quite valuable to me; it clarifies where price will NOT likely settle, and where it will, and that can be converted to edge.
The heavy white line is at today’s low, showing where in the volume hole price finally turned back up.
Okay, prompted by jmdrew’s comment below, here’s an alternate to consider.
I’ll keep a close eye on classic analysis and will publish this and keep it as an alternate, unless conditions become too bullish to consider it.
This is possible. If P5 continues to new ATH’s up to the end of December and the AD line doesn’t make new ATH’s, then the conditions for the end of this bull market would be in place.
Thank you for this and the previous comment. I appreciate you taking the time for it.
Hourly chart for the triangle count updated:
Minute c looks like an incomplete impulse.
If I’ve got the little subdivisions within minor X labelled correctly here on the hourly chart, then minuette wave (iv) may not move into minuette wave (i) price territory above 2,714.98. So look for a little bounce now to remain below this point, and then be followed by a last small wave down to the target.
Great thanks. I was just going to post my take of the current count which matches yours. You are a good teacher.
Long term accounts moving to long positions today. Short term (trading account) moving to long position with completion of the Minor X wave, perhaps today. Look for a gap up in overnight futures and tomorrow morning.
Thanks for sharing that Rodney.
Just told my broker of one of my account to shove 50% of my cash that was in stocks back in now. I’m saving the other for the C wave down…which still could be going a lot deeper…or not. But don’t want to miss this as a likely relative low.
I actually went 50% long today as well. Was also long the previous SPY $270 to $281 so I have a bit of a buffer as well.
Are there any posts on this site would help me see that we are in P4 rather than just completing P5? Thanks in advance!
Okay. After a little thinking I think I may be understanding your question…
Could price be now in primary wave 5? Could primary wave 4 be over?
Well, yes, actually, it could. And maybe I should chart this possibility for you all.
The AD line had it’s last ATH on 29th August. So if P4 is over and now P5 has begun to new ATH’s for price, the AD line could lag and show multi month divergence.
If P5 moves slowly and ends at or after the end of December, which is now just next month (!) then the minimum of 4 months divergence between price and the AD line could be met.
P4 would be reasonably brief, at only 6 weeks to P2 10 weeks, but with P4 a zigzag and P2 a flat that would be acceptable.
The more I look at this idea…. the more I think I need to publish it. As an outlier.
Let’s consider all possibilities. If we do then we are better prepared for market changes.
I support looking broadly at most of the feasible possibilities, too! I have little confidence that the market will play out that way, I think the P4 “naturally” will run for many more weeks/a few more months, with lots of herky jerky moves. But confidence requires knowing the possible alternatives etc etc. so yes please!
RUT has tagged and turned at the 5 minute TF off the 61.8% retrace of the move up off the Oct 26 low.
Nyet?
I have oil (/CL) bouncing at the weekly TF level off a major 61.8% at 55.43.
I think this could still be main count but with Minute b finishing slightly below Lara’s position.
Looking at that SPY volume profile, I ask myself the question “if this market continues up here as I expect, where’s it going to stop and turn?”
Based on the volume nodes, it appears to me to be headed back to the recent highs around 2812. The next major volume node is WAY WAY up there. I don’t believe it’s going that high!! So I’ll be looking for turns around the recent highs in the next day or two as my place to exits the long sides of my spreads etc.
As I pointed out below, I think the odds are very good this market turns back up at or just above 2700 (turns up for a mult-hour/day move up, anyway). If it gets to 2695 and is still moving down…2670 is likely. IMO.
I cannot fathom this wave count at all?
Nick, if you have some specific questions I might be able to attempt an answer for you. Aside from that, Lara has presented 5 possible EW counts for Primary 4 on the daily time frame. She has listed the the reasons why some might be more or less probable than the others. This is the conundrum of EW corrections, there are over 20 possible patterns. At this point, it is difficult or impossible to rule out the five listed in today’s analysis. I hope this might shed some light and help. If you have other specific questions I be happy to give my thoughts, fwiw.
I will be leaving shortly to pick up my wife who has the pleasure of a colonoscopy today! So I won’t be around for a while. But I will check back in when I have time. In the end (he he), the market makers like to give a colonoscopy to guys like me. They want to stick it to me! Yuck.
the only nice thing about a colonoscopy is the dose of demeral they zap you with…eyes roll back…and next thing you know, nice and warm in recovery! And of course hearing that there are no issues…that’s obviously the best thing.
LOL, like it didn’t even happen.
$DXY (dollar index) monthly. I think I showed this a few weeks ago. The lines up are not trend lines, but symmetric move lines from past moves. Price has past one of the five, and continues “within” the time/price range implied by the others. Looks to me like $DXY here is head at least close to the top of the range 103.8 established back in Jan’17. Pretty directly trade-able via UUP and it’s options.
I’ll add that a break up through the 61.8% looks like a great place to jump on board with a very low risk/high reward stop just underneath.
1st
I don’t recall ever seeing so many potential possible wave patterns in the SPX. I am guessing the triangle because it would be a fractal / repeat of Intermediate 4 earlier this year and it tends to cause lots of whipsawed traders.
Best of luck to all in the upcoming weeks.
There sure are a lot of possibilities, but 2,675 area seems almost inevitable in all cases.
Has anyone had a change to overlay the move down in January with this one, they look strikingly similar.
The intermediate 4 B wave first leg up (wave a of the B) initially came up to very close to the (derived) fibo extension of 78.6%. The first leg up here in the P4 came up less, almost exactly to the 61.8%.
The wave b down of the B wave up of the intermediate 4 came back down to the 38.2% of the initial A wave down. Which was also about the 50% of the a wave up.
The move back down here in P4 off the 61.8% retrace tag has come almost 50% of the way back down, a move that would be highly symmetric with the early stages of the I4. If the symmetry is to continue, a turn up very soon is needed. That 50% is also close to the 50% of the I4 A wave down (the blue 50% line that runs off the chart to the left). Additionally, there are three recent daily lows in that range, and the high of the big one day reversal bar at the bottom of the P4 A down. Serious support. While we certainly could see one of the zig-zag structure play out and price tanks here, I will be watching very carefully for a turn, particularly at that zone of 2700 to 2712 (the gray box).
Excellent question! I’m sure there are other ways of answering, too.
The volume node data for SPY shows a giant volume valley by the time price drops to below 2700. The next node down peaks at the 2670 area. So…if price drops below 2700 and keeps moving, it appears to me some aggressive shorting might be appropriate. But watch out for a tag of that 2700 area and instant turn back up, and the launch of a wave up to continue/finish the intermediate B up per several of the models. All considered, I think that’s the higher probability action here. But I’ll let the market inform me.
Rodney I’ve learned not to bet against you in this regard…yet nonetheless, I will look for an opportunity for double or nothing! But nyet…I have no clue, quite yet, just taking it as swing at a time. I am looking for substantially lower to reenter at 100% in a “non-trading” (financial advisor managed generally) account, though (I pulled an “over-ride” of his management very close to to the I5 top and had him exit all stock positions in that account, bingo!). So I would be Really Fine with one of the two zig-zag models.
You would not be betting against me as I said the triangle option is only a ‘guess’. I am also guessing that the current move down will take at least a week and possibly two weeks before the next leg up begins in earnest.
But who knows. We have to let the market guide us. OIL is a perfect example. I was frothing at the mouth ready to go long oil when it got down to $64 or so. I wanted to use the 3X ETF WTIU thinking I’d be lucky to get a price as low as $25. Well, OIL kept going down this past two weeks. It is now roughly $56 and WTUI is now at $17.50. Fortunately, I did not go long. I let the market guide me. A lot of OIL longs have been in a blood bath.
Here, here!!!