Price keeps falling towards the target on the alternate Elliott wave count, but it is not falling quickly or with strength.
Summary: It is possible a low may again be in place. A new high above 2,621.53 and a breach of the channel on the the hourly chart would add confidence in this view.
If price keeps falling here, then the target for the end of primary wave 4 would be about 2,478.
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.
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 at the monthly chart level. It may only be an impulse or ending diagonal. It is clear it is an impulse.
Within primary wave 3, there is perfect alternation and excellent proportion between intermediate waves (2) and (4).
Draw the teal channel from the high of cycle wave I at 1,343.80 on the week beginning 3rd July 2011, to the high of cycle wave III at 2,079.46 on the week beginning 30th November 2014, and place a parallel copy on the low of cycle wave II at 1,074.77 on the week beginning 2nd October 2011. Draw this chart on a semi-log scale. A small overshoot, like that seen at the end of cycle wave IV, would be entirely acceptable.
The channel has now been overshot twice at the end of primary wave 4. This is acceptable. If this wave count is correct, then a breach of this channel would be unlikely. A breach may be defined as a full weekly candlestick below and not touching the lower trend line. If this trend line is not to be breached, then a low and a sharp reversal must be found this week, so that this weekly candlestick does not print fully below the trend line.
This wave count has the right look at the monthly chart level.
If primary wave 5 ends at or after the end of December 2018 and the AD line fails to make new all time highs, there would then be the minimum required four months of bearish divergence between price and the AD line. If this happens, then the conditions for the end of this bull market would be in place.
Primary wave 4 may not move into primary wave 1 price territory below 2,111.05.
Two daily charts are published.
DAILY CHART
Click chart to enlarge.
Primary wave 4 may be a complete double zigzag.
The first zigzag in the double is complete and labelled intermediate wave (W). The double is joined by a complete three in the opposite direction, a zigzag labelled intermediate wave (X). The second zigzag in the double may again today be complete, which is labelled intermediate wave (Y).
Minor wave B within intermediate wave (Y) is labeled as a possible double combination. All subdivisions fit perfectly, but this structure has a downwards slope. Double combinations are fairly common structures, but they normally have a sideways look. This one does not. However, the S&P does not always have normal looking structures. This is acceptable for this market.
The second zigzag of intermediate wave (Y) may today be complete, or it may move just a little lower tomorrow. If it is complete at today’s low, then minor wave C would be 12.33 points longer than equality in length with minor wave A. This variation is still less than 10% the length of minor wave C, so it is small enough to consider they have a Fibonacci ratio of equality.
A new high above 2,621.53 now is required for some confidence in this wave count.
HOURLY CHART
Click chart to enlarge.
It is again possible that the structure of minor wave C could be complete.
The best fit channel is slightly adjusted today. If this channel is breached by upwards (not sideways) movement, it may then provide an early indication that minor wave C may be over and a low may be in place.
A new high now above 2,621.53 would invalidate the alternate wave count below and provide some confidence in this main wave count.
Both wave counts will remain valid, and it will remain possible that price may continue falling, while price remains within the channel and below 2,621.63.
ALTERNATE DAILY CHART
Click chart to enlarge.
The other possible structure for intermediate wave (C) would be a simple impulse. If intermediate wave (C) is unfolding as an impulse, then it may now have three first and second waves complete. The middle of the third wave may have unfolded, and it now shows slightly stronger momentum than the first wave.
Minute wave iv may not move into minute wave i price territory above 2,621.53.
This wave count would expect to see a very large breach of the teal trend channel on the weekly chart. This has not happened during the life of this trend channel.
The S&P commonly forms slow curving rounded tops. When it does this, it can breach channels only to continue on to make new all time highs. When it breaches upwards channels and then continues onwards, price often will find resistance at the lower edge of the channel. It is possible that Grand Super Cycle wave I may end in this way.
ALTERNATE HOURLY CHART
Click chart to enlarge.
If this wave count is correct, then a small series of fourth wave corrections may unfold: minuette wave (iv) may have completed today, then minute wave iv, and then finally minor wave 4. Each is to be followed by a fifth wave down. This may take another week to two to complete.
Minute wave iv may unfold tomorrow. It may end within the fourth wave of one lesser degree price territory. Minuette wave (iv) has its price territory from 2,530.54 to 2,573.99. Within this range is the 0.382 Fibonacci ratio at 2,564.
Thereafter, more downwards movement may unfold towards the target.
TECHNICAL ANALYSIS
WEEKLY CHART
Click chart to enlarge. Chart courtesy of et=”_blank”>StockCharts.com.
The strongest volume for recent weeks is for the upwards week beginning 29th of October. This short-term volume profile at this time frame is bullish.
For a more bearish outlook a bearish signal from On Balance Volume would be preferred.
The last weekly candlestick has a bearish long upper wick, but it has a smaller real body and has not moved price substantially lower.
DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
The lower edge of the teal trend channel is not shown on this chart, but it should be considered as part of this technical analysis. This channel is now breached at the daily chart level, but because it is drawn on the weekly chart only a breach at the weekly chart level would be sufficient for a very bearish outlook to be seriously considered.
Very strong support about 2,530 remains intact so far. This is the lowest price point of cycle wave IV, in early February 2018.
There is a downwards trend in place. Bullish divergence has simply disappeared. If price can overcome support at 2,530 then next support below would be about 2,490. This chart favours the alternate Elliott wave count.
BREADTH – AD LINE
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.
There is mid-term bullish divergence between price and the AD line. Last week price made new lows below the prior low of the week beginning the 30th of April, but the AD line has not. This indicates that downwards movement does not have support from a corresponding decline in market breadth; there is some weakness within price.
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.
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.
Breadth should be read as a leading indicator.
Today both price and the AD line have made new lows. There is no divergence.
Nearing the end of this bull market, to the end of primary wave 5, bearish signals from the AD line may begin to accumulate.
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 has made a new low below the prior swing low, but inverted VIX has not. This divergence is bullish and indicates downwards movement last week does not come with a normal corresponding increase 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.
Like the AD line, inverted VIX may now begin to accumulate instances of bearish signals or divergence as a fifth wave at three large degrees comes to an end.
For inverted VIX, bullish divergence noted in last analysis has today simply disappeared. It may have failed. Today both price and inverted VIX have made slight new lows.
DOW THEORY
The following lows need to be exceeded (at the close) 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 – price has closed below this point on the 13th of December.
S&P500: 2,532.69.
Nasdaq: 6,630.67.
Published @ 08:34 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.
If you ever doubted the dystopian, completely fraudulent nature of these markets we are trading, just take a look at VIX today.
In what real world of reasonable depiction of true implied vol would you see VIX in the red on a day like today?
As I have opined on previous occasions, when it comes to vol, frequently all is not what it seems. This is insane market behavior people….INSANE! 🙂
The vix around 25 is representing the size of the intra day moves in that regard..
Old school vix… starting at 16 which represents intraday moves of 1% and moving up
We are getting 2-3% moves so above 20-25 seems about right
Also as prices fall out .. people aren’t skew protecting as much because a lot of the drop has happened so you don’t get the large lower strike contract positions that can make vix jump
Oh but we will! You just watch!
The short vol trade is STLL firmly in place imho… 🙂
I’ve been watching it closely Verne. So far, I’ve been burned interpreting this VIX price action as bullish. However, I was okay losing on some upside calls today – I felt comfortable with the price action that any bullish news would have sent us flying. Luckily, the other side of my bullish trade was short uvxy upside calls and long some 70 puts. Somehow I got out of my uvxy trades at a small profit today despite what we witnessed! I’m skeptical of VIX and it is public knowledge that uvxy is a broken product. UVXY ultimately goes to $0, it says so in the prospectus, so the fact that its up over 100% over the past few months is a great short opportunity if there is any type of low in place. But I too would have expected very different price action today from VIX / UVXY. It definitely does not signal that we are in or entering a bear market. It’s either very bullish (somebody knows something) or it’s very manipulated.
I suspect the latter…! 🙂
Question will 2,478 hold? If not what is next target for alternate count?
I’m wondering if we are headed for the 200 week moving average.
When wondering about these things, it is often useful to take a look at other indices to see what they have done… 🙂
I know the RUT is already there.
Wow, the transits too
Yup! 🙂
Two reasons shown on why the immediate low might be “it”.
So many interesting numbers involved with spy. ATH to bottom of “bear consolidation” same amount as top of consolidation area to $249.
Nope! Third of a third underway I am afraid….lots more pain to come…for bulls that is…. 🙂
Could be, could be. Powerful P4. But the recession/depression start is still well over a year away, perhaps 18 months or more…this strikes me as substantially over sold relative to the macro economic cycle. But just about ‘perfect’ re: settting up a P5 to end a GSC wave 1.
Ho hum, let’r rip until complete.
VIX is the giveaway. Some folk are not only refusing to unwind, somebody appears to be doubling down on fatally flawed positions!!
Have you ever in your life seen anything so perverse??!!
But don’t you worry…UNWIND, they will…! 🙂
Dec vix futures sellers got crushed today when the contract expired
They were shorting hard at 16.35 less than 2 weeks ago..
And all the way up
Yes indeed. Pavlovian! 🙂
I am really curious.
How many traders on the forum treated the ramp this morning as a counter-trend bounce and shorted the living daylights out of it?
I was reminded at the highs this morning of Jim Rodgers comment about money lying in a corner, waiting for someone to go over and pick it up.
Do you see what is going on with VIX and other vol instruments?
The banksters are in a full blown panic. I have never seen anything quite like it.
I think their terror is amply justified!
not as slick as you, but sold all my santa 24th calls for minimal losses
I am learning ALOT from your and everyone elses posts….. thank you all
If spy got to $263 I would have. But also on the road from DC to Boston currently. Bloomberg Radio definitely underplayed how hard the market sold haha
I was buying $tvix
I subscribe to this being a P4. Which is in its terminal stages. So going short aggressively wasn’t/isn’t something I would do here myself. I’m watching for an end to the P4 to take this market long. I’ve watched too many of these Fed days do extremely hard moves in one direction, only to reverse within 20 minutes and proceed to go the other way for days, to bite short here. Congrats on your successful short term call. What’s next is the question of the moment (for me).
uh oh…
a 50 handle candle
I’m going to be updating both hourly charts, running the counts side by side, and letting you each choose which you deem most likely based upon your own analysis.
My judgement would still be for the main count, hence I’ll keep labelling it the main count, but I’m prepared to switch if price or the TA chart prove I should discard it.
That doesn’t look to be the case today.
For confidence in this count I still want a new high above 2,621.53.
Here is the main count:
The alternate hourly chart updated:
So far this again looks like a small bounce within an ongoing downwards trend. It’s still within the channel, this movement does not look strongly upwards. It looks a little weak at this time frame.
Let us see how the session closes and what volume has to say.
The bottom line today remains: price is in a downwards trend. Lower lows, lower highs.
Assume the trend remains the same, until proven otherwise.
would a hammer on the weekly chart be more convincing to go long? we could make one if they keep this up
2-2:30pm EST action today is the huge question in front of us.
I want to see a new high above 2,621.53.
A bullish candlestick reversal pattern on the weekly chart would also give confidence.
Until that happens, right now, a downwards trend is in place.
i cant find a fibo for it, but I bought a little fedex in my long term, 29% off from highs
You’re catching a falling knife there Peter. There is support from back in 2016…but there’s been lots of “support” at higher levels that it has sliced through.
And a long now is counter-trend at every timeframe. Even the monthly is strong down.
I like to see SOME kind of indication of a turn before I commit, myself. I know some don’t. It certainly could bounce to fill today’s big gap. Best of luck.
agree, just a nibble, it reminds me to buy more later….
One could reasonably trade off multi-time frame trend alone. Here’s AMGN, monthly, weekly, daily, hourly, clockwise starting top left, with zip on the chart except trend data (color coded). The monthly is UP. The weekly is in a mild pullback and NEUTRAL. The daily is STRONG DOWN. The hourly has started a turn up, but is still DOWN. Taking a long (with a target of a multi-day to multi-week run up in price, so a daily TF trade) on a shift of the hourly to “UP” (or even just to “NEUTRAL”) is, to my mind, a perfectly reasonable way to trade, given this overall set up. It would be a “with the trend” trade (which means to me, with the trend two timeframes higher than the timeframe “of the trade”, which is daily here), executed on a weekly/daily level pullback, with the lower timeframe (hourly) turning back to “UP”. There are many ways to skin cats…that don’t involve a large pile of skinning tools! One can suffice. But a multi-tf view is critical IMO.
All SPDR’s up at the moment. Haven’t seen that in many many weeks. And the lowest is XLU at 0.06%.
Now every SPDR is down. Lol!!!
Gold (GLD weekly here) has changed trend this week to “Strong Up”. The monthly is still at “mild down”. Also, the up move this week has broken out of 4 weeks of squeeze.
Gold up is bad for markets
Shorting gold and buying s and p futures has been staple of uptrend
Agreed, gold is a “safe haven” that tends to go up strongly in bear markets. I’m just noting the state of the trending action, for what it’s worth.
Gonna sell 3 onz of gold this week for my tesla 3 down payment….
Craig,
I saw your comment yesterday regarding my post about Lowry’s data. Lowry’s did not say 99 out of 100 times the AD Line Breadth displays negative divergence. Rather, they state that in the past 99 years (or 90+ years) the AD Line Breadth has lead every market top by displaying negative divergence at least four months before the top in price.
Just thought you might like to have that clarified
Rodney may I ask what are your buy triggers here?
Sure. I am looking for three things, one of which has already triggered.
1) Break above the upper channel line defining Minor C of Intermediate Y. If I have drawn my lines correctly, this has happened.
2) A break above 2574.
3) A break above 2621 invalidating Lara’s Alternate count.
I am thinking of buying long positions at two places, above 2574 and above 2621. My dilemma is I need to be on the road in the next half hour or so. Then I have meetings until about 2 PM ET. So I may miss these triggers. It seems like this happens often. That is why I cannot be a day trader.
Gotta go and get my orders ready. We are nearing trigger point 2.
Have a great day.
This has been edited so make sure to read it now.
Thanks Rodney, useful as always.
Thanks Rodney, an important clarification.
Every single bear market in the history of Lowry’s operation, which is over 90 years, has been preceded by minimum 4 months divergence between price and the AD line.
Every. Single. One.
That of course does not mean a bear market can’t happen right now, only that the probability is exceptionally low.
And its a really big reason why I’m not posting an alternate wave count for a bear market. That and poor proportion for the EW count.
XLF (needed for any kind of SPX move up, arguably) has tagged and turned at a 78.6% retrace of the March ’17 low to the Jan ’18 high. Real potential to be a pivot low, and just a tad of confirming evidence to add to the small but growing pile that the SPX low might be in here.
notable as well that that 78.6 is also a significant pivot low from Sept ’17.
I like the double bottom in SPX showing on the hourly, right at the I4 wave A low. If price can get above 2574, polarity at the hourly will invert to “up”, a pretty reasonable bullish sign/sometimes buy trigger.
NDX at the hourly has already polarity inverted. Though there’s high potential for price descending right back into the muck. RUT has a bit further to go to do the same.
Oil (/CL) sat on a 78.6% for 3 weeks…and now has broken through. Now it’s pinged off an even larger (in time) 61.8% at 45.6.
Rod:
Also just saw your post and wrote a quick response on the thread. As I stated, you and I have known each other way too long to take offense at trivia! 🙂
Thanks Verne. It has been a long time hasn’t it.
Hi Lara:
I just noticed your query about VIX on the last thread and I did see some inteteresting responses, one of them quite technical. From a trader’s oint of view, I loved the simplicity and precision of Jack’s response:
“Classic Bull Flag!”
I don’t know Jack but that man is a trader!
The other important think about vol charts is that, as the other poster responding noted, things may not always be quite what they appear. An incredible series of articles by Chris Cole and Francesco Filia have been written about the profound distortions that have taken place in the volatility sphere and the usual, simple correlations we have been used to making for so long may no longer be applicable.
Sorry about the delay as I did not see the post until someone alerted me to the question
I will try to post a bit more about what I think is going on with vol as I am able..
Thank you very much Verne.
I have noticed for some time now that divergence between expectations in S&P price and VIX have not been very reliable. And I have slightly adjusted to put more weight on signals from the AD line, and less on VIX.
This makes me rather nervous for the main wave count. For confidence in that I want to see a big fat green daily candlestick. We’re not getting that.
Numero Uno 🙂
Dear Verne!
Thank you for your articulate and thoughtful response earlier today in the previous analysis. I’m sure I’m not alone in missing your more frequent input in this forum. I hope you start writing more often. Your insight in navigating this P4 will be very helpful…
I also wanted to say to other members my appreciation for their input as well. Yesterday’s comments which included thoughts on quantum physics and further explanation on how the VIX works was a pleasure to read…
Thank you everyone!
Most Welcome Ari!
I generally don’t share private communications with other traders but here is a response to a query I got from a very astute trader on the possibility of bear market price action correlation with contra-indicator market behaviour. I will make an exception today.
I know I probably sound like a broken record on the points I make in the response as I have mentioned them here as well, but I think they are worth repeating, as they are that important.
“Here is a consideration that speaks to potential contra-indicator market price action.
During bull markets, price can and often does, negate bearish signals. The exact opposite is true during bear markets.
We know it is impossible to consistently profitably trade any market if you are wrong about the main trend. That is the very first lesson we were taught as traders.
Take a look for example, at candlesticks with long shadows coming after at least several days of prior downward movement. Until last month, every single time they occurred marked the end of a correction, with price higher one week later. Go and check. As you know, demonstrating predictive power is how a thesis moves from scientific “theory”, to “law”.
The current situation with VIX trading above its upper B band, under this theory, would clearly be expected to have a different outcome if we are indeed in a bear market. ”
The query was prompted by this article on DOW theory, whose link I have included.
https://rambus1.com/author/coons/
One final note. I rarely, if ever, give specific trading advice. I will sometimes post real-tme trades just for fun and comeradrie. I no longer do it since I seemed to be the only one interested in sharing real time executions. I know I learned a tremendous amount from watching other traders do it.
If you lost money in the market this year, what is coming down the pike with regard to volatility just might offer you an opportunity to square the books before the New Year.
O.K. I’m done! :-))
Most Welcome Ari!
I generally don’t share private communications with other traders but here is a response to a query I got from a very astute trader on the possibility of bear market price action correlation with contra-indicator market behaviour. I will make an exception today.
I know I probably sound like a broken record on the points I make in the response as I have mentioned them here as well, but I think they are worth repeating, as they are that important.
“Here is a consideration that speaks to potential contra-indicator market price action.
During bull markets, price can and often does, negate bearish signals. The exact opposite is true during bear markets.
We know it is impossible to consistently profitably trade any market if you are wrong about the main trend. That is the very first lesson we were taught as traders.
Take a look for example, at candlesticks with long shadows coming after at least several days of prior downward movement. Until last month, every single time they occurred marked the end of a correction, with price higher one week later. Go and check. As you know, demonstrating predictive power is how a thesis moves from scientific “theory”, to “law”.
The current situation with VIX trading above its upper B band, under this theory, would clearly be expected to have a different outcome if we are indeed in a bear market. ”
The query was prompted by this article on DOW theory, whose link I have included.
https://rambus1.com/author/coons/
One final note. I rarely, if ever, give specific trading advice. I will sometimes post real-tme trades just for fun and comeradrie. I no longer do it since I seemed to be the only one interested in sharing real time executions. I know I learned a tremendous amount from watching other traders do it.
If you lost money in the market this year, what is coming down the pike with regard to volatility just might offer you an opportunity to square the books before the New Year.
O.K. I’m done! :-))
Great article. Thanks for the link.
🙂
His words on today’s Fed Announcement were almost perfect. Similar to Hedgeye. LOVE their stuff and they have been crazy bearish Quad 4