Overall more downwards movement was expected from the new main Elliott wave count.
Summary: It does not look like a low is in place yet. Expect price to continue falling.
A small bounce may unfold here or very soon for the very short term for minor wave 4, which may last one to a very few days. Thereafter, the target may be recalculated. At this stage, use the next strong line of support at 2,400 as a target.
New updates to this analysis are in bold.
The biggest picture, Grand Super Cycle analysis, is here.
Last monthly chart was published 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).
A best fit channel is copied over from the monthly chart. Price is about the lower edge of this channel today.
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.
The alternate wave count is discarded today. It no longer has support from classic technical analysis. Only one daily chart is published.
DAILY CHART
Click chart to enlarge.
Intermediate wave (C) may be a simple impulse. Within the impulse, minor waves 1, 2 and now 3 may be complete. Minor wave 3 exhibits an increase in downwards momentum; this has the right look so far.
Minor wave 4 may not move into minor wave 1 price territory above 2,631.09.
Intermediate wave (C) has passed equality in length with intermediate wave (A). However, if the next Fibonacci ratio in the sequence of 1.618 is applied to intermediate wave (C), then the target would be too low at 2,270.
When minor wave 4 may be complete, then the target may be calculated at minor degree. That cannot be done yet because minor wave 4 has not begun. Support lines will be used to indicate where downwards movement may halt.
HOURLY CHART
Click chart to enlarge.
Intermediate wave (C) may be close to completion. Within this impulse, minor wave 4 may begin tomorrow or very soon. Minor wave 4 may last one to a few days.
Targets for minor wave 4 would be the 0.236 and 0.382 Fibonacci ratios, at this stage favouring the 0.236 Fibonacci ratio.
When minor wave 4 is complete, then the target may be recalculated.
Minor wave 2 was a very deep 0.92 zigzag, which lasted 6 sessions. Minor wave 4 may be expected to exhibit alternation, so it may be shallow. It may unfold most likely as one of a flat, combination or triangle.
Thereafter, minor wave 5 would be extremely likely to make at least a slight new low below the end of minor wave 3 to avoid a truncation.
ALTERNATE HOURLY CHART
Click chart to enlarge.
This wave count is identical to the main wave count up to the high labelled minor wave 2. Thereafter, it looks at a different way of labelling minor wave 3.
This wave count is more bearish than the main hourly wave count. It expects that the middle of minor wave 3 may have passed today, and minor wave 3 may continue lower for a few more days.
Minor wave 3 has passed 1.618 the length of minor wave 1. The next Fibonacci ratio in the sequence is 2.618 which yields a target at 2,318. This target may be too low.
Within the middle of this third wave, minuette wave (iv) may not move into minuette wave (i) price territory above 2,530.54.
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.
This chart is fully bearish.
Downwards movement can end with strong volume, and in fact this is the case more often than not.
Look for a candlestick reversal pattern and / or clear and strong divergence between price and RSI to indicate a potential low. That is not the case today.
Next strong support below which may halt a fall in price is about 2,400.
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 93 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.
Both price and inverted VIX have now made new lows following bullish divergence. This divergence is considered to have failed.
SUPPLEMENT – DAILY CHART – OCTOBER 2007 TO MARCH 2009
Click chart to enlarge. Chart courtesy of StockCharts.com
This exercise is to determine if there are any signals or a cluster of signals that appeared at minor swing lows and the final low within the most recent bear market from October 2007 to March 2009.
Lows as numbered were characterised by:
1. Declining volume as price fell on the final day, no candlestick reversal pattern, ADX was not extreme. Strong double divergence between price and RSI, but RSI had not reached oversold. A bullish signal from On Balance Volume two days after the low.
2. The day before the low a Hammer pattern (almost a Dragonfly doji but the upper wick is a little too apparent) appeared. The next day a low was found and a Bullish Engulfing pattern completed. Volume increased steadily and markedly to the low. ADX reached extreme just on the day of the low. RSI reached oversold and on the day of the low showed single day bullish divergence.
3. A strong bullish candlestick reversal pattern, and strong divergence with RSI but RSI was not extreme. On Balance Volume gave a bearish signal the day before the low.
4. A candlestick reversal pattern, a strong and steady increase in volume, downwards movement for six sessions after ADX reached very extreme. RSI reached oversold and then exhibited clear divergence with price. On Balance Volume gave a bearish signal two days before the low.
5. A strong bullish candlestick reversal pattern, a spectacular selling climax, ADX reached extreme four sessions prior to the low. RSI reached extreme but exhibited no divergence with price.
6. No candlestick reversal pattern, ADX reached extreme one session before the low, downwards movement had strong support from increasing volume; at the day of the low, there was single day divergence between price and RSI but RSI was not oversold.
7. There was no candlestick reversal pattern (the lower wick was not long enough for a Hammer pattern) at the final low in March 2009. A bullish reversal pattern appeared two sessions after the low. Price fell for the final three sessions on declining volume. ADX reached extreme five sessions prior to the low. On Balance Volume gave a bullish signal two sessions after the low, on the same day as the Bullish Engulfing pattern completed. RSI reached oversold and then exhibited divergence with price.
Additional:
Failed (and partially failed) bearish and bullish candlestick reversal patterns:
14th Feb 2008 – A Bearish Engulfing pattern was followed by only five sessions of downwards movement.
7th May 2008 – A Bearish Engulfing pattern was followed by only two sessions of downwards movement and then a high eight sessions afterwards.
8 Jul 2008 – A Bullish Engulfing pattern was followed by a new low five sessions later.
24th Jul 2008 – A Bearish Engulfing pattern was followed by only two sessions of downwards movement and a new high twelve sessions after.
1 Dec 2008 – A huge Bearish Engulfing pattern was immediately followed by 24 sessions of choppy upwards movement.
20 Feb 2009 – A strong bullish Hammer pattern was followed immediately by downwards movement.
Failed signals from RSI:
3rd Jun 2008 – Price made a slight new swing low and RSI made a slight new swing high. This bullish divergence was slight and RSI was not oversold.
18th Sep 2008 – Single day divergence where price moved lower but RSI moved higher, followed only by one more day of upwards movement.
29th Sep 2008 – Price made a strong new swing low but RSI made a slightly higher swing low, followed by only one day of upwards movement.
3 Oct 2008 – Price made a new low which was not matched by RSI. This bullish divergence was slight and disappeared the following day. It was followed by very strong downwards movement.
13 Nov 2008 – Price made a strong new swing low but RSI was substantially higher. This was followed immediately by very strong downwards movement.
17 Feb 2009 – Price made a new swing low which was not matched by RSI. This bullish divergence disappeared three sessions later and was followed by the final low 13 sessions after.
Volume profile:
Without looking at the price chart, and only looking at volume bars, it is possible to see in what direction price was moving for most of this bear market with a few exceptions. As price moved higher, upwards days exhibited stronger volume than downwards days. The reverse was true as price moved lower. A clear exception was from the 8th to the 18th of Sep 2008, and the 13th of Nov 2008.
Conclusions:
No one indicator or method may be used in isolation.
Strongly rising volume can coincide with a minor or major low. This is also observed by Lowry’s.
Divergence between price and RSI is more reliable when RSI is oversold, or when the divergence is strong. However, even strong divergence can simply disappear.
A cluster of bearish indications at one time increases the probability of a low.
DOW THEORY
Dow Theory confirms a bear market. This does not necessarily mean a bear market at Grand Super Cycle degree though; Dow Theory makes no comment on Elliott wave counts. It may equally as likely mean that Primary wave 4 could be deeper and stronger than originally anticipated.
DJIA: 23,344.52 – a close on the 19th of December at 23,284.97 confirms a bear market.
DJT: 9,806.79 – price has closed below this point on the 13th of December.
S&P500: 2,532.69 – a close on the 19th of December at 2,506.96 provides support to a bear market conclusion.
Nasdaq: 6,630.67 – a close on the 19th of December at 6,618.86 provides support to a bear market conclusion.
Published @ 10:52 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.
This is my first post. I have joined you guys few days ago. I think price will drop around 2300 range. I have drawn a Andrew’s Pitchfork from the low of 2002 (Point 1), top of 2007 (Point 2) and low of 2009 (point 3). Also there is confluence with rising trend-line from 2009 and Bollinger bands(21,2) . Just my two cents. Thanks
Welcome aboard…
Thanks for the chart. Keep it up :).
Could somebody please label the move from 268 on the sand p last week to today 2410
That is a massive move down and I don’t see it accounted for in any of Lara’s counts going back 2 weeks
I’m sure she will have it laid out in the video this week
But it sure felt like a c wave or 3 wave down
Sure didn’t feel like the end of a 5 for the end of p4
Just trying to get a feel for perspective
Thx all… have a great weekend …!!
I just don’t know what to say Scott.
I have labelled it.
I have labelled it as a third wave.
Minor wave 3 within intermediate wave (C).
That’s a third wave.
I just don’t know how to make it more clearly… a third wave.
And the alternate hourly chart provided above labelled the third wave incomplete.
When I’m labelling a wave as incomplete, then I would be expecting it to continue. Until completion.
Does a break of the channel on the weekly chart portend much lower prices from here?
Not necessarily.
As I’ve noted in the analysis above, the S&P sadly just does not always play nicely with it’s trend channels. It can form slow curving rounded tops, and when it does that it can breach a long held channel, only to turn and continue to new highs, sometimes hugging the lower edge of the channel.
It is a really annoying feature of this market, but it is one that I have learned required flexibility.
The alternate hourly chart is looking better today.
Still waiting for minor 4 to turn up. It would most likely last a few days, minor 2 lasted 6 days. So for intermediate (C) to have a five wave look on the daily chart, minor 4 and 2 need to both show up and have some reasonable proportion.
After minor 4 has turned up, then minor 5 down may create strong bullish divergence as price makes new lows but RSI does not. That’s what I’ll be looking for.
When minor 4 is done then I can calculate a target for minor 5 to make the final low. I still can’t do that today, so we can only use support lines below.
Minute iv doesn’t have to show up on the daily chart for the count to have the right look, so it could be over within one session.
Note, the upper invalidation point is moved.
Does a close down around 2400 violate the bottom of the weekly channel and portend much lower prices?
Yep! :-))
Could you entertain labeling this as a c wave down from a p5 top at 2942 and see what your counts look like then …
That makes…. no sense. In EW terms, if this is the start of a huge bear market, it would be labelled wave A. Not wave C.
It would help if you could provide a brief chart outlining your idea, then I could fill it in if it makes sense.
And I’ve explained a few times now why I’m not going to publish a wave count which expects this drop to be the start of a huge bear market.
At the all time high on 21st September there was no divergence between price and Lowry’s Operating Companies Only AD line, nor was there an increase in selling pressure.
Every single bear market in Lowry’s 93 year history has begun from a high which saw a minimum 4 months divergence between price and the AD line, also a steady increase in selling pressure.
Every. Single. One.
I do not like the odds of expecting this time it is different.
I’m with you …
But there was a divergence in Ad and NYMO
Just not 4 months long …
But it was there…
And that’s why I am considering the 2942 as top…
And if it was… how would that line up with what you see in terms of counts from 2942 to here
I see this as possibly completing c down
With a bounce coming to 2700
Then a larger fall from there
?
I’m going to cover this question very throughly in end of week analysis and video.
Coming real soon to a website… here.
Gosh everyone has been picking bottoms for 2 weeks now lol.
Woodshed is probably pretty crowded about now.
It seems the market has headed towards every low probability alternative since november.
I was a little shocked to see the 2111 invalidation level printed a few weeks back but it reminds me not to try to catch the falling knife- which ALOT of us have been trying to do. As of today I am to busy keeping my ego in check to trade, even if it is the bottom forming.
I DONT need to nail down and buy every support and resistance level on the dot. Those levels only hold until they dont. I DO need to identify valid inflection points and make solid low risk trades after trends have established.
I Do need to seperate the craziness of the markets from the love and compassion I have for life and family- and take this time of year and holiday to let the charts print what they may and focus on family and friends and most of all lol -my own mental health!
With 251 business days in 2019- let’s imagine simply making 100$ a day. Sell your losers quick!
Merry Christmas Traders
Multiply by 10 and I’m with ya friend! My lifestyle doesn’t work on $100 a day I’m afraid (wish it did!). Lol!!!
Your point is hugely valid. Why try to pick a bottom? Either ride the current trend (down), or wait for an up trend to be reasonably well established. Then enter on proper pullbacks and turns, with low risk stops and high reward levels for being right.
With that…forget this market, I’m off to play some pool.
Feel you there… I keep buying and keep stopping out. Luckily I am selling quickly for small profits or set stop to break even real quick.
Today I sold on the SPY $249 pump on Fed Comments because that was dumb rally on literally nothing.
Getting ready for a SPY $20 day dump or rally. Bound to happen at this rate. Daily chart straight water falling. I knew $263 breakdown would be bad… but this is pretty damn epic.
I had aapl 162.50-157.50 put spreads sold early this week for a buck
Expecting to get the shares ….or make a little $ on the credit spread
Blew through them like butter…
I bought them end of day at $150
Man
What a day.. what a week
My vol shorts got crushed over $45 on vxx
I’m going to be short vxx on Monday ..
Don’t feel great about it
… but do see a bounce coming to 2700
At least I was able to sell spy call spreads all the way down today as free money hedges against my short vxx …
I’m now naked in the breeze holding aapl at effectively $154
And short a pretty large amount of vxx at $45
I need a drink ..:)
Flat, B finished, C you later?
3 up of c?
RUT when viewed as a big zig-zag down now has C = A and the bottom of C is at the 1.618% extension of A.
Hmmm…..
Lots more downside possible/likely, key fibo’s not hit yet. This is a monthly going all the way back to the 2009 low.
I’m eyeing the 2111 invalidation level as it seems every other level has been blown through like smokey and the bandits road blocks on a cannonball run!
The bottom is near, relatively speaking. I base this on several observations. I will mention a few. 1) Daily MACD is printing the lowest reading in well over a decade indicating a deeply oversold condition. Of course, the markets can always become more oversold. But it is reasonable to expect a ‘reversion to the mean’ in MACD. 2) The McClellan Oscillator plotted as a moving average line hit -90 yesterday. This also is extremely oversold and setting up a potential positive divergence. This indicator identified both the October and November lows which proved to not be the final lows. 3) The 200 week ma is just below 2400. The last time this was approached from above or tagged, was Jan-Feb 2016. That was at SPX 1800. At that time, most on this forum expected the BIG Bear Market to materialize, including me. However, it held and produced a 1000 point 3 year bull run. 4) One final item that I will mention is that the monthly chart shows a clear 3 wave pattern down from the all time high and its lower Bollinger Band is approximately 2360. We would expect a Primary degree wave to show clearly on the monthly chart as it does.
It is my opinion that we are nearing a major bottom which should produce a substantial rally of at least 200-300 points. If Lara’s main count is correct, it will produce a new ATH. That is a 500 point rally. Lara’s count of starting Minor 4 of Intermediate C of Primary 4 is right on. Minor 5 should produce a lower low with positive divergences galore. Currently I am sitting on hands in cash. I am awaiting that point and guessing it will be around the 2400 pivot. That will be a very good time to go long, in my opinion only and not trading advice.
By the way, remember that a 1-2-3 count can also be counted as an A-B-C count and visa-versa of course.
Have a very merry and safe Christmas and New Year’s celebrations.
Rodney, thank you much for your analysis.
I agree…and think deeper first is rather likely, particularly with the political chaos of the moment. Very challenging to view the market right now with pure technical blinders, though I prefer to do that. Of course we have Lara’s call that structure downward is not complete too.
I love macd but it can get absolutely wrecked on a consistent downtrend. Check any emerging market stocks since Jan. Every macd cross up on daily almost instantly negated.
I don’t doubt we will have a bounce but it may get much worse before then.
Just for fun, I could add that at yesterday’s close VIX closed above its upper BB and SPX closed below its lower BB on the daily charts. With a close inside their respective BBs today, it sets up a buy SPX signal. If VIX then closes lower on the next day the markets are open, it would confirm the buy SPX signal.
The supplemental part of this analysis is fantastic Lara! All I can say is: OMG!
Thanks for your hard work!
You’re most welcome.
That’s why it was later today. That took…. a while.
Thanks Lara. This is one example that makes your service a ‘value-added’ service. I’d like to suggest that you put this Supplemental Analysis in the Education section of your site. That way it is readily available to members whenever. Or perhaps, add a section for such analysis. From time to time you could add daily or weekly commentary that would be useful for members to review in future times. Have a great day.
Yes I agree with Ari Lara thanks for the extra work . I’ve posted below re yesterday’s post. Don’t know if you’d see it.
Fair enough I don’t like the truncation either. But I counted wave (X ) as a flat.
A is more 3 than 5 and B was just short of the 90% retracement ?
That wouldn’t be a valid wave count. B must retrace a minimum 0.9 of A. The rule is black and white. It’s 0.87, which is short.
Yep! 🙂