Upwards movement continues as expected and the target remains the same.
Summary: The target is at 2,856. If the target is wrong, it may be too high; there is very strong resistance just above at 2,800 to 2,815.
The upwards trend should be assumed to continue as long as price remains within the blue Elliott channel.
The bigger picture still expects that a low may now be in place.
The final target is at 3,045 with a limit at 3,477.39.
This upwards trend shows increasing internal strength: It began with two 90% upwards days close to the low and now the AD line and On Balance Volume have both made new all time highs.
New updates to this analysis are in bold.
The biggest picture, Grand Super Cycle analysis, is here.
Monthly charts are updated today. A new alternate is considered at the monthly chart level.
ELLIOTT WAVE COUNT
MONTHLY CHART
Click chart to enlarge.
Super Cycle wave (IV) completed a 8.5 year correction. Thereafter, a bull market began for Super Cycle wave (V). The structure of Super Cycle wave (V) is incomplete. It is subdividing as an impulse.
There is no Fibonacci ratio between cycle waves I and III within Super Cycle wave (V). Cycle wave V will be limited to no longer than equality with cycle wave III, so that cycle wave III is not the shortest actionary wave.
A channel is drawn about the impulse of Super Cycle wave (V) using Elliott’s first technique. Cycle wave IV found support about the lower edge.
There is perfect alternation between a shallow time consuming combination for cycle wave II and now a deeper and more brief double zigzag for cycle wave IV. The speed and depth of cycle wave IV makes these two corrections look like they should be labelled the same degree. This wave count has the right look.
Within cycle wave V, no second wave correction may move beyond the start of its first wave below 2,346.58.
This wave count expects MACD to begin to exhibit divergence with price as price makes new highs. Cycle wave III should exhibit strongest momentum and cycle wave V should exhibit some weakness. If price makes new highs but MACD does not, then this would remain the main wave count.
WEEKLY CHART
Click chart to enlarge.
This weekly chart shows all of cycle waves III, IV and V so far.
Cycle wave II fits as a time consuming double combination: flat – X – zigzag. Combinations tend to be more time consuming corrective structures than zigzags. Cycle wave IV has completed as a multiple zigzag that should be expected to be more brief than cycle wave II.
Cycle wave IV may have ended at the lower edge of the Elliott channel.
Within cycle wave V, no second wave correction may move beyond the start of its first wave below 2,346.58.
Although both cycle waves II and IV are labelled W-X-Y, they are different corrective structures. There are two broad groups of Elliott wave corrective structures: the zigzag family, which are sharp corrections, and all the rest, which are sideways corrections. Multiple zigzags belong to the zigzag family and combinations belong to the sideways family. There is perfect alternation between the possible double zigzag of cycle wave IV and the combination of cycle wave II.
Although there is gross disproportion between the duration of cycle waves II and IV, the size of cycle wave IV in terms of price makes these two corrections look like they should be labelled at the same degree. Proportion is a function of either or both of price and time.
Draw the Elliott channel about Super Cycle wave (V) with the first trend line from the end of cycle wave I (at 2,079.46 on the week beginning 30th November 2014) to the high of cycle wave III, then place a parallel copy on the low of cycle wave II. Cycle wave V may find resistance about the upper edge.
It is possible that cycle wave V may end in October 2019. If it does not end there, or if the AD line makes new all time highs during or after June 2019, then the expectation for cycle wave V to end would be pushed out to March 2020 as the next possibility.
DAILY CHART
Click chart to enlarge.
The daily chart will focus on the structure of cycle waves IV and V.
Cycle wave IV now looks like a complete double zigzag. This provides perfect alternation with the combination of cycle wave II. Double zigzags are fairly common corrective structures.
Within Super Cycle wave (V), cycle wave III may not be the shortest actionary wave. Because cycle wave III is shorter than cycle wave I, this limits cycle wave V to no longer than equality in length with cycle wave III at 3,477.39. A target is calculated for cycle wave V to end prior to this point.
Cycle wave V must subdivide as a five wave motive structure, either an impulse or an ending diagonal. An impulse is much more common and that will be how it is labelled. A diagonal would be considered if overlapping suggests it.
Primary wave 1 is labelled as incomplete.
Primary wave 2 may not move beyond the start of primary wave 1 below 2,346.58.
HOURLY CHART
Click chart to enlarge.
If intermediate wave (5) is under way, then within it minor waves 1 through to 3 may be complete.
With this labelling of intermediate wave (5), there is a very close Fibonacci ratio between minor waves 3 and 1. Minor wave 3 shows stronger momentum than minor wave 1.
Minor wave 2 fits as a zigzag. Minor wave 4 fits as a complete double combination: flat – X – zigzag.
The channel is drawn using Elliott’s second technique: the first trend line from the ends of minor waves 2 to 4, then a parallel copy on the end of minor wave 3. The trend channel may show where minor wave 5 ends; it may find resistance about the upper edge of the channel, or it may end about mid way within the channel.
As minor wave 5 continues the lower edge of the channel may provide support.
A breach now of this channel by downwards (not sideways) movement would provide an indication that primary wave 1 may be over and primary wave 2 may be underway.
Minor wave 5 may be extending, and within it the middle third wave may be extending.
Within minor wave 5, subminuette wave iv may not move into subminuette wave i price territory below 2,770.59.
ALTERNATE MONTHLY CHART
Click chart to enlarge.
It is time to consider a more bullish wave count because the AD line is making new all time highs and the end of this bull market now would be extremely likely to be a bare minimum of 4 months away, and likely longer.
If the degree of labelling is moved down within cycle wave III, then it is possible that the last high was only primary wave 1. Cycle wave III may be extending.
Only two actionary waves within an impulse may extend. Cycle wave I was extended. If cycle wave III also extends, then cycle wave V may not extend.
A target is calculated for primary wave 3 to end. If price gets up to this target and the structure is incomplete, or if price keeps rising through the target, then a new higher target would then be calculated.
Within primary wave 3, no second wave correction may move beyond the start of its first wave below 2,346.58.
This wave count expects MACD to indicate stronger momentum as price makes a new all time high. If that happens, then this may be switched to be the main wave count.
TECHNICAL ANALYSIS
WEEKLY CHART
Click chart to enlarge. Chart courtesy of et=”_blank”>StockCharts.com.
Last week completes a very bullish week. The lower wick and shaven head of this green candlestick is bullish. A little support from volume is bullish.
ADX has not yet caught up with the upwards trend. RSI indicates there is room for it to continue for a reasonable distance.
DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
Over a fairly long period of time this ageing bull market has been characterised by upwards movement on light and declining volume and low ATR. For the short to mid term, little concern may be had if price now rises again on declining volume. Current market conditions have allowed for this during a sustained rise in price. There is no concern today over some decline in volume.
It is also normal for this market to have lower ATR during bullish phases, and strongly increasing ATR during bearish phases. Currently, declining ATR is normal and not of a concern.
Considering the larger picture from the Elliott wave count, some weakness approaching the end of Grand Super Cycle wave I is to be expected.
From Kirkpatrick and Dhalquist, “Technical Analysis” page 152:
“A 90% downside day occurs when on a particular day, the percentage of downside volume exceeds the total of upside and downside volume by 90% and the percentage of downside points exceeds the total of gained points and lost points by 90%. A 90% upside day occurs when both the upside volume and points gained are 90% of their respective totals”…
and “A major reversal is singled when an NPDD is followed by a 90% upside day or two 80% upside days back-to-back”.
The current situation saw two 80% downside days on December 20th and 21st, then a near 90% downside day with 88.97% downside on December 24th. This very heavy selling pressure on three sessions together may be sufficient to exhibit the pressure observed in a 90% downside day.
This has now been followed by two 90% upside days: on December 26th and again on 4th January.
The current situation looks very much like a major low has been found.
This chart is overall very bullish. Only the moving averages are not yet full bore bullish.
Price does not move in straight lines though. There will be small and large pullbacks within the trend. Use them as opportunities.
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.
Every single bear market from the Great Depression and onwards has been preceded by a minimum of 4-6 months divergence between price and the AD line. With the AD line making a new all time high last week, the end of this bull market and the start of a new bear market must be a minimum of 4 months away, which is mid June 2019 at this time.
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.
Breadth should be read as a leading indicator.
There is now a cluster of bullish signals from the AD line. This supports the Elliott wave count.
The AD line has again made another new high above the high of the 3rd of December, but price has not. This divergence is bullish.
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.
Inverted VIX has made yet another new high above the prior swing high of the weeks beginning 26th of November and 3rd of December 2018, but price has not. This divergence is bullish for the mid term.
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.
Inverted VIX has made another new high above the prior high of the 3rd of December, but price has not. This divergence is bullish.
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. On the 25th of August 2015 Dow Theory also confirmed a bear market. The Elliott wave count sees that as part of cycle wave II. After Dow Theory confirmation of a bear market in August 2015, price went on to make new all time highs and the bull market continued.
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.
With all the indices moving now higher, Dow Theory would confirm a bull market if the following highs are made:
DJIA: 26,951.81
DJT: 11,623.58
S&P500: 2,940.91
Nasdaq: 8,133.30.
Published @ 08:57 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.
Hourly chart updated:
I’m playing around with how to label minor wave 5, after looking at the five minute chart. This fits quite neatly.
I’d expect if minor 5 is continuing that this pullback for minute iv should end here at support at the lower edge of the blue channel. Minute iv could be over at this low, or it could meander sideways as a triangle. That would see support at the blue line hold.
Say Hey K.
Your Delta long looks very good. I guess we can’t officially call it a cup and handle pattern, so, let’s call it a frying pan and handle.
Between it’s wavering across the 38.2% retrace fibo and the precarious state of the general market re: the very close huge resistance zone as well as key fibo immediately overhead in RUT and NDX…I’m flat in DAL now. I kind of expect selling to renew after today’s opening gap down is filled. So I’m in a watch and wait mode there at the moment.
A lower swing high and an undercut of the last swing low on the 5 minute in SPX…it’s been a while since that happened. Hmmm.
50% retracement possibly?
Or maybe it was a session dip into 2 points of retracement territory. For this theory to hold water, you would have to buy into my retracement narrative. (Ha! Pun)
P.S. — the far right candle is only 25 minutes old
Strong signal from yesterday (with a retracement). The retracement has happened in all 3 sessions, Asia, Europe, & USA.
Since I mentioned the current US President’s name in a reply post to Curtis below, my comment awaits moderation. I am reprinting it here without mentioning that name. It is as follows:
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You said it Curis. Wowza! I really like the monthly Alternate count and if I am correct, no other Elliott Wave or classical TA technician is even contemplating such a move. I think it fits much better with the powerful move we have seen off the 2340 low accompanied by a Zwieg Breadth Thrust Signal. I think it also fits much better with the current economic climate in the US. I believe and have for some time that the current economic revitalization in the USA will mirror that of the Regan era. If this is true, a growing and vital economy for the USA will be the reality for another 10 years.
Some might ask, “Then Rodney, why all the prepping talk for a SHTF or economic collapse yesterday and over the weekend?” First of all, what if I am wrong? Secondly, if never hurts to be prepared. In fact, “A boy scout is always prepared,” is what I was taught. Third and finally, the main count has a Grand Super Cycle top just around the corner. The main count is the main count until proven otherwise.
Bottom line, Lara, I continue to be impressed even after seven years with you as to how you think outside the box, look at all alternatives, and have a completely uninfluenced mind / thought. You are the best. Thanks.
I find too many oddities in the monthly alternate that are required to make it work. It’s excellent re: multiple viewpoints/alternatives. But I don’t “like it” re: a clean EW structure. Super short waves in multiple places bother me, and make it appear a bit forced.
The main monthly and the alternate are the same, with the sole exception of the degree of labelling from the February 2016 low. That’s it.
Are you meaning short waves as in short in time and / or price for the corrections?
Yeah, they’re short.
I’m okay with that for this market though. It has a very strong bullish bias.
I’m totally open to any other way of labelling this, as long as it fits with TA (which basically means, as long as it’s bullish and not a count which sees a high in place).
Yes, it’s the short corrections here and there that “bother” me. That said, I’m not being critical, and I appreciate the alternative take. I just don’t look on it as quite as likely for that reason, is all. For my trading style (shorter term), the difference at this point in time for myself is not immaterial.
No worries, I didn’t read it as critical of me. Only a point to be considered in the analysis.
But the corrections are brief for both wave counts.
And that after the fact, when price continues upwards, we can be certain that the brief corrections were indeed brief. In other words, there is no wave count that could be constructed to see those brief corrections as longer lasting.
Lara is the best there is. So it’s only prudent for her to consider a more bullish alternate, what with AD continuing to make new highs.
That said… sooner or later equity markets must surely begin to reflect what seems to be a deep and serious unraveling of social mood globally. I can’t imagine this disconnect continuing for very much longer.
But I was thinking the same thing five or six years ago. Go figure…
Me too. And I was wrong. And I made investment decisions for myself based upon expecting the bull market to end. I’m prepared to be more flexible now, but I’m also aware I’m entering late so I’m prepared to only hold investments for a few months if necessary.
Looking at /ES high to high points of the overall primary 1 up and projecting those intervals (I found 2) from the most recent (two white horizontal lines)…I get a range for the next high of 2/21-2/25 (spans a weekend). If price stays under the most recent upper trend line (3rd touch today), that would line up perfectly with the 2800-2820 zone. I’ve marked that time-price zone with a rectangle. It may just be a high in a continuing move up in the channel, but a relative high nonetheless. If it happens there.
That’s a key area (Thurs-Mon) I’ll be watching for topping action then sell triggers. Until then, I day trade long and take advantage of this up trend best as possible without taking any significant downside risk (no over night long holds for me right here).
Fives can always be shorties; this giant 1 up can end at any time as I see it. And the 2 down just might be significant. Brexit crash and burn plus a China trade deal crash and burn, and 62% of the move off the Dec low could be gone in a few days. But until it starts rolling over and cracking prior swing lows, the bull is still charging.
It’s also interesting to note that every daily bar with the exception of one is on or above the 5 period EMA (in white). A full bar break below that EMA could very well be a key signal that it’s on to the short side here.
Excellent work as always, Lara. I especially appreciate your wisdom in introducing the new monthly alternate count. Thank you!
You said it Curis. Wowza! I really like the monthly Alternate count and if I am correct, no other Elliott Wave or classical TA technician is even contemplating such a move. I think it fits much better with the powerful move we have seen off the 2340 low accompanied by a Zwieg Breadth Thrust Signal. I think it also fits much better with the current economic climate in the US. I believe and have for some time that the Trump economic revitalization will mirror that of the Regan era. If this is true, a growing and vital economy for the US will be the reality for another 10 years.
Some might ask, “Then Rodney, why all the prepping talk for a SHTF or economic collapse yesterday and over the weekend?” First of all, what if I am wrong? Secondly, if never hurts to be prepared. In fact, “A boy scout is always prepared,” is what I was taught. Third and finally, the main count has a Grand Super Cycle top just around the corner. The main count is the main count until proven otherwise.
Bottom line, Lara, I continue to be impressed even after seven years with you as to how you think outside the box, look at all alternatives, and have a completely uninfluenced mind / thought. You are the best. Thanks.
Gorgeous new monthly chart Lara. I appreciate the large scope view! Great visual, excellent insight!
Thanks guys!
Hiyah Verne. In response to your last post from yesterday: looking forward to see what you and your posse are doing with the markets, or should I say doing to the markets! 🙂
Hi Ari!
Bryan’s new platform is absolutely mind-blowing!!
It has a brand new “Auto-Trade” feature that will execute trades for Alliance members without them lifting a finger!
I have never seen anything this sophisticated and am still trying to pick my jaw up off the floor! 😀
One is the loneliest number…
Two can be as bad as one…
Three can be more fun…
And four can turn out square.
“…that you will ever do….” 🙂