Some consolidation or a pullback was expected to begin. An outside day which closes red overall fits this expectation.
Summary: The upwards trend remains intact. A consolidation may unfold here that may be shallow and short lived.
The final target remains the same at 3,045. Alternate monthly wave counts allow for a target as high as 4,119.
New updates to this analysis are in bold.
The biggest picture, Grand Super Cycle analysis, is here.
Monthly charts were last published here. Video is here.
ELLIOTT WAVE COUNTS
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. Thereafter, the next possibility may be October 2020. March and October are considered as likely months for a bull market to end as in the past they have been popular. That does not mean though that this bull market may not end during any other month.
DAILY CHART
Click chart to enlarge.
The daily chart will focus on the structure of cycle wave V.
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 2 may have been a very brief and shallow expanded flat correction.
Within primary wave 3, intermediate waves (1) and (2) may be complete. It is possible that intermediate wave (3) may be complete. It is also possible that minor wave 5 within it may extend higher.
Intermediate wave (4) may not move into intermediate wave (1) price territory below 2,852.42.
The channel shows where small pullbacks are finding support. It may continue to do so, but the S&P does not always fit well within channels. It is possible that the channel may be breached and price may continue higher to find resistance at the lower edge of the channel.
HOURLY CHART
Click chart to enlarge.
Intermediate wave (2) was a shallow expanded flat correction lasting four sessions. Given the guideline of alternation, intermediate wave (4) may be expected to most likely unfold as a single or multiple zigzag, or a triangle or combination. Intermediate wave (4) may be very shallow if the last open gap continues to provide support at 2,893.42.
Today intermediate wave (4) is labelled as a possible double combination: flat – X – zigzag. A combination would provide alternation with the flat correction of intermediate wave (2). If intermediate wave (4) were to continue for another two to few sessions, it would be in good proportion to intermediate wave (2).
It is still impossible to know which structure intermediate wave (4) may be. Labelling within it may change again as it unfolds.
It is also possible that only minute wave i within minor wave 5 is complete at yesterday’s high. Minor wave 5 may be incomplete; it may be extending.
If this wave count is wrong, it may be in expecting intermediate wave (3) is complete. It may continue higher.
TECHNICAL ANALYSIS
WEEKLY CHART
Click chart to enlarge. Chart courtesy of et=”_blank”>StockCharts.com.
Resistance about 2,880 has been overcome. Next resistance is about the prior all time high about 2,940.
On Balance Volume makes another new all time high last week strongly supporting the Elliott wave count.
A decline in volume while price moves higher is not of concern given current market conditions. This has been a feature of this market for a long time and yet price continues higher.
DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
The December 2018 low is expected to remain intact. The two 90% upwards days on 26th December 2018 and 6th January 2019 indicate this upwards trend has internal strength.
Lowry’s data shows that on the 8th of April Selling Pressure has reached another new low for this bull market, and Buying Power has reached a new high for this rally. This indicates an expansion in demand and a contraction in supply, which has historically been associated with strong phases of bull markets. This strongly supports the Elliott wave count, which expects new all time highs to come this year.
While the last swing low of the 25th of March remains intact, there exists a series of higher highs and higher lows from the major low in December 2018. It would be safest to assume the upwards trend remains intact. ADX agrees.
The pennant pattern is a reliable short-term continuation pattern. A target calculated using the flag pole is about 2,956.
A gap up on Friday may be another breakaway gap from a very small consolidation. It may provide support at 2,893.42. The breakaway is supported by volume for the short term.
Today volume pushes price lower. The risk of a near-term pullback or consolidation here is heightened. This supports the short-term view for the 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.
Every single bear market from the Great Depression and onwards has been preceded by a minimum of 4 months divergence between price and the AD line. With the AD line making a new all time high again 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 the end of July 2019 at this time.
Last week the AD line makes another new all time high. Bullish mid-term divergence continues.
Both mid and large caps have made new swing highs above the prior highs of the 25th of February, but small caps have not. This indicates some selectivity within this upwards trend.
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.
Today both price and the AD line moved slightly lower. Downwards movement has support from falling market breadth. There is no new 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 both price and inverted VIX have moved higher. There is no mid or short-term divergence. Long-term divergence between all time highs remains.
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.
Today both price and inverted VIX have moved lower. Inverted VIX has made a new short-term low below the low two sessions prior, but price has not. This divergence is bearish for the short term.
DOW THEORY
Dow Theory confirmed a bear market in December 2018. 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 @ 05:38 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.
I’m going to label intermediate (4) an incomplete double flat. But this labelling may change as it continues sideways.
The gap from last Friday is now closed and so it’s an exhaustion gap which indicates a pullback or consolidation and now supports the wave count.
It’s not possible to tell what structure intermediate (4) is unfolding as. The focus now will not be on what it is, but identifying when it could be complete.
Hi Lara,
When you have a chance would you be willing to update Russell 2000 and US Dollar charts under categories? The charts don’t look to have been updated since 2017 under categories.
Thank you in advance.
The $ (UUP and $DXY) is breaking out today to the upside, consistent with the EW models from most of the pundits. Nice. Currencies are trendy, and the $ trend is strongly up here, all time frames, from the monthly on down.
gap closed below, still a gap open above…
They don’t seem to be doing the smaller time frame retracements any more. Smaller frames like 10/15/20/30 minute candles. In those smaller time periods, the move begins and just runs. However, they are still doing retracements in the larger timeframes. For instance, there is a “perfect” retracement in the 8 hour candle chart.
The yellow box is a screaming sell signal. The 2 arrows are the perfect retracement part. The right arrow is the high point of the current 8 hour candle which is in progress now. It retraced to the exact middle of the real body at the start of the screaming sell signal (shown by the left arrow).
I’m waiting for this whole pile of red to get down to ES 2886 and flip and then climb up to my 2927 target. So, that’s my wishful thinking for the rest of the week!
I adjusted my AMGN (daily shown) wave count a week or so ago, and it’s playing out here. Per this count, a 6+ month combination correction is in it’s final C of Y wave down. Of course I’m a complete amateur and this could be all wrong, but it’s how I learn. I will be interested in a long when this current move down terminates and buy triggers start firing.
Within Y your A looks like a three but B is < 0 9 X A. When A subdivides as a three it indicates a flat correction. Which needs B to be a minimum 0.9 retracement of A. Try moving the end of A to the swing low to the left. B may then be a combination. Y may be a zigzag. And I can't see it as it's off to the left of the chart, but also check that for W if A is a three, B needs to be 0.9 X A.
Too many reasons why a significant swing high might be in place here, along with non-trivial risk that it will turn out to be a MAJOR swing high, to be long in this market. I’m flat re: equities. Only holding a GLD spread and a UUP call. A time to be cautious, as I see it.
The other guys have called the move up from the December lows a completed 5 wave move, with a call last night that this final wave 5 is now a completed 5 wave move.
We will see. The market loves indecision, and turning here just slightly under the ATH for a larger consolidation maximizes uncertainty re: was it a bear market “B wave” or a new motive wave.
It’s important to note that NDX has now double topped (if it sells off somewhat here).
That’s a big call from their point of view. Having long ago given up subscribing to them I can only assume how their B wave is constructed but I guess 1 down to 2603.54 then an expanded flat to yesterday’s high.
If so, then their supposed B wave down to 2346.58 is much more than 2x the A wave from 2603.54 to 2815.15. This is a guideline not a rule but virtually all “genuine” expanded flats are well within this ratio. Often B is 1.382 x A but very rarely if ever more than twice A.
Wow… so quick!