A breakout is expected tomorrow. The target remains the same.
Summary: Conditions are still suggesting a sustainable low may be in place. The next target is 3,120.
A new low below 2,822.12 would indicate a continuing deeper pullback. The first target would then be at 2,663.
The biggest picture, Grand Super Cycle analysis, is here.
Monthly charts were last published here, with video here. There are two further alternate monthly charts here, with video here.
ELLIOTT WAVE COUNTS
The two weekly Elliott wave counts below will be labelled First and Second. They may be about of even probability. When the fifth wave currently unfolding on weekly charts may be complete, then these two wave counts will diverge on the severity of the expected following bear market. To see an illustration of this future divergence monthly charts should be viewed.
FIRST WAVE COUNT
WEEKLY CHART
Click chart to enlarge.
The basic Elliott wave structure consists of a five wave structure up followed by a three wave structure down (for a bull market). This wave count sees the bull market beginning in March 2009 as an incomplete five wave impulse and now within the last fifth wave, which is labelled cycle wave V. This impulse is best viewed on monthly charts. The weekly chart focusses on the end of it.
Elliott wave is fractal. This fifth wave labelled cycle wave V may end a larger fifth wave labelled Super Cycle wave (V), which may end a larger first wave labelled Grand Super Cycle wave I.
The teal Elliott channel is drawn using Elliott’s first technique about the impulse of Super Cycle wave (V). Draw the first trend line from the end of cycle wave I (off to the left of the chart, the weekly candlestick beginning 30th November 2014) to the end of cycle wave III, then place a parallel copy on the end of cycle wave II. This channel perfectly shows where cycle wave IV ended at support. The strongest portion of cycle wave III, the end of primary wave 3, overshoots the upper edge of the channel. This is a typical look for a third wave and suggests the channel is drawn correctly and the way the impulse is counted is correct.
Within Super Cycle wave (V), cycle wave III is shorter than cycle wave I. A core Elliott wave rule states that a third wave may never be the shortest. For this rule to be met in this instance, cycle wave V may not be longer in length than cycle wave III. This limit is at 3,477.39.
Cycle wave V may subdivide either as an impulse or an ending diagonal. Impulses are much more common. This main wave count expects that cycle wave V may be unfolding as an impulse.
The daily charts below will now focus on all of cycle wave V.
In historic analysis, two further monthly charts have been published that do not have a limit to upwards movement and are more bullish than this wave count. Members are encouraged to consider those possibilities (links below summary) alongside the wave counts presented on a daily and weekly basis.
MAIN DAILY CHART
Click chart to enlarge.
There is enough support from classic technical analysis to consider this the main wave count.
Cycle wave V is seen as an impulse for this wave count.
Within cycle wave V, primary waves 1 and 2 may be complete. Primary wave 3 may have begun.
Primary wave 3 may only subdivide as an impulse. Within primary wave 3, intermediate waves (1) and (2) may be complete.
Intermediate wave (3) may have begun. Intermediate wave (3) may only subdivide as an impulse. Within the impulse of intermediate wave (3), minor wave 2 may not move beyond the start of minor wave 1 below 2,822.12.
MAIN HOURLY CHART
Click chart to enlarge.
Intermediate wave (3) may only subdivide as a five wave impulse. Within intermediate wave (3), minor waves 1 and 2 may now be complete. Minor wave 3 may only subdivide as a five wave impulse. Within minor wave 3, minute wave ii may not move beyond the start of minute wave i below 2,825.51.
Minute wave iii must move beyond the end of minute wave i. Minute wave iii must move far enough above the end of minute wave i to allow room for minute wave iv to unfold and remain above first wave price territory.
The degree of labelling within minute wave ii is moved down one degree today. Minute wave ii may be an incomplete regular flat correction. Within minute wave ii, minuette wave (a) fits as a three and minuette wave (b) also fits as a three, and within it subminuette wave b is an expanded flat. This is a common pattern, to see B waves within B waves subdividing as flat corrections. Minuette wave (c) would be likely to make at least a slight new low below the end of minuette wave (a) at 2,899.60 to avoid a truncation and a very rare running flat. As soon as a slight new low below 2,899.60 is seen, then minute wave ii may be over.
The next wave up for this wave count may then exhibit an increase in momentum as a third wave at three degrees unfolds.
It remains possible that minute wave ii was over at the last small low on the 20th of August. An upwards breakout tomorrow without any prior downwards movement would indicate minute wave ii should be labelled as complete and a third wave up at three degrees should then be expected to be underway.
ALTERNATE DAILY CHART
Click chart to enlarge.
This first alternate wave count considers the possibility that cycle wave V may be unfolding as an impulse.
Cycle wave V must subdivide as a five wave motive structure. Within that five wave structure, primary wave 1 only may be complete.
Primary wave 2 may be unfolding as an expanded flat correction. These are reasonably common Elliott wave corrective structures. Flat corrections subdivide 3-3-5. Expanded flats have B waves which are 1.05 or more the length of their A waves. In this example for primary wave 2, intermediate wave (B) is a 1.33 length of intermediate wave (A). The target for intermediate wave (C) expects it to exhibit the most common Fibonacci Ratio to intermediate wave (A) within an expanded flat.
If price reaches the target at 2,663 and keeps falling, then the next target would be the 0.618 Fibonacci Ratio of primary wave 1 at 2,578.66.
Primary wave 2 may not move beyond the start of primary wave 1 below 2,346.58.
SECOND ALTERNATE DAILY CHART
Click chart to enlarge.
This second alternate daily chart considers the other structural possibility for cycle wave V, that of an ending diagonal.
All sub-waves within an ending diagonal must subdivide as zigzags. Primary wave 1 may have been complete as a zigzag at the last all time high on the 26th of July.
Primary wave 2 may be continuing lower as a zigzag. Within the zigzag, intermediate wave (B) may be completing as a sideways triangle.
Within diagonals, sub-waves 2 and 4 are normally very deep, ending within a range of 0.66 to 0.81 the prior wave. This range for primary wave 2 is from 2,578 to 2,476. Primary wave 2 may possibly come as low as the lower edge of the teal channel, which is copied over from the weekly chart.
Primary wave 2 may not move beyond the start of primary wave 1 below 2,346.58.
SECOND WAVE COUNT
WEEKLY CHART
Click chart to enlarge.
This weekly chart is almost identical to the first weekly chart, with the sole exception being the degree of labelling.
This weekly chart moves the degree of labelling for the impulse beginning in March 2009 all down one degree. This difference is best viewed on monthly charts.
The impulse is still viewed as nearing an end; a fifth wave is still seen as needing to complete higher. This wave count labels it primary wave 5.
TECHNICAL ANALYSIS
WEEKLY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
Last weekly candlestick completes an upwards week with a slightly higher high and a slightly higher low, but the balance of volume is down and the candlestick is red. Long lower wicks and On Balance Volume at support suggest the downside here may now be limited.
DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
Lowry’s data now indicates Friday was a 90% OCO up day. Monday is a near 80% up day. Conditions for a sustainable low may now be in place, so a more bullish outlook is warranted.
The last two gaps may be pattern gaps as they occur so far within a consolidation zone which has resistance about 2,940 and support about 2,820.
A decline in volume for upwards movement is not of a concern. Price has been rising for years in this market on light and declining volume.
A close above the high of the 13th of August at 2,943.31, preferably with support from volume, would indicate confidence that the low is sustainable. At that stage, it would be reasonable to expect new all time highs.
Today completed an outside day that has closed red.
Up volume had the edge at 53% of total up / down volume. This indicates a little internal strength today and offers very small support to the main 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.
Bear markets from the Great Depression and onwards have been preceded by an average minimum of 4 months divergence between price and the AD line with only two exceptions in 1946 and 1976. With the AD line making new all time highs again recently, the end of this bull market and the start of a new bear market is very likely a minimum of 4 months away, which is mid November 2019.
In all bear markets in the last 90 years there is some positive correlation (0.6022) between the length of bearish divergence and the depth of the following bear market. No to little divergence is correlated with more shallow bear markets. Longer divergence is correlated with deeper bear markets.
If a bear market does develop here, it comes after no bearish divergence. It would therefore more likely be shallow.
Last week both the AD line and price have moved slightly higher. There is no new short-term divergence.
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.
The AD line has yesterday made another new high above the prior high of the 13th of August, but price has not. This divergence is bullish and still supports the main Elliott wave count.
Today completed an outside day with the balance of volume downwards and a red candlestick. Downwards movement within the session had a little support from a decline in the AD line. There is no new divergence today.
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.
The all time high for inverted VIX (which is the same as the low for VIX) was on 30th October 2017. There is now nearly one year and nine months of bearish divergence between price and inverted VIX.
The rise in price is not coming with a normal corresponding decline in VIX; VIX remains elevated. This long-term divergence is bearish and may yet develop further as the bull market matures.
This divergence may be an early warning, a part of the process of a top developing that may take years. It may not be useful in timing a trend change.
Last week price has moved very slightly higher although the candlestick closed red, but inverted VIX has moved a little lower. This divergence is bearish, but it is contrary to the AD line and shall not be given weight in this analysis.
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 yesterday made a new high again above the prior high of the 13th of August, but price has not. This divergence is still bullish and confirms the bullish signal from the AD line. This supports the main Elliott wave count.
Today an outside day with a red daily candlestick completed. Inverted VIX has declined. There is no new short-term divergence.
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 having moved higher following a Dow Theory bear market confirmation, Dow Theory would confirm a bull market if the following highs are made:
DJIA: 26,951.81 – a close above this point has been made on the 3rd of July 2019.
DJT: 11,623.58 – to date DJT has failed to confirm an ongoing bull market.
S&P500: 2,940.91 – a close above this point was made on the 29th of April 2019.
Nasdaq: 8,133.30 – a close above this point was made on the 26th of April 2019.
Published @ 08:26 p.m. EST.
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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.
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New updates to this analysis are in bold.
Apologies for the lateness today. Insomnia again.
This is deeper than expected, but the subdivisions fit and it remains above the invalidation point.
still like the triangle
closed 1/3 of my SPXS position
sold my puts on the way down, looking to buy back next week
bought a small amount of calls at 284.5 to hopefully make some cash Monday
Very good day. I have learned so much over the last year or so. Thanks to all!
Going to press my short s – Monday May be nasty .
VIX bull flag. We could get a downside gap…
The move from 2899.60 (August 20) to 2937.90(August 22) is only in 3 waves, which will give a lot of hope for the bulls: if 2825 is broken, there would be a massive truncation at the top yesterday. All EW counts were expecting 5 waves up…
… unless it was a B and we are now in C but it’s way too stretched
At this point it seems far less likely that the eventual break out of this very large trading range will be to the upside. Far less likely.
TWO HOs on the clock hinted that might be the case… 🙂
It appears to me that between the general insanity of “the world” re: fundamentals and economic shenanigans, and the market action here, that the potential for a very large correction through the course of Sept-Oct and maybe not ending until Dec. has reasonably high potential. While on the other side, it’s very difficult to find any legitimate reasons why the US equities would be going up substantially during this same period. So I’ve as of this moment I’ve moved my long term investment money (generally managed by a pro advisor) out of equities and into various “safer harbors”. Just in case this little wind storm from the north turns into a serious blow. What was the message from the Clint Eastwood movie about the female boxer? “Protect yourself at all times”. Yup.
Kevin, I think your move was quite wise.
Both of the gaps on the latest up leg of the SPX, have been closed. This provides support for the two Alternate Daily counts. This support is dramatic and substantial today. I think that now the odds strongly favor one of these two counts even though we have not yet breached the Primary Count invalidation point of 2825.51.
I suspect that Monday we will see many others make the same decision as Kevin has done today. This will provide a lot of fuel for the current down leg.
Rodney and Kevin,
Based on both of Lara’s bear cts. It would seem we may get a bounce into an ‘E’ of (B) or iic before going down again. Maybe Monday morn. Your thoughts?
Also if her triangle (B) is correct, 85% of (C) would bring us to 2841ish for (D) [bit below .786] before a bounce.
I need to read what Lara has to say and suspect she will answer your questions with this weekend’s analysis. I would also look to C. Ciovacco.
All in all, we are in a precarious position. I would not want to trade any counter trend moves.
On a pure technical note. the large range-bound action since the recent ATH now has the look of big distribution off a top. I see multiple analogous situations in the last year or two followed by booming sell offs (Oct-Nov 2018 being the most notable). That doesn’t mean it’s going to happen again this time. But it’s following a common model. So far.
Well, folk, there you have it! Enjoy!!! 😀
U see it as the buying opportunity or u think we are going below 2700
Are you going to stay short over the weekend V ?
Those pivots were important. Unless they can reclaim them today…well, let’s just say I would not get too bullish…! 🙂
Market lows generally do not occur on Thursdays or Fridays. I think we see a lower market next week. I am not bullish at this point at all, at least short to intermediate term.
RUT appears to have finished it’s minute 2 with a hit and turn off the 38% retrace level.
wrongo! happy to have bought up some IWM puts…
Haha!
Big buy order from the Treasury at 2901…
Now comes the battle of the round numbers…SPX 2.9K and DJIA 26K…
How will Powell position…dove…or hawk?
AND…does it really matter?
Does the Powell yapping start precisely at 2pm EDT today? Or a different time?
This is a day to reflect on Raschke’s quote: “the market goes to the obvious place…by the most non-obvious path!”.
7:30…
Hmm, I’m being told 10am ET, so about 8 minutes from as I type…
Remember his language on Dec 19 of 2018 totally tanked the markets. So yes, I think it does matter, frankly. In the short term at least.
Something about this set up feels like a bear trap to me…but I’m usually wrong so. I bought a few puts as price has broken my lower threshold here.
Ah, I see we also have “retaliatory tariffs” rocking the market.
Wow
During impulsive declines, VIX generally makes its high at the end of the third wave NOT the fifth. I suspect it is smart money recognizing the impending trend change going short vol early. It is a gem of a set-up and one of the most reliably consistent I have ever seen. Some veterans here like Rod I know are familiar with it. Extended fifths can be a bit tricky making the divergence even more stark. Have a great week-end everyone!
Highly concerned that the trend line was busted yesterday.
The red and green lines are my “go” lines. Here’s not not getting whipsawed tomorrow. Best of luck all!
The algos are working overtime to defend ES 2920…lol! 🙂
Yup, buying has been relentless.
It’s no fun being a bear in this market.
When it decides to go up, forget pullbacks. Lol
Despite the relentless buying, the markets has essentially gone nowhere. for the last year. We know how this ends….SPX 2160 is a real possibility…
Lazy dog here!
Drat! Again!
I have an excuse. Don’t ask. But it has to do with running into a door jamb with a shoulder that recently underwent surgery and excruciating the pain that follows such an idiotic maneuver. The relief from opiod pain medication can also make one drowsy and suffer from brain cloud.
Oh nooooo! :-/
Be carful Rod. You gotta be extra cautious with the opioids…
Thanks Ari. Back in the mid 80’s I was in drug rehab 2 times in a year for cocaine abuse. So I am familiar with the issue(s) and my family watches after me. In addition, during my first shoulder replacement surgery recovery, after the first two weeks, my surgeon was adamant on the weening from the opioids in a rather quick fashion. In fact, Oregon Health Science University & Hospitals where I had the surgery, has a major campaign running through every department against opioid abuse. There are posters and literature everywhere.
Be that as it may, I appreciate your concern and care.