Downwards movement remains above the invalidation point and within the channel on the hourly chart. Both main and alternate Elliott wave counts remain valid.
Summary: The main wave count is now in some doubt with closure of the last gap and price below the hourly trend channel. The alternate should today be taken seriously. The next target for the main count remains at 3,120.
A new low below 2,931 would indicate a deeper pullback. Use the alternate wave count. The target would then be at 2,923 or 2,898.47.
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 focus on price movement from the end of primary wave 2.
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.
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 intermediate wave (3), minor waves 1 and 2 may be complete. Within minor wave 3, minute waves i through to iii may now be complete. Minute wave iv may not move into minute wave i price territory below 2,931.
All of primary wave 3, intermediate wave (3), minor wave 3 and minute wave iii may only subdivide as impulses. This labelling of minute wave iii as complete sees the middle of a third wave at multiple degrees now complete.
Intermediate wave (3) must move far enough above the end of intermediate wave (1) to then allow intermediate wave (4) to unfold and remain above intermediate wave (1) price territory.
HOURLY CHART
Click chart to enlarge.
Minute wave iv may be a complete double combination ending at support about the lower edge of the Elliott channel, which is copied over from the daily chart. There is still alternation in depth and structure with the deeper flat correction of minute wave ii.
There is now a concern for this wave count: price has closed below the lower edge of the Elliott channel in the last two hours of the session. While fourth waves are not always contained within channels, the invalidation point is very close by and there is not much room for minute wave iv to move into. This channel for this wave count should have contained minute wave iv. The alternate wave count should now be taken seriously.
A new high now above 2,992.53 would invalidate the alternate wave count and provide some confidence in this main wave count.
ALTERNATE DAILY CHART
Click chart to enlarge.
If the main daily wave count is invalidated with a new low by any amount at any time frame below 2,931, then this is the alternate that should be used.
The degree of labelling of the current pullback is today moved up two degrees. This pullback now looks too large and time consuming to be a lower degree second wave.
All of primary wave 3, intermediate wave (3) and minor wave 3 may only subdivide as impulses. Within each impulse, its second wave correction may not move beyond the start of its first wave. Minor wave 2 may not move beyond the start of minor wave 1 below 2,822.12.
Targets for intermediate wave (3) and primary wave 3 remain the same.
ALTERNATE HOURLY CHART
Click chart to enlarge.
If a second wave correction is unfolding lower, then it would most likely subdivide as a zigzag.
Within minor wave 2, minute waves a and b may be complete. Minute wave c may have begun. At 2,923 minute wave c would reach equality in length with minute wave a. If price keeps falling through this first target, then the next target is at 2,898.47 where minor wave 2 would reach the 0.618 Fibonacci ratio of minor wave 1.
Minute wave b should now be complete. Within minute wave c, no second wave correction may move beyond the start of its first wave above 2,992.53.
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.
There is no bearish candlestick reversal pattern in the last three weekly candlesticks. A decline in volume last week with a small range real body is slightly bullish. This looks like a small pullback within an ongoing upwards trend.
DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
There is now a series of higher highs and higher lows since the 5th of August. Strength in 90% up days and back to back 80% up days off lows indicate the lows may be sustainable.
The target from the triangle at 3,060 was not met in the movement up and out of the triangle. The target now looks to have been optimistic. The movement out of the triangle may have been over at the last high, short of the target. Now the breakaway gap out of the triangle is closed. The next support may be the upper trend line from the triangle.
Stochastics is not yet oversold. There is a little room for price to fall further.
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 this week, 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 end January 2020.
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 price has moved lower, but the AD line has moved slightly higher to make a slight new all time high. This divergence is strongly bullish and supports the main Elliott wave count.
Small caps have made a new swing high above the prior high of the end of July, but mid and large caps have not yet done so. This upwards movement of the last four weeks appears to be led by small caps. Because small caps are usually the first to exhibit deterioration in the later stages of a bull market, some strength in small caps at this stage indicates a healthy bull market with further to run.
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.
Stockcharts changed the data from the AD line retrospectively. Yesterday’s data showed the AD line made a new all time high but today that changed. The AD line did not make a new all time high.
Today both price and the AD line have moved lower to make new very short-term swing lows. There is no new 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.
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 eleven 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 both price and inverted VIX moved lower. 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.
Both price and inverted VIX have moved lower today. Both have made new short-term swing lows. There is no new 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 @ 06:33 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.
Look at the weekly charts above since January 1, 2018
Weekly chart has only shown A – B – C , Corrections and Rally’s.
One more question to everyone here?
Is the expanding triangle completely out of the question?
An example of one would be the Dow Jones Industrial average in the 1970’s went through and expanding triangle, it also was showing a lot of A-B-C wave counts then.
Now it looks like a somewhat similar pattern now just on a shorter time frame.
All comments welcome
Thank You
I get the impression that everyone here is bullish?
And from what I see on the charts above that things will only go up.
We all know that’s not 100% true!
Should there also be alternatives to the wave count as well that things can point down?
A 20% percent correction from the recent top would that be completely off the table here?
Heck even a 10 – 15% correction off the top is not even mention above.
The only thing i see above is that the market will go up another 17 – 20%
Is that possible sure!
But it’s also possible for the market to go down the opposite way too!
Can you put a chart up showing your bearish count ?
If we are in a third wave then this is the weakest 3rd wave that i have ever seen!
Something just seems off from the current weekly count!
A chart showing your thoughts would be good.
I have published this before, and fairly recently too.
Now is the time for this to again become a daily published alternate.
If this more bearish EW count fits with your own analysis which suggests a more bearish outlook, then this count may be the one you prefer to use.
It would only become my main count and very seriously considered if price makes a new low by any amount at any time frame below 2,822.12.
The structure here for cycle wave V is an ending diagonal; within ending diagonals all sub-waves must subdivide as zigzags.
I will not be publishing a wave count with an expanding triangle, I have only seen one, once.
However, in my research to date I have not finished a complete wave count of DJIA back through the 1970’s, if there is one there I have not yet got to it. It would be only the second I have seen. They are extremely rare.
In the current political/economic environment I lean more bearish myself. I won’t list the reasons why except to say I “expect more of the same”, and…that’s bearish in my book!!!
But I don’t think it really matters. THIS IS A TRADER’S MARKET. You’ve got to be nimble and you’ve got to work both sides OR you’ve got to stand aside, in my opinion. This big 2 year long trading range is brutal for “investors”.
At the open today price was below the invalidation point for the main hourly count, and so that was the time to switch to the alternate with confidence.
Price has fallen through both targets. The structure may be complete.
But I shall not have confidence that a low is in until there is enough sign of strength off the low for that; a 90% up day, two back to back 80% up days, a strong bullish candlestick reversal pattern or bullish very long lower wicks.
Taking data from the SPY, when the market opened this morning, wave 3 was already 50% of wave 1. I would not qualify this level as a confident entry point…
Maybe it was time to switch to the alternative count, but it was certainly not time to initiate a short position in confidence IMHO.
Thank you Lara. May I ask what is meant by a 90% up day? Is that the volume of 90% of the s&p stocks being higher from the previous day?
A 90% up day is when up volume is 90% or more of total up / down volume, and also when advances are 90% or more of total advances / declines.
RUT has now hit and is showing the very beginnings of a possible pivot off one of my fibo fitted targets. There’s some decent bottom structure on this hourly chart. A break above the green neckline and I just might take a long…
even better structure now, bought a pilot position, will buy a lot more above 1483 (the green line).
On the SPX, the current rebound will probably count best as a wave 4
updated targets.
imagine what happens late next week if the trade talks “fail”….I can count lots of rational reasons why they will “fail”, and very few why they might succeed, myself.
Can we get some updated guidance, since the S&P went below 2898?
The alternate daily and hourly is now the EW model of choice, and that doesn’t get invalidated unless/until SPX goes under 2822.
If you mean trading guidance…well, yesterday or first thing this morning was the time to get short IMO. Now, you may have to wait for a new set up of some type I think. Too much danger of a strong bounce starting up any time.
That is what the alternate count is for, and why I provide alternates. Also, I provide very specific price points where a main count is invalidated and so discarded, and then the alternate becomes the main count. That price point today was at 2,931 which was breached on the open.
The selling has been relentless, with no buyers in sight. The bears just catch their breath (consolidate) and just go lower…
Meanwhile, XBI (biotech) which has been hammered 13% in the last 2 weeks in a waterfall selloff, is actually positive today. Looks like it put in a low, and ready for a nice bounce…
Interesting. There must be one or two large components of XBI bucking the trend strongly. IBB is down 0.9%. But overall, this bears watching as a possible area of quick strength in the inevitable bounce. IBB is just tagging and turning (?) off the lower volatility band on the weekly, a set up I frequently like. Thanks Ari.
For long stock traders: ALGN is WAY off it’s highs, and has based now for about 7 weeks. In today’s big down market…ALGN is showing a reversal bar to the upside in the middle of its consolidation range. I.e., no selling in ALGN at all. Over 186.60 and I think it’s a strong buy. BTW, it’s ATH in May was 334. There’s a lot of room to rumble to the upside.
Daily SPY with volume profile. Price is exactly on a node now (dead center in my butterfly…please be there next Wednesday, market gods!). Notice the giant “valley” below; if it heads there, price is not stable there and will either turn back up or keep trucking to the next node down. IMO.
Yesterday SPX closed below its daily Bolinger Band, VIX closed above its daily BB, and $NYMO closed below its daily BB. This is setting up to gives us a snap back rally. How high it will go I do not know. My guess is about 2960 which is the 50% retracement of the drop since the SPX 3021 high on September 19th.
At that point, depending upon the wave pattern and other technicals, I may be liquidating all my long equity positions and awaiting further evidence as to the long term direction of the markets. I am not liking what I see at all. But we must remain patient.
Right now the McClellan Oscillator is about -75. The low in early August saw -79. So we may be closing in on this swing low today.
If the overall pattern across this daily chart holds…this market is going down quite a bit here.
On the other hand…the recent larger moves from the last year are projected. This one price is tracking (time and price) is the LOWEST momentum such previous swing (which went quite deep). If it “breaks off” by slowing yet more/turning up a bit, I’m quite suspicious “it’s over”. But I’m guessing we get acceleration pretty quickly instead. The red lines are symmetric projection levels (and one key pivot low), the purple are Fibonacci fitted projections. The gray area is a fly I put on today.
If the alternate is the one, [c] of Minor 1 is 1.382 [a] at 2897 as well as .618 of minor 1 retraces to 2898.
Nice little cluster.
Rat-a-tat-a-tat-a-tat!!
I mis-positioned that gray ‘fly zone on the chart, it is quite a bit higher centered at 2880. Nice in the money now…but I’m concerned that price may go right by it over the next few days!
Price at 2900 which is a major 61.8%. That should hold for a while, I would guess…
went guttural and added to my loosing short positions all morning. why go against training and ad to underwater positions? I dont know. but got paid for it. reminds me of the cliche- “you’ve got to know the rules before you can break them.” I think my biggest failure is recognizing just how long (horizontally) these patterns/moves/trends take to play out. Expecting more chop. probably back up to the top of the alternate elliot channel to fake out believers in the invalidation points and pull in longs… then what the heck and smash back through them to kill those longs and suck in shorts. that sounds about the right time to go long again (maybe toss in one more repeat to really draw things out on the horizontal) I think we have a huge triangle forming from the highs of july to the lows of august… it makes sense that (as it creeps just above the lows of august) spx would visit the 200 day MA, giving support to push back up and continue the range bound coil.
Triangles don’t present as wave 2s.
Man, what a day