Upwards movement is continuing as expected. The Elliott wave count and target remain the same.
Summary: The next target is at 3,120. Overall, expect upwards movement to continue.
For the very short term, closure of the gap with a new low by any amount at any time frame below 3,027.39 would indicate a short-term pullback. Today a Gravestone doji candlestick suggests this possibility should be taken seriously. At that stage, a target for a pullback to end would be about 3,002.
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. An alternate wave count, which looked at the possibility of a diagonal unfolding, has been invalidated with a new all time high.
The daily chart below will focus on movement from the end of intermediate wave (1) within primary wave 3.
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.
Within cycle wave V, primary waves 1 and 2 may be complete. Within primary wave 3, intermediate wave (2) may not move beyond the start of intermediate wave (1) below 2,728.81.
DAILY CHART
Click chart to enlarge.
Primary wave 3 may have begun.
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 3 may be underway and may have passed through its middle strongest portion (main hourly chart). Within minor wave 3, if minute wave ii is yet to unfold (alternate hourly chart below), then it may not move beyond the start of minute wave i below 2,855.96.
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.
Minor wave 2 should be over.
There are multiple ways now to label upwards movement from the end of minor wave 2. Today the degree of labelling within the middle of this third wave is moved up one degree in consideration of the target. It is possible that the middle of the third wave has passed, with weaker momentum than the first wave. The fifth wave may be weaker still so that the third wave is not the weakest.
Within minute wave iii, minuette wave (iv) may now unfold as a very small and shallow pullback or sideways consolidation. Minuette wave (iv) may not move into minuette wave (i) price territory below 3,014.57.
Prior to invalidation this wave count may be discarded or swapped over to an alternate if the gap is closed with a new low below 3,027.39 or the best fit channel is breached.
ALTERNATE HOURLY CHART
Click chart to enlarge.
If price makes a new low below 3,027.39 tomorrow, then this is the hourly wave count which should be used.
This labelling of upwards movement from the end of minor wave 2 better fits MACD. If minute wave i is just now complete, then the strongest middle portion of sub-micro wave (3) corresponds with the strongest momentum from MACD.
The channel is drawn as a best fit in the same way on both hourly charts. Minute wave ii may breach the channel.
Minute wave ii may end about the 0.236 or 0.382 Fibonacci ratio. Minute wave ii may not move beyond the start of minute wave i below 2,855.96. The 0.236 Fibonacci ratio is favoured as a target because there is strong support in this area, and the upwards pull of a third wave at three degrees may force minute wave ii to be shallow.
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.
Primary wave 5 may be subdividing as either an impulse, in the same way that cycle wave V is seen for the first weekly chart.
TECHNICAL ANALYSIS
WEEKLY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
There is still a series of higher highs (with the exception of the last high) and higher lows from the low in December 2018. This is the basic definition of an upwards trend. For that view to shift then a lower low below 2,822.12 would need to be seen.
Last week looks more clearly bullish with some support from volume. There is strong resistance which has been overcome.
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 still be sustainable.
Volume for the breakout day yesterday has been revised by Stockcharts. It shows some support for the breakout, so now there is more confidence in it.
The gap up breaks above strong resistance about 3,027. This breakaway gap may now offer support; breakaway gaps should remain open. Look for support at 3,027.39. If this gap is closed, it would be renamed an exhaustion gap and a pullback would be expected to find support about 3,000 in the first instance.
On Balance Volume suggests a very little weakness in upwards movement.
The Gravestone Doji today is a strong warning that a pullback or consolidation may develop here.
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 February 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 only large caps have made a new high above the prior swing high in mid September. Small and mid caps have not. This current rise is driven mostly by larger caps, which is a feature more typical of an aged bull market.
The new all time high from the AD line last week is again a very bullish signal. This strongly supports the main Elliott wave count.
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 makes yet another new all time high today. This divergence is bullish and strong. It is given reasonable weight in this analysis.
The new all time high from the AD line today confirms the new all time high from price.
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 almost two years 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 have moved higher. Both have made new short-term swing highs. There is no new 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.
Again, today price has moved higher, but inverted VIX has moved lower. Upwards movement in price today does not come with a normal corresponding decline in VIX. This divergence is bearish for the short term and will be given a very little weight as On Balance Volume has not confirmed the new high in price, now for two sessions in a row. These indicators together suggest the alternate hourly wave count may be correct.
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 @ 06:45 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 everybody for being late today. Sometimes it’s just not possible to be here prior to the NY close.
Main hourly chart updated. Minuette (iv) may now be complete as a double zigzag. The invalidation point now moves up to the end of minute i; minute iv may not overlap minute i price territory.
With Barchart and Stockcharts data the gap has it’s low at 3,027.39
But the low for today is at 3,028.39 and so the gap remains open on Barchart data
But it’s closed on Stockcharts data with a low today at 3,025.96.
Those two data feeds really should be the same. But they’re not. Both are cash market, not futures, so that’s not the reason for the difference…
I have the low at 3025.96 on CQG data.
Yeah, I think that and StockCharts are correct. I’m going with that, and the gap being closed.
I’ve heard the maxim that news doesn’t alter the count. However, the recent rate cut announcement sure seems to be moving price around.
It didn’t alter the count. Price today did exactly what the main hourly count expected, and the support line has held.
So far…
Actually, it didn’t behave exactly as expected, the gap was closed.
That is unexpected.
Okay fellow traders / investors. Here comes the retrace and test of the trend line drawn from the July and Sept. highs which is currently about 3018. The next level of support is at the SPX 3000 area. This support should be significant just as the resistance was significant. Going long now can be an excellent entry point because a stop loss can be set relatively close and the upside potential is significant.
And RUT turned down off my Fibo projection at 1580. I suspect RUT is in a iv wave that matches the 10/7 – 10/8 ii wave. Sadly, I think it’s likely to overrun the lower edge of my butterfly for Friday, and if/as it does, I will bail rather than accept a potentially larger loss. That’s the beauty as I see it of generally “at the money” butterflies: you can play them for “profits only”, mean, if/as price moves to the edge, and it’s a very short term fly, you can get out with a trivial loss. It can be a virtually “no lose” trade (he said confidently before getting destroyed by a giant gap down!!! Lol!!!). Actually, a short term ‘fly like this has a max loss right about the max win size, so it’s not by any means a disaster should disaster strike. But in normal environments, it’s an awesome reward/risk trade, IMO.
Nicely riding the profit bubble up in the middle of my IWM fly now. Boy I love this trade!! Risk/reward when managed is just tremendous.
I like it so much I put on an unbalanced fly on SPY for Friday, 301/303/304. I make $2-3/fly even if SPY goes to the moon. I lose $17/fly (or less) if price hits 301.87 (I exit). At 303 at close I make $100/fly. And I pocket profit on any SPY > 301.87. Love these little gadgets!
Since we closed the gap at 3027.39, you guys don’t think we’re going to retrace here as Lara mentioned in her opening notes?
I actually opened a short position yesterday in anticipation we would close the gap, and added to shorts this morning.
I do think we may very well have much more correction to go. I don’t discount that probability. I was just pointing out some support levels and possible trades. In fact, to get the right look for a Minute ii correction as per the Alternate Hourly chart, I think we need several more days of correction. The correction can take us all the way back to the start of Minute i which is right around 2855 and still remain valid. But based on the longer term bullish wave count, I suspect the correction to be relatively shallow and relatively brief.
I don’t know.
But I’m definitely not short. Daily trend is STRONG UP. I don’t ever fight that, even if I’ve got (rather strangely but there ya go) a down trend at the weekly and monthly. I I even took off my GOOGL short for a couple $’s profit. I think there’s a real possibility of this market going straight up very soon in a massive short squeeze/bull rush.
SPX hourly now sporting 3 recent (today/yesterday) long tail candles, very bullish looking to me.
Normally you’d expect closure of a gap like that (also coming right after a Gravestone Doji) to be very bearish.
But the strong finish to the end of the session suggests otherwise.
Hey hey boo boo!
Yogi, you’re smarter than the average bear.