The Elliott wave count now expects a pullback or consolidation to continue. An upwards day remains below the last high and fits expectations so far.
Summary: A pullback or consolidation has begun. It may continue now through to the end of next week and possibly a little longer. Support is expected to be about 3,153; but if this expectation is wrong, it may be too low.
Three large pullbacks or consolidations (fourth waves) during the next 1-2 years are expected: for minor wave 4 (just begun), then intermediate (4), and then primary 4.
The biggest picture, Grand Super Cycle analysis, is here.
Last monthly charts analysis is here with video here.
ELLIOTT WAVE COUNTS
FIRST WAVE COUNT
WEEKLY CHART
Click chart to enlarge.
Cycle wave V may subdivide either as an impulse or an ending diagonal. Impulses are much more common, and it is clear at this stage that cycle wave V is an impulse and not a diagonal.
At this stage, cycle wave V may take another one to two or so years to complete.
A channel is drawn about the impulse of Super Cycle wave (V) using Elliott’s first technique. Draw this channel first from the high of 2,079.46 on the 5th of December 2014 to the high of 2,940.91 on the 21st of September 2018, then place a parallel copy on the low at 1,810.10 on the 11th of February 2016. Cycle wave IV found support about the lower edge.
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 new high by any amount at any time frame above this point would invalidate this main wave count in favour of one of the two alternate wave counts in the monthly chart analysis which are much more bullish.
The daily chart below will focus on movement from the end of minor wave 1 within intermediate wave (3).
Within cycle wave V, primary waves 1 and 2 may be complete. Within primary wave 3, intermediate waves (1) and (2) may be complete. Within the middle of intermediate wave (3), minor wave 4 may not move into minor wave 1 price territory below 3,021.99.
Within cycle wave V, the corrections of primary wave 2, intermediate wave (2) and minor wave 2 all show up clearly on the weekly chart. For cycle wave V to have the right look, the corresponding corrections of minor wave 4, intermediate wave (4) and primary wave 4 should also show up on the weekly chart. Three more large multi-week corrections are needed as cycle wave V continues higher, and for this wave count the whole structure must complete at or before 3,477.39.
DAILY CHART
Click chart to enlarge.
All of primary wave 3, intermediate wave (3) and minor wave 3 may only subdivide as impulses.
Minor wave 3 may now be complete.
Minor wave 2 was a sharp deep pullback, so minor wave 4 may be expected to be a very shallow sideways consolidation to exhibit alternation. Minor wave 2 lasted 2 weeks. Minor wave 4 may be about the same duration, or it may be a longer lasting consolidation. Minor wave 4 may end within the price territory of the fourth wave of one lesser degree; minute wave iv has its range from 3,154.26 to 3,070.49. However, this target zone at this stage looks to be too low.
Minor wave 4 may not move into minor wave 1 price territory below 3,021.99.
When minor wave 4 may be complete, then a target will again be calculated for intermediate wave (3).
When intermediate waves (3) and (4) may be complete, then a target will again be calculated for primary wave 3.
Draw an Elliott channel now about intermediate wave (3): draw the first trend line from the end of minor wave 1 to the end of minor wave 3, then place a parallel copy on the end of minor wave 2. Minor wave 4 may find support at the lower edge of this channel if it is long lasting or deep enough.
Price has recently reached just above the upper edge of the wide teal channel copied over from monthly and weekly charts. A reaction downwards here increases the technical significance of this trend line.
HOURLY CHART
Click chart to enlarge.
A correction to last about two weeks should begin with a five down on the hourly chart. That now looks complete and is labelled minuette wave (a). Minuette wave (b) may not move beyond the start of minuette wave (a) above 3,337.77.
Minor wave 4 is least likely to subdivide as a zigzag and most likely to subdivide as either a flat, triangle or combination. The first movement within these structures is a three, usually a zigzag. This zigzag is labelled minute wave a or w and is incomplete.
Minor wave 4 may end within the price territory of the fourth wave of one lesser degree. Minute wave iv has its range from 3,154.26 to 3,070.49. Within this range is the 0.382 Fibonacci ratio of minor wave 3 at 3,153.72. If this target range is wrong, then it may be too low.
SECOND WAVE COUNT
WEEKLY CHART
Click chart to enlarge.
This second wave count sees all subdivisions from the end of the March 2009 low in almost the same way, with the sole difference being the degree of labelling.
If the degree of labelling for the entirety of this bull market is all moved down one degree, then only a first wave at cycle degree may be nearing an end.
When cycle wave I is complete, then cycle wave II should meet the technical definition of a bear market as it should retrace more than 20% of cycle wave I, but it may end about either the 0.382 or 0.618 Fibonacci Ratios of cycle wave I. Cycle wave II may end close to the low of primary wave II within cycle wave I, which is at 1,810.10. It is also possible that cycle wave II could be fairly shallow and only barely meet the definition of a bear market.
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 still need another year to two or so to complete, depending upon how time consuming the corrections within it may be.
Primary wave 5 may be subdividing as 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.
It is very clear that the S&P is in an upwards trend and the bull market is continuing. Price does not move in straight lines; there will be pullbacks and consolidations along the way.
This chart is overall bullish. There are no signs of short-term weakness in upwards movement.
RSI is now overbought. That does not mean upwards movement must end here, because it can continue for several weeks while RSI reaches more extreme. RSI reaching overbought is a warning that conditions are now becoming extreme. A pullback or consolidation will follow and the longer conditions are extreme the closer this will be. However, assume the trend remains the same until proven otherwise. This warning should be heeded by careful attention to risk management.
DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
The larger trend, particularly at the monthly time frame, remains up. Expect pullbacks and consolidations to be more short term in nature although they can last a few weeks.
In a bull market which may continue for months or years, pullbacks and consolidations may present opportunities for buying when price is at or near support.
Yesterday’s downwards day fell just short of a 90% downwards day; confidence that a longer lasting pullback or consolidation has begun may be had. Look for first support about 3,150 to 3,155. This aligns with the Elliott wave target and the Elliott wave channel.
Today upwards movement exhibits a little weakness in volume and it falls well short of an 80% up day. This fits the Elliott wave count as B waves should exhibit some weakness.
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 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 mid May 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 higher with a higher high and a higher low, but the AD line has moved lower. This divergence is bearish and supports the Elliott wave count.
Large caps all time high: 3,337.77 on 22nd January 2020.
Mid caps all time high: 2,106.30 on 17th January 2020.
Small caps all time high: 1,100.58 on 27th August 2018.
For the short term, there is a little weakness now in only large caps making most recent new all time highs.
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.
Both price and the AD line have moved higher today. 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.
The all time high for inverted VIX was on 30th October 2017. There is now over 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 is clearly not useful in timing a trend change from bull to a fully fledged bear market.
Last week price has moved higher, but inverted VIX has moved lower to make a new low below the low 4 weeks ago. This divergence is bearish and supports the Elliott wave count.
A cluster of bearish signals supports the 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.
Both price and inverted VIX have today moved higher. Bearish divergence remains. There is no new bullish divergence today.
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 @ 06:20 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.
Making some moves in mid and long term positions.
Bonds looking quite good. Long via TLT
Gold looks to be shaping up for a nice move higher. Long GLD and GDXJ
Beautiful monthly shooting star on AMD and also looking ripe for a great swing trade.
Hourly chart updated:
Again, minuette (b) could be complete at todays high. But the invalidation point must remain as it is to allow for the possibility that minuette (b) may continue higher.
The narrow channel about this bounce is now being breached by downwards movement. This may be taken as some indication that minuette (b) may be over. However, this particular market has a tendency to breach channels and then continue higher as it forms slow rounded tops.
on the move since the low 2 days ago:
a (orange) is 5 waves -> perfect
b (orange) is 3 waves -> perfect
c (orange) is clearly 3 waves. A 5 wave count would have 3 as the shortest -> not good at all
Alternate count is:
a (orange) is 1
b(orange) is a of 2
c (orange) is b of 2
SPX is currently in c of 2, ready to rally tomorrow?
This is the count.
Obviously, the count I’m proposing would go to new highs (there is no room to develop 5 waves and remain below ATH).
so the (a) (green) on the 24th would be all of wave 4 (blue).
This would be quite bullish…
It looks to me like SPX is about to roll over. W-X or A-B may have been completed.
agreed! but instead of adding to my short exposure via more sold call spreads, I decide to target a butterfly for next (not this) friday in SPY centered at 324. Great risk/reward! May it be so…
Surely one lil’ ‘ole BLK 500 put can’t do much harm.
Offering 3.00 even for a March 6 500 put. Spread fairly wide at 2.30 x 3.60
how do you interpret this wide spread? lower total of open positions?
A few things.
First, it is a fairly high confidence trade as I do not expect BA to trade above 345 prior to expiration.
Second, the spread width is not as important as the total risk exposure of the trade, which in turn is strictly limited by the number of spreads sold.
Third, sometimes a wider spread allows for the same risk exposure with fewer contracts sold so limiting overall cost (commissions) of executing the trade.
Good question!
The problem with orders placed in the market is that the market makers can see what you are up to. Just watch. They are going to keep prices propped up the entire cash session. I guess I am going to have to take a look at YM for that DJIA trade…
p.s. Is that a BLK gravestone doji…?!
Blackrock price action is fascinating. I know a few hedge funds that are heavily short the stock and it looks like there is quite a dog-fight going on between them and the banksters. It is going to be truly hilarious to see what happens when the lame stream media finally connects them to Ukraine corruption. We could see it gap down past 500.
Somebody is pumping it like there is no tomorrow…gaps higher the last two days represents some serious leveraged buying….lol!
Hi Verne,
what is the source of this BLK information and/or speculation regarding IMF-Ukraine fund? I know it’s not official, obviously, but where did you see that speculation? I would like to read about it.
Thank you.
It is amazing what you can learn by reading international news sources!
You don’t even have to be fluent in a foreign language as Google has some great translators! Quite a few countries, including U.K and Greece flagged the unusual wire transfers from Burisma and tracked some of the money to IMF loans which were subsequently “laundered” by Franklin Templeton ( I mistakenly cited Magellan previously but it was actually Franklin Templeton)
Here is one US link to get you started.
Happy hunting!
https://www.newcoldwar.org/biden-jr-benefited-from-money-laundering-says-ukraine-mp/
Also, see what you can find out about PrivatBank….
Hi Elgleon:
I posted a response earlier to your query that is awaiting moderation as it included a link. Here is a repeat sans the link which you can check out later.
“It is amazing what you can learn by reading international news sources!
You don’t even have to be fluent in a foreign language as Google has some great translators! Quite a few countries, including U.K and Greece flagged the unusual wire transfers from Burisma and tracked some of the money to IMF loans which were subsequently “laundered” by Franklin Templeton ( I mistakenly cited Magellan previously but it was actually Franklin Templeton)
Here is one US link to get you started.
Happy hunting!”
Filed on spread. Ten spread contracts on a 5 point spread will tie up 5K for the duration of the trade. ROI is around 13% if position held through expiration. Nothing at all wrong with closing spread for an early smaller profit (less than (700.00), rolling spread to lower spread equivalent strikes to follow BA’s decline, or widening spread (with fewer contracts to maintain equivalent exposure) to lock in profits and tighten stop…
Selling March 6 expiration BA 345/350 bear vertical call spread for 0.70 per spread.
Hard stop on any move above 344.14 on a closing basis…
When I see a pivot high again on the daily, I might join you on that one. I had a small sold call spread on BA going into earnings…but when it moved against me yesterday my stop was hit and I pulled the rip cord! The monthly is in it’s 8th month of squeeze; a break to the down side could put BA into free fall. My opinion of the 737Max is exactly yours Verne: it’s an unstable airframe now and software hacks to “auto-correct” it are insane from the get go. But if they admit it, you can cut the valuation of Boeing by what, 20%? More? Huge potential for a BA price collapse in 2020.
Absolutely! I expect a 30% haircut initially, with a possible move down to…gasp…!!… 140.00….!
I have a suspicion, this incident has the ability to bankrupt Boeing. I am hoping, just hoping, that it does not happen. It would be a huge blow to the economic picture of the USA as well as the Pacific Northwest where I live. There are tens of thousands of people whose jobs are on the line.
Their DOD contracts may save them from complete disaster.
We will know the crisis is nearing an end when they ‘fess up and announce a replacement of those MAX 737 engines. That will be the sign that they are ready to deal with the problem. It’s going to be financially quite painful but it is the right thing to do, and their only hope of saving that model imho.
BA is in a world of hurt. They foolishly tried to fix a an engineering design problem with software. They cut corners and put jet engines on the Max 737 that were simply not designed for it, and when early testing exposed the serious issues with the mis-match, rather than scrapping the idea and putting the right engines on the plane, they doubled down with idiotic attempts at a software fix that made the problem worse. They reported their first loss since the nineties so why is the stock higher today?
It is going lower….much lower!
Opening speculative trade on DIA 287 puts for this Friday.
Contingency order to execute IF DIA trades below 287 today with limit at the ask…current ask @ 0.93 so order should fill at 1.30 to 1.50 on execution depending on where VIX is trading….profit target a double…
Sold some of the Verne puts this morning, nice call sir!
Masterful scalping! Way to go!
A bullish alternate for /ES. This positions the highest momentum of the move per RSI exactly in the 3 of 3 period, where it ideally belongs. Ergo, risk manage all shorts here, because it is by no means impossible that this correction is over. This model goes up strong in probability if price exceeds the 76-78% retrace zone. I expect a turn there, or lower at the 61.8%…but if it breaks through both the main gets highly suspect.
Possibility is always there but then to continue this strong trend it has to break multi-month trendline. Also possible, but I would not put too much probability on that. So far it had hard time breaking it. Also, last time it was retracing, it went just several ticks below ATH before dropping hard. So even 76-78% won’t be a 100% probability of the uptrend unless it breaks ATH, as per Lara.
The Federal Reserve Bank of New York has pumped $6.6 trillion into major financial trading houses in the last five months through the repo market (repurchase agreement) market, according to data posted on the bank’s website.
How to inflate a balloon by really trying…
As long as FED is pumping cheap money into market, any correction outside of a black swan will be bought.
BTW – how does coronavirus affect Apples sales for next qtr? Is it transmitted by FaceTime or talking over the phone ? They have issued next qtr guidance with $4 billion range gap 🙂 leverage by bringing sales up to beat and hide behind coronavirus….
Possible effects: Closure of retail stores in China as Starbucks just did. But the worst scenario is when supply chain won’t be able to fulfill its obligations for the upcoming 5G phones. This is the major investors worry. And FYI – this Q was the first when AAPL’s Services growth went below 20% (at +17%) – it has always been 20-35% range, never below 20%. It might be just an off Q, but also could be a sign it is slowing down. With multiple at 23x Services growth is expected to be at high end of the range – too much is already priced in this high multiple. Now they only way for the stock to work is for analysts to up their EPS projections. Multiple expansion is very questionable at this stage for AAPL. Just my 2 cents from fundamental side of things.
Two comments: one is that AAPL is now painting my “next up” Fibonacci projection for potential swing completion. Doesn’t mean it’s going to turn down…just means it’s a “excellent structural” level from which it may turn down.
Second comment: the flu kills 250,000 to 500,000 people every year. Corona virus or no. It’s a routine massive killer around the globe. 150 deaths from corona virus isn’t a blip, and 1500 won’t be much of one either, really. That’s not to say the defensive actions aren’t wise nor that they won’t have some economic impact. But if anyone is concerned re: “this is dangerous”, all I can say is, the flu is always dangerous, nothing new here.
primero…
Will settle for 2nd …
tertio