A downwards day closes green. Another inconclusive day fits overall expectations of a consolidation continuing.
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 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) looks most likely to be complete. The downwards wave labelled subminuette wave i within minuette wave (c) fits perfectly as a five wave impulse on the five minute chart; if this is correct, then minuette wave (b) should be complete.
Minuette wave (c) must subdivide as a five wave structure. Within minuette wave (c), subminuette wave ii may not move beyond the start of subminuette wave i above 3,293.47.
Minuette wave (c) would be likely to make at least a slight new low below the low of minuette wave (a) to avoid a truncation. At 3,190 minuette wave (c) would reach equality in length with minuette wave (a).
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.
Upwards movement was weak this session. Lowry’s Selling Pressure has gained 2 points. In the absence of a 90% up day or two back to back 80% up days, the consolidation or pullback may be reasonably expected to continue.
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.
Today price has moved lower with a lower low and a lower high although the candlestick has closed green. The AD line has declined. There is no new short-term divergence. Downwards movement within this session has some support from declining market breadth.
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.
Today price has moved lower with a lower high and a lower low although the candlestick has closed green. Inverted VIX has moved higher. This short-term divergence is bullish and does not support the Elliott wave count, but because it is not matched by bullish divergence in any other indicator, particularly the AD line, it shall be given no weight in this analysis.
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 @ 08:31 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.
Just want to say thank you to Lara for the great analysis and too everyone that contributes to the forum. I am sure I am not the only one that may not post lots but gets masses of information for everyones comments that helps manage their trades with less risk and more profit. It has been a good week here and hope it has been the same for all of you.
Have a great weekend!!
Fourth down per Lara’s update likely coming up. Looking to launch some “stink bids” on calls for next Wed… 😉
Have great week-end all!
Rolling out Triple Q puts one week at break-even for 218 strikes….if we bounce Monday will turn into put spread for minute B up….
Bit surprised at TSLA holding up in this market so far.
always seems to trade in its own universe….
Same as AMZN after today’s earnings.
TSLA short sellers coughed up a billion and a half last this week….Ouch!!!
The way I look at the selloff is until likes of TSLA and AMZN are not soldoff, bottom is temporary.
Hi Verne,
is there any way to contact you offline (email)? I have few questions given your experience and knowledge?
Thank you,
Leo
Lara can send it to you Leo…no problem…
Thank you, Verne. Lara, could you please send me Verne’s email address?
Sure. Done now.
Can y’all believe I sold my SPY 326 puts expiring today for a lousy buck fifty or so??!!
What did I tell ya about not paying attention to Lara’s targets?? 😀
Good morning everybody.
Minuette (c) looks to be unfolding downwards as a five, if that’s correct then a small bounce for subminuette iv may arrive shortly.
But right now I’m going to put the invalidation point at the start subminuette iii. It does not look yet like it may have moved low enough to allow room for subminuette iv to unfold, and so subminuette iii down right now may be incomplete. Within subminuette iii no second wave correction may move beyond its start.
Hi Lara,
Can you please tell me how I can get cash prices downloaded into MotiveWave?
As you can see from the attached chart the futures chart shows some key differences in shape and a recent high of 3298 in contrast to your latest hourly chart.
Also can you please explain why you think minute a is still unfolding and could not have finished where you have minuette a? Is it a time comparison with minor 2?
Nick re your 2nd question..Lara answered the very same thing for me at 3.37 am near the bottom of comments.
Thanks Peter.
Nick: I think that this Yahoo Finance data may be cash market. I’ve not checked enough price points against futures, but it looks gappy enough to be cash. It’s downloadable.
OK, thanks Lara. Is that where you get your feed from? I think it is only daily.
Hey Verne,
Olga said good-bye to all some time ago. She mentioned her appreciation of you and Joe as well as a few others in her last post. I am passing that along. It certainly was great having her intraday analysis down to five minute charts or even less sometimes. If I recall properly, her life took her in other directions and she would not be following the markets any more.
I don’t post as much either as my focus has become more longer term, weekly and monthly. I do read virtually all the posts, however. My focus as I approach retirement is shifting more to “preservation” of capital as well. If I retire in two years as sort of planned now, I am not sure if I will continue even watching the markets. I might lock it all up. But the longer term picture according to Ciovacco is very tempting to stay in the US equity market. I might turn it all over to a financial manager with quarterly and six month input from me. I will be out in the wilds to much and too spontaneous with travel etc. I don’t know if I want to be checking in with a computer daily.
Have a great day.
I now see Lara’s comment below regarding Olga. I hope my recollection is correct.
I really miss that lady…! 🙁
Me too
Thanks Rod. Have a great trip!
Selling Feb 21 329 strike SPY puts for 8.24…nice double! 🙂
Bet on the upside by Feb21?
Probably. I expect to be out of the short leg of my bear call spreads early next week…
I’m looking for 321.5 to sell back some more hot cakes
Hey Kevin, what are your updated charts showing?
I am a lousy chartist!
Overnight my day TD trading account dipped a couple bucks under 25k, shut me down till Monday …. good thing I got an ET too!
Funny story, wed I didn’t sell my micro gold contracts on ET and they also shut me down for a day to teach me a lesson, they just sold them for me, scolded me and I am back in business!
My broker rang me to say it was FND coming up and could I please exit my long micro golds, even though I trade online.
That’s probably why they earn the big bucks down here !
The pattern day trader rule is monumental stupidity. It is after all the trader’s money at risk and the broker can simply limit the size of the traders’ exposure instead of telling him how to trade his own money. Gotta keep the balance above 25K to avoid being harrassed…. 🙁
“I am a lousy chartist!”
Aha! I wondered all these years why someone who is evidently such a very good and successful trader would continue to subscribe to my analysis.
It’s the charts. 🙂
Indeed! The charts tell all! 🙂
Besides Lara, been around so long we’re like family!
Haha! Here come the the BTF dippers!
They are really WAY too funny…!
Hi Verne, sorry for my ignorance, but could you explain? What are BTF dippers?
Buy the F…ing dip…. 🙂
Man, I feel stupid for not recognizing this acronym:) I will start using it now:) I like it.
Or… and this is what I thought it was,
Buy the Failed Dip ?
Ha ha sorry Verne but I’ve been BTFD all the way up !
Look at the weekly chart of ES and SPX.
You’ve got to have some sort of a system ?
If VIX can clear 20 today, those stingy maket makers are gonna have to play ball on those Triple Q puts…! 🙂
Why is everyone so quiet?
Back in the old days a day like to-day would have the boards humming!
At any rate, it was good to come back and spend a week with the gang!
p.s. Is Olga still around?!
Man, I hope to see you more often !
🙂
You keep this board alive:) I’m just checking your updates – fund to watch
Not here. She now only subscribes to Lara’s Weekly. (I’m posting this info here because when she left here Olga made this comment herself)
I suspect that eventually when the bull market ends and the bear market arrives that she and some others may return.
This comments section does get more active in bear moves, and tends to die off in bull moves.
Which is a bit of a shame, as there is still plenty of money to be made on the bullish side, and IMO it’s easier too for less experienced traders as risk is easier to manage with reduced volatility.
Very true. In bull trends the profits are “Steady as she goes…”
In bear markets…. “Katie bar the door…!”
It is also true that markets tend to fall much more rapidly than they rise so that does generates more excitement….
You know the old saying: “Bulls make money, bears make money…but pigs…well….you know…! 🙂
Triple Q 220 puts not doing so hot, so just might roll ’em out of we don’t see some giddy ‘yap!
Ringing the register on SPY 325 puts for 1.53….Thank you banksters! 🙂
( Keep it quiet but I added to my position on the phony ramp higher at the close…hehe!)
Selling good sized (50 contracts) of Feb 7 UVXY bull put vertical spread at 12.50 X 13.00 for 0.25 credit.
A fairly conservative trade on ramping volatility that has potential to pay twice…..
VIX just might be useful in giving us a heads up when the correction is done.
Measured target for bull flag is around 24.00 and move down to tag top of most recent falling wedge just might be hinting we are headed there without interruption….
Been selling back these puts like hot cakes ….
Yum! 🙂
Here is an update of my NYSE weekly chart showing the breakout of a long inverse head and shoulders pattern with a price projection of 15,800 by the end of 2020. Notice the retest of the breakout area. The NYSE is presenting a great buying opportunity between 13,600 and 13,300. We are just above the top of that range. Of course, I do not actually buy NYSE. But this is tremendous support to the current EW wave count, long term bullish trend, and the Long Term Alternate EW pattern Lara shows that will take the SPX over 4000. It is my intention to catch the majority of that move. Have a great weekend everyone.
That’s a very nice chart. Thank you for sharing Kevin
Hey Peter S.
Get ready to unload those 325 strike puts as soon as we take out yesterday’s low at 3242.80. They should go for at least 1.50…..
Traders refer to”B” waves as “sucker waves”
C waves in my opinion are worst.
B waves frustrate in the fact that they can go on interminably. C waves move far and fast and trick you in loosing sight of the main trend, so getting whipsawed by brutal reversals. Classic banksterism! 🙂
Verne, you were right on the money yesterday when you said it was classic bull trap. Lara’s analysis works like a charm. By the way, thank you for the BLK article reference. I have read it – very interesting. The truth might eventually come out. It might.
Most welcome Elgleon.
When it comes to keeping traders on the right side of the trend, Lara is peerless imho , and I have followed just about every EW analyst on the planet.
Another over-looked aspect of her analysis is her price targets. I was a subscriber for many years before it finally dawned on me how much money I kept leaving on the table! 🙂
Totally agree – invaluable service and I’m happy I found it.
Thank you very much for the kind words guys
Selling half remaining 326 SPY puts from straddle for 0.85…
Selling rest for a buck….
I’ve updated the Bitcoin analysis over at Elliott Wave Gold, you can find it here.
Lara is it possible that the whole correction could be lifted up a degree where minuette (a) is minute [a] and we’ve finished or nearly finished minute [b] not minuette (b)?
Or does that conflict too much with the guideline of alternation between minor 2 and 4?
Thanks.
Technically that’s valid. But it would see minor 4 likely over in under 2 weeks, that’s probably too brief.
If it were to play out that way, there’s potential that this is all minute iv of the minor 3 instead, and what we are calling minute iv now is in fact minute ii. As I’ve noted a couple times, I consider that viable very bullish alternate.
Hi Lara, what would be the alternate count in case price breaks 3293 level, invalidation for the current hourly count?
Thank you
If that happens then I’d see minuette (b) continuing higher, and the invalidation point would move back up to the last ATH at 3,337.77.
I chose not to put the idea into a separate chart today because upwards movement in this last session was weak.
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