Today both Elliott wave counts remain valid. Specific price points will be used to identify which is most likely tomorrow.

Summary: A new high above 3,375.63 would indicate more upwards movement. The target would be at 3,415.

If today’s gap is closed with a new low below 3,352.26, then it would be possible a pullback may continue lower. Further confidence may be had in this view with a new low below 3,317.77. If this happens, then expect a pullback to end about support at the lower edge of the blue Elliott channel on the daily charts, at least slightly below 3,214.68.

Three large pullbacks or consolidations (fourth waves) during the next 1-2 years are expected: for minor wave 4 (which may be complete), 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. Minor wave 4 now shows up on the weekly chart, and so now two 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.

FIRST DAILY CHART

Click chart to enlarge.

Today the wave counts will be labelled “first” and “second”. There is slightly more technical support now for this first wave count, but upwards movement still exhibits enough weakness for the second wave count below to continue to be seriously considered.

Minor waves 2 and 4 for this wave count both subdivide as zigzags; there is no alternation in structure. Minor wave 2 is deep at 0.83 the length of minor wave 1, and minor wave 4 is shallow at 0.26 the length of minor wave 3; there is alternation in depth. Minor wave 2 lasted 10 sessions and minor wave 4 lasted 7 sessions; the proportion is acceptable and gives the wave count the right look.

There is no adequate Fibonacci ratio between minor waves 1 and 3. This makes it more likely that minor wave 5 may exhibit a Fibonacci ratio. The target expects minor wave 5 to exhibit the most common Fibonacci ratio within an impulse.

Within minor wave 5, no second wave correction may move beyond its start below 3,214.68.

When intermediate waves (3) and (4) may be complete, then a target will again be calculated for primary wave 3.

Price has now printed a full daily candlestick above the upper edge of the teal channel, which is copied over from the weekly chart. This trend line may now be about where price may find some support.

FIRST HOURLY CHART

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Minor wave 5 may subdivide as either an ending diagonal or an impulse. An impulse is much more common and so shall be charted unless overlapping suggests a diagonal.

So far within minor wave 5, minute waves i and ii may be complete. Minute wave iii may have begun. Within minute wave iii, minuette waves (i) and (ii) may be complete.

This wave count now expects the next upwards movement may be a third wave at two small degrees. Some increase in momentum may be expected.

Minuette wave (ii) may not move beyond the start of minuette wave (i) below 3,317.77.

SECOND DAILY CHART

Click chart to enlarge.

This second wave count remains valid. If price makes a new high tomorrow above 3,375.63, it shall be discarded.

All of primary wave 3, intermediate wave (3) and minor wave 3 may only subdivide as impulses.

Minor wave 3 now looks 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 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).

Draw an Elliott channel 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. It is possible that minor wave 4 may breach the lower edge of the channel as fourth waves are not always contained within a channel drawn using this technique. If minor wave 4 breaches the channel, then it shall need to be redrawn using Elliott’s second technique.

Minor wave 4 may subdivide as any corrective structure, most likely a flat, triangle or combination. Within all of a flat, triangle or combination, there should be an upwards wave which may be fairly deep. The common range for minute wave b within a flat is from 3,337.77 to 3,384.45. At today’s high minute wave b is 1.31 times the length of minute wave a. This is still within the most common range.

SECOND HOURLY CHART

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Minor wave 4 is here labelled a possible expanded flat correction, but it may still morph into one of either a combination or a running triangle.

If minor wave 4 unfolds as an expanded flat correction, then within it minute wave c downwards may have just begun. Minute wave b may be complete.

The blue channel may be used as a guide to where an expanded flat may end. Minute wave c within a flat would be very likely to make at least a slight new low below 3,214.68 to avoid a truncation and a very rare running flat.

If minor wave 4 unfolds as a running triangle, then minute wave c may not move beyond the end of minute wave a below 3,214.68.

If minor wave 4 unfolds as a combination, then minute wave x within it may be complete. Minute wave y would need to unfold as either a flat or triangle. Minute wave y may end about the same level as minute wave w at 3,214.68, so that the structure takes up time and moves price sideways.

SECOND WAVE COUNT

WEEKLY CHART

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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 weakness in upwards movement.

A pullback or consolidation has begun. This is relieving extreme conditions. Look for strong support below about 3,020 to 3,025.

Although price has made a slight new high last week, it has not done so with conviction. Volume is weaker than the prior downwards week, and RSI and On Balance Volume exhibit short-term bearish divergence.

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.

Bullish evidence:

– Although overall volume is declining, there was a small increase in volume short term today. Upwards volume was 71% of total up/down volume.

– On Balance Volume.

– The AD line (below).

Bearish evidence:

– RSI exhibits triple bearish divergence.

– Overall volume declines as price rises.

– Only large caps have made a new swing high above the 6th of February, and a new all time high. Small and mid caps are lagging.

– Inverted VIX (this is given little weight).

Overall, most weight is given to new all time highs today from both of On Balance Volume and the AD line slightly favouring a bullish outlook for the short term, but RSI suggests the upside here may be limited.

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 last 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 made a new high, but the AD line has not. There is now short-term bearish divergence that supports the main Elliott wave count.

Large caps all time high: 3,375.63 on 11th February 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.

Bearish divergence noted in last analysis has not been followed by any downwards movement and has now disappeared, so it is considered to have failed.

Today both price and the AD line make new all time highs. Upwards movement has support from rising market breadth. This is bullish.

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 is clearly not useful in timing a trend change from bull to a fully fledged bear market.

Price has moved higher and made a new high, but inverted VIX has not. There is again short, mid and long-term bearish divergence. This 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.

Price has made a new all time high, but inverted VIX has not. There is still all of short, mid and long-term bearish divergence.

Today price moved higher, but inverted VIX has moved lower. This divergence is bearish for the short term.

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 @ 09:00 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.