The target for the next interruption to the trend was at 3,415. Upwards movement has fallen 21.48 points short of this target.
Summary: The trend is up. Consolidations and pullbacks may last a few weeks but should be viewed in the bigger context of an ongoing bull market. At support they may provide opportunities to join the trend.
Intermediate wave (4) may have arrived. A target for support would be about 3,259. If this expectation is wrong, it may be too low; intermediate wave (4) may be very shallow.
If price makes a new all time high tomorrow, then a new target for upwards movement to be interrupted would be at 3,538 (this would necessitate one of the alternate monthly wave counts being used).
Two more large pullbacks or consolidations (fourth waves) during the next 1-2 years are expected: for intermediate (4) (which may have just arrived) and then primary 4.
If price makes a new high by any amount at any time frame above 3,477.39 (even a fraction of a point on a tick chart), then this analysis switches to one of the very bullish alternate monthly charts. The next cycle degree target would then be either 4,092 or 4,213.
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 intermediate wave (1).
Within cycle wave V, primary waves 1 and 2 may be complete. Within primary wave 3, intermediate waves (1) and (2) may be complete. Intermediate wave (3) may be over at any stage now. Intermediate wave (4) may not move into intermediate wave (1) price territory below 3,027.98.
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.
DAILY CHART
Click chart to enlarge.
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. If minor wave 5 is now complete, then it would be 5.21 points short of 0.382 the length of minor wave 3.
Intermediate wave (2) subdivides as a zigzag that lasted 6 sessions and was deep at 0.69 of intermediate wave (1). Intermediate wave (4) may subdivide as any corrective structure, most likely one of either a flat, combination or triangle. It may also unfold as a zigzag.
Intermediate wave (4) should show up on the weekly chart, so it should last at least one week and possibly as long as three or four weeks if it is a more time consuming structure such as a triangle or combination.
Intermediate wave (4) may end within the price territory of one lesser degree; minor wave 4 has its price territory from 3,337.77 to 3,214.68.
Use Elliott’s first technique to draw a channel about primary wave 3. Draw the first trend line from the ends of intermediate wave (1) to intermediate wave (3) then place a parallel copy on the end of intermediate wave (2). Intermediate wave (4) may find support about the lower edge of this channel.
HOURLY CHART
Click chart to enlarge.
If intermediate wave (4) has arrived, then it should begin with a five down on the hourly chart. That may be incomplete and is labelled minute wave a.
Within the first five down, no second wave correction may move beyond the start above 3,393.52.
When a five down may be complete, then a smaller three up bounce should unfold. This may be labelled minute wave b. Minute wave b may not move beyond the start of minute wave a above 3,393.52.
ALTERNATE DAILY CHART
Click chart to enlarge.
Alternatively, it is possible that intermediate wave (3) may still be incomplete.
This wave count moves the degree of labelling within minor wave 5 down one degree. Minor wave 5 may extend and continue higher. Within minor wave 5, minute wave i may be complete at the last high and minute wave ii may not move beyond the start of minute wave i below 3,214.68.
The target calculated for this alternate wave count only works with one of the more bullish monthly charts. The structure of cycle wave V would be the same.
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 weakness in upwards movement.
A pullback or consolidation is complete and found strong support below about 3,020 to 3,025.
This bull market beginning in March 2009 has been characterised now for many years by rising price on declining volume. Despite all technical textbooks stating this is unsustainable, it has now been sustained for over a decade. This is concerning for an eventual bearish move as it may mean that support below is thin and weak, but for now the bull market continues. A decline in volume in current market conditions shall not be read necessarily as bearish.
Last week exhibits some strength in upwards movement with reasonable range, although a small decline in volume again is not of a concern here.
Further pullbacks or consolidations will unfold. Do not expect price to move in a straight line. Pullbacks to support in a bull market may be used as opportunities to join an established trend.
Continued bearish divergence for the short term between price and RSI suggests the risk of a pullback remains high.
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.
Look for initial support for any pullbacks about 3,350.
There is now a small cluster of candlestick reversal patterns in two Dragonfly doji and now a Hanging Man. Bearish divergence between price and RSI remains and supports the Elliott wave count.
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.
Bearish short-term divergence noted last week has not been followed by any downwards movement. It is considered to have failed.
This week both price and the AD line have made new all time highs. Upwards movement has support from rising market breadth. This is bullish and supports the Elliott wave count.
Large caps all time high: 3,393.52 on 19th February 2020.
Mid caps all time high: 2,109.43 on 20th February 2020.
Small caps all time high: 1,100.58 on 27th August 2018.
For the very short term, some strength in mid caps today may support the alternate daily 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.
Today price has moved lower, but the AD line has declined *edit: increased. This divergence is bullish for the short term and supports the alternate daily Elliott wave count (this is the main reason why the alternate is provided today).
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.
Short-term bearish divergence has now been followed by some downwards movement.
Today both price and inverted VIX have moved lower. There is no new short-term divergence. Inverted VIX does not agree today with the AD line.
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 @ 07:44 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.
Someone asked about a downside target for TSLA last thread and I expect a return to the origin of the parabolic rise…about….gasp!! ….250.00
Not sure when, or how we get there, but I think we ultimately will.
Hmmm…it will be stair steps down IMHO…so looking for drop to $500 range first to guage when and how much it can drop. A lot of other luxury manufacturers are bringing vehicles this year. Expecting Tesla might suffer declines in sales with increased competition. Wait and watch till then..$166 billion market cap for a car manufacturer …something is very wrong here.
Thank my lucky stars NDX and RUT options expire at the opening bell today, not at the closing bell!!! Full profits, vs. would be teetering on the edge of the profit/loss cross over point right now. I like Euro style index options; no risk of assignment, and out before the final frequent expiration day madness.
Awesome!
It was not looking to promising at the open on a massive 11.50/12.00 UVXY bull put spread expiring to day but that pony sure did find some gid’yap going into the close…whew…too close for comfort; thought I would have to roll that baby out a week or two. Eyeing an entry on UAL for an over-sized position to play the stampede out of airports this Spring and likely Summer as well.
NFLX is also looking quite short-side tasty. I anticipate a bounce in both early next week and a beautiful sell trigger after.
Have a great week-end folk!
Do anyone here thinks that the real drop will start Monday next week as people realign with new reality? I suspect the big players are lighting the load as the desperation is not very visible in the current orderly selling. Like I said before a violent and sharp down move is more likely to play out.
Oh yea, though it could be a bit later in the week to really start up too. It’s a comin’…and it may very well free fall Sunday night.
Might be a strong sell off into the close too…
Many indices at support so we should expect some kind of reaction – either a bounce of sideways consolidation with the former more likely imho. In fact a very brisk bounce would not surprise me in the least. We did have some negative indicator crosses today (eg. PPO) so I don’t think we done with donwside action. We should at the very least tag the round nubmer at 3000.00 or there-abouts….
From the top, I see an initial 5 wave down, and an ongoing 3 wave corrective rally. Target around 3370 / 3375 to enter short.
Lara:
Why do you see such a small b wave rally (23.6%) ?
Well, the market just answered my question. Shallow b is is!
Good morning everybody 🙂
Hourly chart updated.
I can now see a five down. Shall expect a three up, a little bounce.
But the three up is probably a B wave, and B waves are the most varied in structure and price behaviour. It could be a quick sharp bounce, or it could be a slow sideways time consuming little consolidation. It could be over now as labelled, or equally as likely it could continue further.
The only thing it should not do is make a new all time high. A three that follows a five should not move beyond the start of the five it’s correcting. This rule is the same for wave 2 that follows wave 1, and for wave B that follows wave A (when A is a five).
Watch DJIA 29K. The round numbers carry some pyschological significance for the banksters and they have a tendency to fiercely defend them with relentless liquidity injections…
I agree. I feel when we get to 30K, it would be a very hard resistance to break.
One oddball ETN I’m buying here: JO (coffee). The chart strongly indicates higher prices ahead, and there’s a close by pivot low for a stop for low overall capital exposure.
I like the chart too.
Jan 22 high…. current support….. thanks Verne!
Just wish my coffee kicked in a little sooner…. almost forgot to trade it
sold half of my gold contracts at 1650, will to to rebuy after checking out Lara’s gold chart this weekend…
🙂
I’m on that too, using upro to avoid option costs and funky pricing issues (temporary price skews) given I might be out in minutes. Lovely initial a-b-c down “complete” in SPX.
Is it? Or we might just finished a of abc of A on the hourly for SPX.
oh absolutely, I’m not suggesting this is IT for this correction! It’s merely and initial move, probably even OF an initial move as you describe. It is a natural place for a reasonably strong bounce though, and I’m just trying to milk some profits around the edges. I’ve a break even stop in place already…I love free trades!
Now testing 61.8 retracement. We’ll see if it holds or breaks down.
I note with some amusement (since I have no involvement) that TSLA has barely budged through this initial phase of the intermediate 4. Gee, ya don’t think Musk would use his own fortune to keep that stock price high, do ya? He only has billions in bonus coming to him if it holds up…
Ya think…?!
If true then perhaps the SEC really puts him in his place. He made a mockery of SEC last time.
I put on a cheap AAPL put butterfly earlier today at 292.5/300/307.5, for March 13. about 8-1 max reward to max risk. Just might pay…
Expected correction just proves the point once again that multi-year resistance trend line is very, very hard to break.
It’s an awesome trading tool!!!
I’ve got some sold call spreads now for one and two weeks out, and a SPY ‘fly for Mar 6, 321-325-329, with max win to loss ratio of about 14-1.
Happy to have my sold long put spreads all close up shop right at the open!! All for max gains. Also bailed out of a couple of straggler longs for slight profits, assuming those will drop over the coming few days/weeks. Oh, and I won’t dissemble…I also exited one ugly long put spread on MRK, and took a moderate loss there; it was only likely to get worse over the next few weeks. Can’t win ’em all!!
Well for a very very bullish case and considering the 2018 low to be a major low never to be broken.
We could just be finishing the minor 1 of the intermediate 3 and drop down to test the breakout at 3020ish before a very long and strong minor 3??
Which will be a test of the 200 MA, obviously means a significant drop in next few weeks of upto 300 points
The daily AD line has declined? I believe you meant increased.
Yes. Yes, I do indeed.
Will fix now. Thank you for pointing that out Kevin.
Lara could this fly as another alternate?
240 minute chart where minuette (ii) bounced off very close to the .618 retracement of minuette (i) and closed near its high.
The invalidation point is 3317.77 and also if correct then I can’t see 3477.47 holding it as it is quite bullish.
Yeah, that looks totally legit to me. The proportion between minuette (ii) and minute ii isn’t great, but this particular market doesn’t always have really great proportions.
hi
namo namah
Looks like you have a reason to do this 🙂
Reason left me long ago.