More upwards movement has support today from a corresponding rise in market breadth. The Elliott wave count remains the same and the target remains the same.

Summary: The bounce may end about 2,934 either at the end of this week or early next week.

Thereafter, the downwards trend may resume with strength.

The biggest picture, Grand Super Cycle analysis, is here.

Last monthly charts are here. Video is here. Members are encouraged to view all three monthly charts. The third is much more bearish than this main wave count and remains a valid possibility.

ELLIOTT WAVE COUNTS

WEEKLY CHART

Click chart to enlarge.

The channel is now breached by a full weekly candlestick below and not touching the lower edge. Further confidence in this wave count may be had. Price has closed above the lower edge of this channel.

Price has reached below the 0.382 Fibonacci ratio of cycle wave I at 2,352 on the last downwards movement. The structure of cycle wave II may need further to go to complete. The next Fibonacci ratio at 0.618 is now a preferred target for cycle wave II to end.

Cycle wave II would most likely subdivide as a zigzag; thus far that looks like what is unfolding. When primary waves A and B may both be complete, then the target may be calculated using a Fibonacci ratio between primary waves A and C. At that stage, the final target may change or widen to a zone.

Cycle wave II may not move beyond the start of cycle wave I below 666.79.

DAILY CHART

Click chart to enlarge.

Draw the wide maroon trend channel carefully: draw the first trend line from the end of primary wave 1 at 2,093.55 (December 26, 2014), to the end of primary wave 3 at 2,940.91 (September 21, 2018), then place a parallel copy on the end of primary wave 2 at 1,810.10 (February 11, 2016). The channel is fully breached indicating a trend change from the multi-year bull trend to a new bear trend. Resistance at the lower edge has been overcome; price has closed above this trend line. Primary wave B may now end closer to the 0.618 Fibonacci ratio of primary wave A at 2,924.

Cycle wave II may subdivide as any Elliott wave corrective structure except a triangle. It would most likely be a zigzag. Primary wave A may be a complete five wave impulse. Primary wave B may not move beyond the start of primary wave A above 3,393.52.

HOURLY CHART – ZIGZAG

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At this stage, it looks now most likely that primary wave B may be subdividing as a zigzag.

Within the zigzag: intermediate wave (A) subdivides as a five wave impulse, intermediate wave (B) may be a complete regular flat correction, and intermediate wave (C) may only subdivide as a five wave motive structure, most likely an impulse.

Within an impulse for intermediate wave (C): minor waves 1 through to 4 may be complete, minor wave 3 has moved beyond the end of minor wave 1. If it continues sideways as a double combination or a triangle, then minor wave 4 may not move into minor wave 1 price territory below 2,533.22.

There is perfect alternation now between the deep 0.85 expanded flat of minor wave 2 and a shallow 0.33 zigzag of minor wave 4.

Redraw the channel about primary wave B to contain all of this bounce. This redrawn channel is more conservative. Assume primary wave B may continue higher while price remains within the channel. If the channel is breached by downwards movement, that may be taken as earliest indication that primary wave B may be over and primary wave C downwards may have begun.

HOURLY CHART – FLAT

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It is again possible that primary wave B may subdivide as a flat correction. If the zigzag is invalidated with a new low below 2,533.22, then this wave count may be considered.

Both intermediate waves (A) and (B) within a flat correction must subdivide as three wave structures. Intermediate wave (A) may be a complete zigzag. Intermediate wave (B) may be an incomplete expanded flat.

Within the expanded flat of intermediate wave (B): minor wave A may be a double zigzag, minor wave B may be a single zigzag, and minor wave C should now subdivide downwards as a five wave motive structure.

Minor wave C must subdivide as a five wave structure. Within minor wave C: minute wave ii may not move beyond the start of minute wave i above 2,756.89. A new high above this point tomorrow would see this wave count discarded.

Intermediate wave (B) must retrace a minimum 0.9 length of intermediate wave (A).

When intermediate wave (B) may be complete, then intermediate wave (C) may move higher and should make at least a slight new high above the end of intermediate wave (A) at 2,641.39 to avoid a truncation.

This wave count expects primary wave B to be a very wide ranging consolidation, with swings from support to resistance and back again. When the consolidation is complete, then a downwards breakout would be expected.

ALTERNATE DAILY CHART

Click chart to enlarge.

This alternate daily chart follows the Second Alternate Monthly chart published here. Video is here.

By simply moving the degree of labelling in the bull market beginning March 2009 up one degree, it is possible that a Grand Super Cycle trend change occurred on February 19, 2020.

A correction at Grand Super Cycle degree may be expected to last at least a decade, possibly longer. Corrections for this market tend to be much quicker than bullish moves, and so a fair amount of flexibility is required in expectations for duration of the different degrees.

Grand Super Cycle II would most likely subdivide as a zigzag, although it may be any corrective structure except a triangle. It should begin with a five down at the weekly chart time frame, which would be incomplete.

The first five down on the daily chart is labelled cycle wave I. If this degree of labelling is wrong, it may be too high; it may need to be moved down one degree.

Following cycle wave I, cycle wave II may be continuing higher as a zigzag. Cycle wave II may not move beyond the start of cycle wave I above 3,393.52.

A target is calculated for cycle wave III to end based upon a common Fibonacci ratio to cycle wave I.

ALTERNATE HOURLY CHART

Click chart to enlarge.

Cycle wave II may be a continuing higher as a single zigzag.

TECHNICAL ANALYSIS

WEEKLY CHART

Click chart to enlarge. Chart courtesy of StockCharts.com.

The bounce has relieved RSI somewhat. ADX is still not extreme; there is room for this trend to continue. Watch On Balance Volume carefully for a breakout.

DAILY CHART

Click chart to enlarge. Chart courtesy of StockCharts.com.

Price has closed above a small consolidation. A target calculated from the width of the consolidation is at 2,839. It is still expected that this bounce is a counter trend movement within an ongoing bear market.

To see what signals may be looked for to identify a high, the two previous large bear markets were analysed in end of week analysis. The DotCom crash was analysed here with video here. The Global Financial Crisis was also analysed here with video here.

Stochastics is now overbought; this bounce may end soon.

With another 90% up day today, there is now a great amount of strength off the low of 23rd of March. There is now three 90% up days and two back to back 80% up days. It looks technically possible that the 23rd of March may be a sustainable low and that price could be moving up to new all time highs in a sustainable bull market.

However, as compelling as that technical picture looks at this time, it would mean that the US stock market would be bullish while a pandemic unfolds in the country and the economy suffers greatly as a result. While this analysis is focussed on technical data, it would be rather obtuse to ignore the reality of a global pandemic that has shut borders and locked down economies world wide, and may still be in its early days.

If either price or the AD line make new all time highs, then a bull market would be seriously considered.

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 no divergence between the AD line and price at the last all time high, this current bear market now makes a third exception.

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.

This bear market comes after no bearish divergence. It would more likely be shallow, but this is a statement of probability and not certainty. So far it is slightly more than the 0.382 Fibonacci ratio of the bull market it is correcting (beginning March 2009).

Last week price has moved higher although the candlestick has closed red. The AD line has declined. This divergence is bearish for the short term.

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.

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 today have made new swing highs above the prior swing high of the 26th of March. Bearish divergence has not been followed by any downwards movement, so it may have failed. Upwards movement now has support from a corresponding rise in 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.

Last week both price and inverted VIX have moved higher. There is no new short term 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.

Short-term single day bearish divergence noted yesterday has been followed by upwards movement, so it is considered to have failed. Today both price and inverted VIX have moved higher. There is no new short-term divergence.

DOW THEORY

Dow Theory has confirmed a bear market with the following lows made on a closing basis:

DJIA: 21,712.53 – a close below this point has been made on the March 12, 2020.

DJT: 8,636.79 – a close below this point has been made on March 9, 2020.

Adding in the S&P and Nasdaq for an extended Dow Theory, a bear market has now been confirmed:

S&P500: 2,346.58 – a close below this point has now been made on March 20, 2020.

Nasdaq: 7,292.22 – a close below this point was made on the March 12, 2020.

Published @ 07:05 p.m. EST.

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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.