Sideways movement this week sees price remain within the channel and above the invalidation point. The target zone remains the same.

Summary: The bounce may now end about 3,069 to 3,261.

Thereafter, the downwards trend may resume with strength.

Alternatively, a new low now below 2,727.10 and below the trend channel would indicate a potential end to the bounce.

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 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. A new target is calculated for primary wave B based upon a Fibonacci ratio between intermediate waves (A) and (C) within it. This target would see primary wave B end within a common range for the first major bounce within a bear market.

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.

Draw a channel about intermediate wave (A) using Elliott’s first technique: draw the first trend line from the end of minor waves 1 to 3, then place a parallel copy on the end of minor wave 2. Minor wave 5 may find resistance at the upper edge of this channel. 

When intermediate wave (B) may be complete, then a new and wider channel may be drawn to contain all of primary wave B.

MAIN HOURLY CHART

Click chart to enlarge.

Copy the channel drawn about intermediate wave (A) over to hourly charts.

It remains possible that primary wave B is incomplete.

So far it looks like a five wave structure upwards may be completing, which is labelled intermediate wave (A).

Within intermediate wave (A): minor wave 2 fits as a regular flat correction and minor wave 4 is a double combination, zigzag – x – flat. There is alternation in structure between minor waves 2 and 4. Minor wave 4 may be complete.

Within minor wave 5: minute wave ii may not move beyond the start of minute wave i below 2,727.10.

The target zone for primary wave B is calculated based upon a normal depth for the first major bounce within a bear market. When intermediate waves (A) and (B) may be complete, then Fibonacci ratios at intermediate wave degree may be used to calculate a target for primary wave B to end. At that stage, the target zone may change.

SECOND HOURLY CHART

Click chart to enlarge.

Invalidation of the main hourly chart would provide confidence in this second hourly chart.

This second hourly chart looks at the possibility that primary wave B is complete, falling a little short of the 0.618 Fibonacci ratio of primary wave A.

Within intermediate wave (C): minor wave 5 is an ending contracting diagonal. However, although this structure meets all rules for an ending contracting diagonal, it does not have a normal look; the trend lines do slightly converge, but not by much, and there is no normal overshoot of the upper trend line of the diagonal by the final fifth wave.

If primary wave C has begun, then within it no second wave correction may move beyond the start of its first wave above 2,879.22.

Draw the channel to be more conservative and contain all upwards movement.

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 wave 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.

When cycle wave II may again be complete, then a target for cycle wave III may be calculated.

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.

An inside week closes as a doji. This represents a balance of bulls and bears and indecision. Doji may appear within trends; on their own they are not reversal signals. 

ADX is a lagging indicator as it is based upon averages. It has not yet caught up with this multi-week bounce as it is based upon a 14 week average.

DAILY CHART

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

In the bear market from October 2000 to March 2009, the first multi-day bounce retraced 0.73 of the first wave down. In the bear market from March 2000 to October 2002, the first multi-day bounce retraced 0.89 of the first wave down. So far this current bounce has retraced 0.57 of the first wave down, so it seems reasonable that it could continue higher.

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.

There is no candlestick reversal pattern. There is no sign yet that the bounce is over, so it would be reasonable to expect it 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 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).

This week price has moved sideways and closed red, and the AD line has slightly declined. There is no new short-term divergence.

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.

Today both price and the AD line have moved higher. There is no new divergence.

Only large caps made a new short-term swing high on the 17th of April. Small and mid caps did not. This bounce is led by large caps, which is a feature of an aged market and / or a lack of breadth. This supports the Elliott wave count that sees this bonce as a counter trend movement.

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.

This week price has moved sideways to close red and inverted VIX has moved higher. There is single week bullish 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.

On Friday inverted VIX has made a new high above the prior short-term swing high of the 17th of April, but price has not. This divergence is bullish for the short term.

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 @ 07:49 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.