The S&P 500 has yet to show signs of strength to resume its upwards trend. Subminuette wave ii proved that it has more to offer towards the downside before upwards trend resumption.
The main Elliott wave count expected upwards movement. A new high above 2,034.17 confirmed the main Elliott wave count and invalidated the alternate. The bull market is intact.
Another green candlestick and mostly sideways movement fits the Elliott wave count. The structure is managing to complete below the target, and may manage to end by the target.
Summary: I expect upwards movement for tomorrow’s session to a short term target at 2,077. About this point I expect another small fourth wave correction.
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Bull Wave Count
I will favour neither the bull or bear wave count. Both are viable and both expect this current upwards impulse may again be close to completion.
To see a weekly chart with subdivisions and how to draw trend lines and channels click here.
Upwards movement from the low at 666.79 subdivides as an almost complete 5-3-5. For the bull wave count this is seen as primary waves 1-2-3.
Within intermediate wave (5) minor wave 2 is an expanded flat and minor wave 4 is a zigzag. Minor wave 3 is 14.29 points longer than 1.618 the length of minor wave 1.
At intermediate degree there is also a very close relationship between intermediate waves (3) and (1): intermediate wave (3) is just 0.76 points less than 2.618 the length of intermediate wave (1).
The aqua blue trend lines are traditional technical analysis trend lines. These lines are long held, repeatedly tested, and shallow enough to be highly technically significant. When the lower of these double trend lines is breached by a close of 3% or more of market value that should indicate a trend change. It does not indicate what degree the trend change should be though.
There is triple technical divergence between MACD and price at the weekly chart level.
There is now no longer technical divergence between price and MACD at the daily chart level.
I would expect the final top to form a slow curving structure, like a double head and shoulders or a rounding top. At the high volume should be low. Once the high is in place the new downwards trend may begin with slow movement, and deep second wave corrections. These would form two right hand shoulders, or the right hand side of a rounding top. When the neckline is formed, and eventually broken I would not expect to see an increase in volume, but I would expect to see an increase in momentum.
Movement below 1,820.66 could not be a second wave correction within minor wave 5, and so at that stage the final fifth wave would have to be over. A trend change at primary (bull count) or cycle degree (bear count) would be confirmed.
Wednesday began with more sideways movement, not downwards movement. Micro wave 4 completed as a regular contracting triangle. This fits very well on the five minute chart. Thereafter, price moved upwards to begin micro wave 5.
At 2,077 micro wave 5 would reach 0.382 the length of micro wave 1.
Keep drawing an Elliott channel about subminuette wave iii: draw the first trend line from the highs labelled micro waves 1 to 3, then place a parallel copy on the end of micro wave 2. Look for upwards movement to find resistance and end when it touches the upper trend line.
Subminuette wave iv to come should show up on the daily chart as one to four red candlesticks or doji. Subminuette wave iv should break below the parallel channel containing subminuette wave iii, and may not move into subminuette wave i price territory below 2,038.70.
Technical divergence between price and MACD should continue.
Bear Wave Count
This bear wave count differs from the bull wave count at the monthly chart level and at super cycle wave degree. To see the historic picture go here.
The subdivisions within primary waves A-B-C are seen in absolutely exactly the same way as primary waves 1-2-3 for the bull wave count.
For both wave counts now that minor wave 5 may be a complete structure on the hourly and five minute charts, I have an alternate wave count which moves the degree of labelling within it all down one degree. A completion of a five wave impulse up within minor wave 5 may be either minor wave 5 in its entirety, or it may only be minute wave i within minor wave 5.
At cycle degree wave b is over the maximum common length of 138% the length of cycle wave a, at 161% the length of cycle wave a. At 2,393 cycle wave b would be twice the length of cycle wave a and at that point this bear wave count should be discarded.
This analysis is published about 09:08 p.m. EST.
Upwards movement has confirmed the main hourly Elliott wave count and invalidated the alternate. The second target was reached and passed by 1.08 point.
A green candlestick was expected for Tuesday, which is what happened.
Friday began with a little downwards movement which breached the first invalidation point on the hourly Elliott wave chart. Thereafter, price turned upwards. The target is altered and now has a better probability.
A new low and downwards movement still fits the current Elliott wave count.
Summary: I expect that a low degree B wave has begun and may take about five to seven days in total to unfold. B waves exhibit the greatest variety in form and structure of all Elliott waves. There are more than thirteen possible structures of a B wave. It will most likely be very choppy and overlapping. Alternate wave counts will be essential, and the wave count will change as the structure unfolds. In more traditional technical analysis terms I expect the S&P has begun a sideways consolidation phase. For tomorrow I expect a green candlestick, with upwards movement to a short term target at 1,933.
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The aqua blue trend lines are critical. Draw the first trend line from the low of 1,158.66 on 25th November, 2011 to the next swing low at 1,266.74 on 4th June, 2012. Create a parallel copy and place it on the low at 1,560.33 on 24th June, 2013. While price remains above the lower of these two aqua blue trend lines we must assume the trend remains upwards. This is the main reason for the bullish wave count being my main wave count.
Bullish Wave Count.
There are a couple of things about this wave count of which I am confident. I see minor wave 3 within intermediate wave (1) as over at 1,729.86 (19th September, 2013). It has the strongest upwards momentum and is just 0.76 longer than 2.618 the length of minor wave 1. At 455 days duration this is a remarkably close Fibonacci ratio. The subdivisions within it are perfect. If this is correct then minor wave 4 ends at 1,646.47 and this is where minor wave 5 begins.
Minor wave 5 is unfolding as an impulse. If minor wave 5 has passed its middle then I would expect to see more divergence between price and MACD develop over coming weeks.
Along the way up towards the final target I would expect to see two more corrections complete: the current correction for minuette wave (iv) and one more for minute wave iv.
Minuette wave (iv) may not move into minuette wave (i) price territory below 1,858.71.
At 2,218 minor wave 5 would reach equality in length with minor wave 3. This target may be met in October.
I have drawn a parallel channel about minuette wave (iii) using Elliott’s first technique: draw the first trend line from the highs of subminuette waves i to iii, then place a parallel copy on the low of subminuette wave ii. Minuette wave (iv) has arrived and breaches the channel about minuette wave (iii). Minuette wave (iv) may reach as low as the 0.618 Fibonacci ratio of minuette wave (iii) at 1,881.28, which would provide alternation in depth of correction between minuette waves (ii) and (iv), (minuette wave (ii) was a shallow 37% correction). Downwards movement may find final support about or just above the upper aqua blue trend line, continuing a pattern which has lasted about a year now.
The large maroon – – – channel is copied over from the weekly chart. It is drawn in exactly the same way on bull and bear wave counts. For the bull wave count this channel is termed a base channel about primary waves 1 and 2. A lower degree second wave should not breach the lower edge of a base channel drawn about a first and second wave one or more degrees higher. The lower maroon – – – trend line differentiates the bull and bear wave counts at cycle degree and monthly chart level.
Although the channel about subminuette wave a is not breached yet, sideways movement of the last thirteen hours trading is in three wave structures. This fits as the start of subminuette wave b and not as a continuation of subminuette wave a.
Subminuette wave b may be unfolding as a single flat correction where micro wave A subdivides as a three, itself an expanded flat.
Subminuette wave b may also be unfolding as a double flat correction. It may also be a running triangle.
All these options are sideways and most often shallow corrections. I would now expect subminuette wave b to be reasonably likely to reach only up to the 0.382 Fibonacci ratio of subminuette wave a about 1,941.60.
Within micro wave A submicro wave (B) is a 138% correction of submicro wave (A). At 1,933 submicro wave (C) would reach 1.618 the length of submicro wave (A).
Thereafter, micro wave B may make a new low below the start of micro wave A at 1,911.45, or if subminuette wave b is a combination or triangle the downwards wave to follow may not make a new low below 1,911.45.
Overall I expect to see very choppy overlapping sideways movement for a few days. As more structure unfolds and the possibilities narrow (or expand) the wave count will probably change in coming days for this piece of movement.
Subminuette wave b may not move beyond the start of subminuette wave a above 1,991.39.
Bearish Alternate Wave Count
This bearish alternate wave count expects that the correction is not over. The flat correction which ended at 666.79 was only cycle wave a (or w) of a larger super cycle second wave correction.
The structure and subdivisions within primary wave C for the bear wave count are the same as for intermediate wave (1) for the bull wave count. Thus the short to mid term outlook is identical.
The differentiation between the bull and bear wave count is the maroon – – – channel. The bull wave count should see price remain above the lower maroon – – – trend line. The bear wave count requires a clear breach of this trend line. If this trend line is breached by a full weekly candlestick below it and not touching it then this bear wave count would be my main wave count and I would then calculate downwards targets.
We should always assume the trend remains the same until proven otherwise; the trend is your friend. While price remains above the lower maroon – – – trend line I will assume that the S&P 500 remains within a bull market.
This analysis is published about 06:57 p.m. EST.
Price remains above the invalidation point and within the small channel on the hourly chart.
Downwards movement was expected. Price has not moved low enough for confidence in this wave count yet. The outlook is unchanged.
A small red candlestick on the daily chart fits with this wave count. While price remains within the pink channel on the hourly chart we do not have confirmation of a trend change.