S&P 500

A strong signal from On Balance Volume adds confidence to the Elliott wave count.

Summary: A short term Elliott wave target is 2,744. A short term classic analysis target is 2,811. At about one of these points a small consolidation or pullback may be expected.

The long to mid term Elliott wave target is at 2,922, and a classic analysis target is now at 3,045.

Corrections are an opportunity to join the trend.

New all time highs this week, from both the AD line and On Balance Volume, give a high level of confidence to the expectation that price is likely to follow through to new all time highs.

Always practice good risk management. Always trade with stops and invest only 1-5% of equity on any one trade.

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

Last historic analysis with monthly charts is here. Video is here.

An alternate idea at the monthly chart level is given here.

An historic example of a cycle degree fifth wave is given at the end of the analysis here.

ELLIOTT WAVE COUNT

WEEKLY CHART

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Cycle wave V must complete as a five structure, which should look clear at the weekly chart level. It may only be an impulse or ending diagonal. At this stage, it is clear it is an impulse.

Within cycle wave V, the third waves at all degrees may only subdivide as impulses.

Intermediate wave (4) has breached an Elliott channel drawn using Elliott’s first technique. The channel is redrawn using Elliott’s second technique: the first trend line from the ends of intermediate waves (2) to (4), then a parallel copy on the end of intermediate wave (3). Intermediate wave (5) may end either midway within the channel, or about the upper edge.

Intermediate wave (4) may now be a complete regular contracting triangle lasting fourteen weeks, one longer than a Fibonacci thirteen. There is perfect alternation and excellent proportion between intermediate waves (2) and (4).

If intermediate wave (4) were to continue further as either a flat or combination, both possibilities would require another deep pullback to end at or below 2,532.69. With both On Balance Volume and the AD line making a new all time highs this week, that possibility looks extremely unlikely.

If intermediate wave (4) were to continue further, it would now be grossly disproportionate to intermediate wave (2). Both classic technical analysis and Elliott wave analysis now suggest these alternate ideas should be discarded based upon a very low probability.

DAILY CHART

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It is possible that intermediate wave (4) is a complete regular contracting triangle, the most common type of triangle. Minor wave E may have found support just above the 200 day moving average and ending reasonably short of the A-C trend line. This is the most common look for E waves of triangles.

Intermediate wave (3) exhibits no Fibonacci ratio to intermediate wave (1). It is more likely then that intermediate wave (5) may exhibit a Fibonacci ratio to either of intermediate waves (1) or (3). The most common Fibonacci ratio would be equality in length with intermediate wave (1), but in this instance that would expect a truncation. The next common Fibonacci ratio is used to calculate a target for intermediate wave (5) to end.

Price has clearly broken out above the upper triangle B-D trend line. This indicates that it should now be over if the triangle is correctly labelled.

A resistance line in lilac is added to this chart. It is the same line as the upper edge of the symmetrical triangle on the daily technical analysis chart. Upwards movement has sliced cleanly through this line, finding no resistance before breaking it. This line may offer some support for any pullbacks.

Sometimes the point at which the triangle trend lines cross over sees a trend change. A trend change at that point may be a minor one or a major one. That point is about the 3rd of June.

TECHNICAL ANALYSIS

WEEKLY CHART

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A classic symmetrical triangle pattern may be forming. These are different to Elliott wave triangles. Symmetrical triangles may be either continuation or reversal patterns, while Elliott wave triangles are always continuation patterns and have stricter rules.

The vertical green lines are 73% to 75% of the length of the triangle from cradle to base, where a breakout most commonly occurs.

From Dhalquist and Kirkpatrick on trading triangles:

“The ideal situation for trading triangles is a definite breakout, a high trading range within the triangle, an upward-sloping volume trend during the formation of the triangle, and especially a gap on the breakout.”

For this example, the breakout may have happened this week. There is a high trading range within the triangle, but volume is declining.

DAILY CHART

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The symmetrical triangle may now be complete, and now price has completed an upwards breakout. There may be some small cause for concern today that the upwards breakout does not have support from volume. However, in current market conditions only some small concern is had here. Rising price on light and declining volume has been a feature of this market for many months, yet price continues to rise.

After an upwards breakout, pullbacks occur 59% of the time. A pullback may find support at the upper triangle trend line and may be used as an opportunity to join a trend.

The base distance is 340.18. Added to the breakout point of 2,704.54 this gives a target at 3,044.72. This is above the Elliott wave target at 2,922, so the Elliott wave target may be inadequate.

For the short term, the next smaller consolidation or pullback may come about 2,811. This shorter term target is calculated using the measuring gap. That gap may now provide support and may be used to pull up stops on long positions.

On Balance Volume has made a new all time high, providing a very strong bullish signal; expect price to follow.

VOLATILITY – INVERTED VIX CHART

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So that colour blind members are included, bearish signals will be noted with blue and bullish signals with yellow.

Normally, volatility should decline as price moves higher and increase as price moves lower. This means that normally inverted VIX should move in the same direction as price.

There is still a cluster of bullish signals on inverted VIX. Overall, this may offer support to the main Elliott wave count.

Inverted VIX today is again much higher than the prior swing high of the 9th / 13th March, but price is not yet. Reading VIX as a leading indicator, this divergence is bullish.

BREADTH – AD LINE

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There is normally 4-6 months divergence between price and market breadth prior to a full fledged bear market. This has been so for all major bear markets within the last 90 odd years. With no longer term divergence yet at this point, any decline in price should be expected to be a pullback within an ongoing bull market and not necessarily the start of a bear market. New all time highs from the AD line this week means that any bear market may now be an absolute minimum of 4 months away. It may of course be a lot longer than that. My next expectation for the end of this bull market may now be October 2019.

Small caps have made a new all time high this week, but mid and large caps have yet to do so. This divergence may be interpreted as bullish. Small caps may now be leading the market.

Breadth should be read as a leading indicator.

There has been a cluster of bullish signals from the AD line in the last few weeks. This also overall offers good support to the main Elliott wave count.

The AD line has made another new all time high today. This is a very strong bullish signal, and is one reason today why the more bearish Elliott wave counts are discarded. It is extremely likely now that price shall follow with a new all time high.

DOW THEORY

The following lows need to be exceeded for Dow Theory to confirm the end of the bull market and a change to a bear market:

DJIA: 23,360.29.

DJT: 9,806.79.

S&P500: 2,532.69.

Nasdaq: 6,630.67.

At this stage, only DJIA has made a new major swing low. DJT also needs to make a new major swing low for Dow Theory to indicate a switch from a bull market to a bear market. For an extended Dow Theory, which includes the S&P500 and Nasdaq, these two markets also need to make new major swing lows.

GOLD

Upwards movement continues overall as the main Elliott wave count expects.

Both the main and alternate Elliott wave counts remain valid.

Summary: The target is now at 1,431. Further and substantial confidence in an upwards trend may be had now if price makes a new high above 1,333.84.

Always trade with stops to protect your account. Risk only 1-5% of equity on any one trade.

Grand SuperCycle analysis is here.

Last in-depth historic analysis with monthly and several weekly charts is here, video is here.

There are multiple wave counts at this time at the weekly and monthly chart levels. In order to make this analysis manageable and accessible only two will be published on a daily basis, one bullish and one bearish. This does not mean the other possibilities may not be correct, only that publication of them all each day is too much to digest. At this stage, they do not diverge from the two possibilities below.

BULLISH ELLIOTT WAVE COUNT

FIRST WEEKLY CHART

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Cycle wave b may be a single zigzag. Zigzags subdivide 5-3-5. Primary wave C must subdivide as a five wave structure and may be either an impulse or an ending diagonal. Overlapping at this stage indicates an ending diagonal.

Within an ending diagonal, all sub-waves must subdivide as zigzags. Intermediate wave (4) must overlap into intermediate wave (1) price territory. This diagonal is expanding: intermediate wave (3) is longer than intermediate wave (1) and intermediate wave (4) is longer than intermediate wave (2). Intermediate wave (5) must be longer than intermediate wave (3), so it must end above 1,398.41 where it would reach equality in length with intermediate wave (3).

Within the final zigzag of intermediate wave (5), minor wave B may not move beyond the start of minor wave A below 1,236.54. However, if it were now to turn out to be relatively deep, it should not get too close to this invalidation point as the lower (2)-(4) trend line should provide strong support. Diagonals normally adhere very well to their trend lines.

Within the diagonal of primary wave C, each sub-wave is extending in price and so may also do so in time. Within each zigzag, minor wave B may exhibit alternation in structure and may show an increased duration.

Within intermediate wave (1), minor wave B was a triangle lasting 11 days. Within intermediate wave (3), minor wave B was a regular flat lasting 60 days. Intermediate wave (5) is expected to be longer in price than intermediate wave (3), and it may also be longer in duration, and so minor wave B within it may also be longer in duration. If minor wave B is over at the last low, it would have lasted 68 days.

This first weekly chart sees the upwards wave labelled primary wave A as a five wave structure. It must be acknowledged that this upwards wave looks better as a three than it does as a five. The fifth weekly chart below will consider the possibility that it was a three.

FIRST DAILY CHART

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Minor wave B may be a complete single regular flat correction. Within the flat, minute wave a is a three, a single zigzag, and minute wave b is a three, a double zigzag, and minute wave c is a five that has moved price slightly below the end of minute wave a. There is a very close Fibonacci ratio of equality between minute waves a and c.

Regular flats normally fit very well into parallel channels. Minute wave c has found support almost exactly at the lower edge of this channel. This gives the flat correction the right look.

FIRST DAILY CHART – ALTERNATE

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It is possible that the impulse for minute wave c is incomplete. The last seven days may be minuette wave (iv) only. There is now a little disproportion between the corrections of minuette waves (ii) and (iv). Both are double zigzags, so there is no alternation in structure. The probability of this wave count is reduced.

Minute wave c may end with a small overshoot of the lower pink trend line. Strong support is still in the zone about 1,300 to 1,310, so not much if any movement below this zone would be expected for this wave count.

Minuette wave (iv) has breached a channel drawn using Elliott’s first technique. The channel is redrawn using Elliott’s second technique.

Minuette wave (iv) may not move into minuette wave (i) price territory above 1,333.84.

This wave count may be discarded prior to invalidation if upwards movement continues and has support from volume.

BEARISH ELLIOTT WAVE COUNT

FIFTH WEEKLY CHART

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There were five weekly charts published in the last historic analysis. This fifth weekly chart is the most immediately bearish wave count, so this is published as a bearish possibility.

This fifth weekly chart sees cycle wave b as a flat correction.

If cycle wave b is a flat correction, then within it primary wave B must retrace a minimum 0.9 length of primary wave A at 1,079.13 or below. The most common length of B waves within flats is from 1 to 1.38 times the length of the A wave. The target calculated would see primary wave B end within this range.

Primary wave B may be subdividing as a regular flat correction, and within it both intermediate waves (A) and (B) subdivide as three wave structures. Intermediate wave (B) fits as a triple zigzag.

I have only seen two triple zigzags before during my 10 years of daily Elliott wave analysis. If this wave count turns out to be correct, this would be the third. The rarity of this structure is identified on the chart.

FIFTH DAILY CHART

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Minor wave 1 may have been a relatively brief impulse over at the low of the 8th of February. Thereafter, minor wave 2 may be an incomplete double combination.

The first structure in the double may be a zigzag labelled minute wave w. The double may be joined by a three in the opposite direction, a zigzag labelled minute wave x. The second structure in the double may be an incomplete running triangle labelled minute wave y. This structure may yet take some weeks to complete. In my experience a double combination with a triangle for minute wave y is not very common. This reduces the probability of this wave count, but it remains valid.

This wave count is a good solution for this bearish wave count. All subdivisions fit and there are no rare structures so far within intermediate wave (C).

TECHNICAL ANALYSIS

WEEKLY CHART

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Gold is within a small consolidation with resistance about 1,365 to (final) 1,375 and strong support about 1,310 to 1,305. Volume suggests an upwards breakout is more likely than downwards.

This week’s candlestick has support from volume, which is bullish.

Gold looks reasonably bullish at the weekly chart level.

DAILY CHART

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Gold is within a consolidation that began back on about the 3rd of January. This consolidation is delineated by resistance about 1,360 to 1,365 and support about 1,310 to 1,300. It is the upwards days of the 15th of January and the 11th of April that have strongest volume. This strongly suggests an upwards breakout may be more likely than downwards.

Price has found support. Bullish divergence with Stochastics while it is oversold is clear. With a few long lower wicks and support about the 200 day moving average, it looks like Gold has found a low.

Friday’s session moved price higher, but the balance of volume was down and the session closed red. Volume was very light; the market fell of its own weight during Friday’s session. This offers a little support to the first daily Elliott wave charts.

It is possible that lows may again be tested, but expect very strong support in the zone 1,310 – 1,300.

GDX WEEKLY CHART

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Support about 20.80 has been tested about eight times and so far has held. The more often a support area is tested and holds, the more technical significance it has.

In the first instance, expect this area to continue to provide support. Only a strong downwards day, closing below support and preferably with some increase in volume, would constitute a downwards breakout from the consolidation that GDX has been in for a year now.

Resistance is about 25.50. Only a strong upwards day, closing above resistance and with support from volume, would constitute an upwards breakout.

Overall, a slow upwards swing may be underway. Do not expect it to move in a straight line; it may have downwards weeks within it.

The short term volume profile remains bearish, but this week On Balance Volume gives a bullish signal.

GDX DAILY CHART

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On trading triangles from Dhalquist and Kirkpatrick, page 319:

“The ideal situation for trading triangles is a definite breakout, a high trading range within the triangle, an upward-sloping volume trend during the formation of the triangle, and especially a gap on the breakout. These patterns seem to work better with small-cap stocks in a rising market.

Although triangles are plentiful, their patterns suffer from many false and premature breakouts. This requires that a very strict breakout rule be used, either a wide filter or a number of closes outside the breakout zone. It also requires a close protective stop at the breakout level in case the breakout is false. Once these defensive levels have been exceeded, and price is on its way, the trader can relax for a little while because the failure rate after a legitimate breakout is relatively low. Trailing stops should then be placed at each preceding minor reversal.

…. in symmetrical triangles, the best performance comes from late breakouts in the 73% – 75% distance.

Volume on the breakout seems more desirable in symmetrical triangles.”

In this case, the breakout has come 61% of the triangle length from base to cradle. Volume towards the end of the triangle declined. The breakout is accompanied by a gap and has good support from volume.

Pullbacks occur 59% of the time for symmetrical triangles.

It looks like the pullback may be over. Price found support.

On Balance Volume gives a clear bullish signal with a break above resistance. This signal is reasonable as this resistance line is long held and tested many times. But it is not very strong because it has been broken once and has a reasonable slope. This could turn out to be another false signal.

It should also be noted that since the 28th of February On Balance Volume has been overall rising, which is bullish. On Balance Volume has made a new high above the high of the 19th of April, but price has not. This is also bullish.

GDX continues to look more clearly bullish than Gold at this stage.

US OIL

Upwards movement continues as the second Elliott wave count expected.

Summary: Classic technical analysis remains overly bullish. There is an upwards trend in place. Pullbacks are an opportunity to join the trend.

The mid term target is now at 97.92. A longer term target is at 106.25.

Always practice good risk management as the most important aspect of trading. Always trade with stops and invest only 1-5% of equity on any one trade. Failure to manage risk is the most common mistake new traders make.

MAIN WAVE COUNT

MONTHLY CHART

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It is possible that the bear market for Oil is over and a new bull market is in the very early stages.

A huge zigzag down to the last low may be complete and is labelled here Super Cycle wave (II).

Cycle wave b must be seen as complete in August 2013 for this wave count to work. It cannot be seen as complete at the prior major swing high in May 2011.

Cycle wave b is seen as a zigzag, and within it primary wave B is seen as a running contracting triangle. These are fairly common structures, although nine wave triangles are uncommon. All subdivisions fit.

Primary wave C moves beyond the end of primary wave A, so it avoids a truncation. But it does not have to move above the price territory of primary wave B to avoid a truncation, which is an important distinction.

If cycle wave b begins there, then cycle wave c may be seen as a complete five wave impulse.

Super Cycle wave (III) must move beyond the end of Super Cycle wave (I). It must move far enough above that point to allow room for a subsequent Super Cycle wave (IV) to unfold and remain above Super Cycle wave (I) price territory.

Cycle wave I may be incomplete. It may be ready to move through the middle and end of its third wave at primary degree, which may be the strongest upwards portion of cycle wave I; a strong increase in momentum and range may be ahead.

When cycle wave I is complete, then cycle wave II may be a deep correction that may not move beyond the start of cycle wave I below 26.06.

Data from FXCM for USOil does not go back to the beginning of Super Cycle wave (I). Without an accurate known length of Super Cycle wave (I) a target cannot be calculated for Super Cycle wave (III) to end using Fibonacci ratios. The target for Super Cycle wave (III) may be calculated when cycle waves I, II, III and IV within it are complete. That cannot be done for many years.

WEEKLY CHART

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If a new bull market is in the very early stages for Oil, then it may have begun with two overlapping first and second waves at primary then at intermediate degree.

Primary wave 3 may only subdivide as an impulse, and within it intermediate wave (3) may be complete.

Within intermediate wave (3), only minor waves 1 and 2 may be complete. Minor wave 3 may have just begun. The most common Fibonacci ratio is used to calculate a target for it to end. Minor wave 3 may only subdivide as an impulse, and within it minute wave ii may not move beyond the start of minute wave i below 58.13.

A new target is calculated for primary wave 3 to end, which fits with the earlier target for minor wave 3 to end.

Commodities typically exhibit swift and strong fifth waves within their impulses, and this tendency is particularly common for third wave impulses. Intermediate wave (5) may be a swift strong upwards wave when it arrives.

DAILY CHART

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Minor wave 3 may have begun with a leading expanding diagonal for minute wave i.

It is possible that minute wave ii may be over as a relatively brief and shallow regular flat correction.

Although it would be unusual for a second wave correction following a first wave leading diagonal to be this shallow, continuing upwards movement shows that this wave count is now more likely correct.

This wave count would now expect explosive upwards movement.

Within minute wave iii, no second wave correction may move beyond its start below 66.86.

DAILY CHART II

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It is now possible to see another impulse complete at the last high. This may be minute wave i.

If price makes a new low below 66.86, then a deeper pullback may have begun. The target would be the 0.618 Fibonacci ratio at 63.39.

The only problem with this wave count is subminuette wave iii because this wave looks like a three and not a five.

This wave count does not have good support from classic technical analysis, so it is judged to have a lower probability.

ALTERNATE WAVE COUNT

MONTHLY CHART

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Within the bear market, cycle wave b is seen as ending in May 2011. Thereafter, a five wave structure downwards for cycle wave c begins.

Primary wave 1 is a short impulse lasting five months. Primary wave 2 is a very deep 0.94 zigzag lasting 22 months. Primary wave 3 is a complete impulse with no Fibonacci ratio to primary wave 1. It lasted 30 months.

There is alternation in depth with primary wave 2 very deep and primary wave 4 relatively shallow. There is inadequate alternation in structure, both are zigzags. So far primary wave 4 has lasted 26 months. At this stage, there isstill reasonable proportion between primary waves 2 and 4.

Primary wave 4 may not move into primary wave 1 price territory above 74.96.

The wider Elliott channel (teal) about this whole movement may offer support to primary wave 5.

WEEKLY CHART

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This wave count now expects a huge trend change for a new wave down for primary wave 5, which may last about a year or so. Primary wave 5 would be likely to make at least a slight new low below 26.86 to move below the end of primary wave 3 and avoid a truncation.

An Elliott channel is added to this possible zigzag for primary wave 4. A breach of the lower edge of this channel would provide a very strong indication that primary wave 4 should be over and primary wave 5 should be underway. Look out for some support on the way down, perhaps a short term bounce about the lower edge of the channel.

DAILY CHART

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Minor wave 5 will now subdivide as an impulse. The only piece of movement that is problematic is minuette wave (iii) because it looks like a three but should be a five.

There is almost no room left for primary wave 4 to move into. If this alternate wave count is correct, then price must reverse here or very soon indeed.

A new low below 58.13 would add a little confidence to this wave count. It would also require a breach of the black channel on the weekly chart for reasonable confidence.

TECHNICAL ANALYSIS

MONTHLY CHART

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For the last four months all now complete, the volume profile is bullish. There are now three completed monthly candlesticks with long lower wicks.

This chart is overwhelmingly bullish. It supports the main Elliott wave count.

Strong volume for the month of June 2017 may have been a selling climax. This is typical behaviour of commodities.

The strongest recent volume is a downwards month for August 2017. This is the only bearish indication on this chart.

DAILY CHART

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The pullback expected from last week’s analysis did turn up on the 8th of May, but this was more brief and shallow than the Elliott wave count had expected. At that point, this downwards day resolved the bearishness.

ADX may reach very extreme, and remain there for a long period of time, when Oil has a strong trend. Stochastics may reach overbought and remain so for a very long time. Neither of these indicators are useful in predicting the end of a trend.

At this time, Oil is moving through an area with little prior support to offer resistance. Next resistance is about 72.50, which is weak.

RSI is not yet overbought. Only when RSI is overbought and then exhibits clear divergence with price should a reasonable correction be expected as likely.

This chart is very bullish and supports the new main Elliott wave count.