Sideways movement was expected. A red candlestick with a small real body fits expectations for the session.
Summary: Another one to two days of sideways movement is expected at this stage, followed by a short sharp thrust lower to support at 1,190 or the target at 1,183. That should complete the first large correction within the new bull market.
New updates to this analysis are in bold.
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DAILY ELLIOTT WAVE COUNT
Intermediate wave (2) is not over.
Normally, the first large second wave correction within a new trend is very deep, often deeper than the 0.618 Fibonacci ratio.
Intermediate wave (2) may be an expanded flat correction. Minor wave A is a three, minor wave B is a three and a 1.28 length of minor wave A. This is within the normal range of 1 to 1.38.
At 1,183 minor wave C would reach 1.618 the length of minor wave A. This would be the most likely target. If price keeps falling through this first target, then the second target would be at 1,108 where minor wave C would reach 2.618 the length of minor wave A. When minute wave iv within minor wave C is complete, then the target may be calculated at two wave degrees. At that stage, the target may widen to a small zone or it may change.
Intermediate wave (2) may not move beyond the start of intermediate wave (1) below 1,046.27.
There are two structural options for minor wave C: either an impulse or an ending diagonal. Minor wave C does not look at this stage like an ending diagonal. It looks like the more common impulse.
Minute wave iv has begun and so far shows up on the daily chart with three candlesticks. The structure on the hourly chart still looks incomplete today.
Minute wave iv may not move into minute wave i price territory above 1,269.07.
Draw a channel about minor wave C as shown in pink: the first trend line from the ends of minute waves i to iii, then a parallel copy on the high labelled minuette wave (ii) so that all downwards movement is contained.
Minute wave iv may find resistance at the upper edge of the pink channel. It may also find resistance at the lilac trend line copied over from the weekly chart, if it gets that high.
For this main wave count, minute wave iii is 5.05 short of 2.618 the length of minute wave i.
There are no adequate Fibonacci ratios between minuette waves (i), (iii), and (v) within minute wave iii.
Ratios within minuette wave (iii) are: there is no Fibonacci ratio between subminuette waves i and iii, and subminuette wave v is 2.64 short of 2.618 the length of subminuette wave i. Subminuette wave ii is an expanded flat and subminuette wave iv is a zigzag.
HOURLY ELLIOTT WAVE COUNT
Minute wave ii was a quick deep 0.76 zigzag lasting 23 hours. Given the guideline of alternation, minute wave iv is most likely to be a shallow sideways structure and may be more time consuming than 23 hours. Minute wave iv is most likely to be a flat, combination or triangle. It is most likely to end about either the 0.236 or 0.382 Fibonacci ratios, so targets at 1,222 and 1,236 are reasonable.
If minute wave iv unfolds as an expanded flat (which is a very common structure), running triangle or combination, then it may include a new low below its start at 1,200.07. A new low below this point in the next one or two sessions does not mean minute wave iv is over; it would more likely be a part of minute wave iv.
At this stage, there are still multiple structural possibilities for minute wave iv. Alternate wave counts and flexibility while this correction unfolds will be essential. It is impossible to tell with certainty which structure will unfold, so it is impossible for me to give you an accurate road map for how price will move during this correction. Small corrections do not present good trading opportunities; they should be avoided. They present an opportunity to join the trend at their completion, so analysis over the next few days will focus on identifying if minute wave iv could be complete and what price points will confirm its completion.
So far a zigzag upwards may be complete. This is most likely minuette wave (a) of a flat or triangle, or minuette wave (w) of a double combination.
If minute wave iv is a flat correction, then the minimum requirement for minuette wave (b) is to retrace 0.9 the length of minuette wave (a) at 1,202.08. If price reaches down to this point, then the minimum requirement will be met; the rule that minuette wave (b) must be at least 0.9 the length of minuette wave (a) will be met. This is not the same as the normal range for minuette wave (b).
If minute wave iv is a flat correction, then the normal length of minuette wave (b) is 1 to 1.38 the length of minuette wave (a). This gives a normal range of 1,200.07 to 1,192.45.
If minute wave iv is a triangle, there is no minimum nor maximum for minuette wave (b); it must only be a three wave structure. It may make a new low below the start of minuette wave (a) at 1,200.07 as in a running triangle.
If minute wave iv is a double combination, then the first structure in the double may be a complete zigzag. Minuette wave (x) has no minimum nor maximum requirement; it must only be a corrective structure and would most likely be deep.
So far within minuette wave (b) or (x) the structure looks like it is most likely unfolding as a zigzag. Subminuette wave c has not yet moved below the end of subminuette wave a at 1,205.97, but it is most likely to do so to avoid a truncation.
As soon as a truncation is avoided, whether or not the minimum for a flat at 1,202.08 is met, then downwards movement for subminuette wave (b) or (x) may be complete.
Overall, more choppy overlapping sideways movement is expected for another two days most likely. That would see minute wave iv total a Fibonacci five sessions.
It is still impossible to tell which structure minute wave iv is unfolding as. It may still be either a flat, triangle or combination. This means it is still impossible to tell with any accuracy the pathway price will take over the next couple of days.
Just this one hourly wave count will be published today. There are alternate possibilities but they hardly diverge in expectations from this idea. At this stage, the most important point to note is minute wave iv does not yet look to be complete.
ALTERNATE DAILY ELLIOTT WAVE COUNT
It is possible that intermediate wave (2) is over as a completed expanded flat. It would be a shallow 0.350 correction of intermediate wave (1) lasting 56 days, just one more than a Fibonacci 55. There would be no Fibonacci ratio between minor waves A and C.
For this alternate wave count, ratios within minor wave C are: there is no Fibonacci ratio between minute waves i and iii, and minute wave v is just 1.13 short of equality in length with minute wave i.
Within minute wave iii, there are no adequate Fibonacci ratios between minuette waves (i), (iii) and (v).
Ratios within minuette wave (iii) are: there is no Fibonacci ratio between subminuette waves i and iii, and subminuette wave v is 0.70 short of 0.618 the length of subminuett wave i. Subminuette wave ii is an expanded flat and subminuette wave iv is a regular contracting triangle.
On balance, there is no advantage for either wave count, this alternate or the main, in terms of Fibonacci ratios or alternation which would indicate one is more likely than the other.
What is problematic for this alternate is the structure of minuette wave (v): the fit on the hourly chart is not as neat for this alternate as it is for the main wave count. For this reason, in terms of Elliott wave, this alternate must be judged to have a lower probability. It requires confirmation with a new high above 1,269.07 before it may be used.
At 1,582 intermediate wave (3) would reach 1.618 the length of intermediate wave (1). No second wave correction may move beyond the start of its first wave below 1,200.07 within intermediate wave (3).
Click chart to enlarge. Chart courtesy of StockCharts.com.
On Balance Volume is breaking below a reasonably long held and clearly defined consolidation zone. It would be entirely reasonable to expect price to follow by continuing lower for a few weeks. This piece of evidence strongly supports the Elliott wave count.
Price has broken below and closed below support about 1,225. Price has fallen on increasing volume for four weeks in a row. This supports a downwards trend.
RSI is neutral. There is plenty of room for price to fall.
Click chart to enlarge. Chart courtesy of StockCharts.com.
Price is finding support at the lower pink trend line about 1,210. Volume for the last two sessions declines as price moves sideways, typical of a consolidation. During this small sideways movement, the strongest day is an upwards day which indicates an upwards breakout may be more likely than downwards. This favours the alternate daily wave count over the main daily wave count still.
ADX still indicates a downwards trend is in place. ATR still disagrees. ATR has consistently declined as price has been moving lower since the high of 2nd of May. Normally, ATR increases during a trending market. The decline of ATR indicates that this downwards movement is more likely to be a counter trend movement which supports the Elliott wave counts, which see it as the end of an intermediate degree correction.
Trend lines about the current movement for On Balance Volume can now be tentatively drawn. The two gold lines are horizontal. A break above would be bullish. A break below would be bearish. These would provide weak signals only though as the lines are not much tested.
There does not look to be any divergence still between price and RSI to indicate any weakness. RSI has not reached oversold. There is still room for price to fall further.
Stochastics is returning from oversold.
This analysis is published @ 10:55 p.m. EST.