S&P 500

The S&P 500 has continued to make new highs this week exactly as the Elliott wave count expected. There is underlying strength in this market with rising breadth and new all time highs from On Balance Volume. Elliott wave targets remain the same.

Summary: Overall, expect more upwards movement with shallow and / or brief corrections along the way. A third wave is continuing higher and has good support from breadth and volume.

The next target is at 3,179 where minor wave 4 may begin (expect it to be very shallow). Thereafter, the next target is at 3,302 and then 3,336.

Three large pullbacks or consolidations during the next few months are expected: for minor wave 4, then intermediate (4), and then primary 4. Prior to each of these large corrections beginning, some weakness may begin to be evident.

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

Monthly charts were last published here. There are two further alternate monthly charts here.

ELLIOTT WAVE COUNTS

The two weekly Elliott wave counts below will be labelled First and Second. They may be about of even probability. When the fifth wave currently unfolding on weekly charts may be complete, then these two wave counts will diverge on the severity of the expected following bear market. To see an illustration of this future divergence monthly charts should be viewed.

FIRST WAVE COUNT

WEEKLY CHART

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The basic Elliott wave structure consists of a five wave structure up followed by a three wave structure down (for a bull market). This wave count sees the bull market beginning in March 2009 as an incomplete five wave impulse and now within the last fifth wave, which is labelled cycle wave V. This impulse is best viewed on monthly charts. The weekly chart focusses on the end of it.

Elliott wave is fractal. This fifth wave labelled cycle wave V may end a larger fifth wave labelled Super Cycle wave (V), which may end a larger first wave labelled Grand Super Cycle wave I.

The teal Elliott channel is drawn using Elliott’s first technique about the impulse of Super Cycle wave (V). Draw the first trend line from the end of cycle wave I (off to the left of the chart, the weekly candlestick beginning 30th November 2014) to the end of cycle wave III, then place a parallel copy on the end of cycle wave II. This channel perfectly shows where cycle wave IV ended at support. The strongest portion of cycle wave III, the end of primary wave 3, overshoots the upper edge of the channel. This is a typical look for a third wave and suggests the channel is drawn correctly and the way the impulse is counted is correct.

Within Super Cycle wave (V), cycle wave III is shorter than cycle wave I. A core Elliott wave rule states that a third wave may never be the shortest. For this rule to be met in this instance, cycle wave V may not be longer in length than cycle wave III. This limit is at 3,477.39.

Cycle wave V may subdivide either as an impulse or an ending diagonal. Impulses are much more common. An alternate wave count, which looked at the possibility of a diagonal unfolding, has been invalidated with a new all time high.

The daily chart below will focus on movement from the end of intermediate wave (1) within primary wave 3.

In historic analysis, two further monthly charts have been published that do not have a limit to upwards movement and are more bullish than this wave count. Members are encouraged to consider those possibilities (links below summary) alongside the wave counts presented on a daily and weekly basis.

Within cycle wave V, primary waves 1 and 2 may be complete. Within primary wave 3, intermediate waves (1) and (2) may be complete. Within the middle of intermediate wave (3), no second wave correction may move beyond its start below 2,855.96.

DAILY CHART

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All of primary wave 3, intermediate wave (3) and minor wave 3 may only subdivide as impulses.

Minor wave 3 may be underway and may have passed through its middle. Minor wave 3 now shows an increase in momentum beyond minor wave 1; MACD supports this wave count. Within minor wave 3, minute wave iv may not move into minute wave i price territory below 3,003.28.

Intermediate wave (3) must move far enough above the end of intermediate wave (1) to then allow intermediate wave (4) to unfold and remain above intermediate wave (1) price territory. While intermediate wave (3) has now moved beyond the end of intermediate wave (1), meeting a core Elliott wave rule, it still needs to continue higher to give room for intermediate wave (4).

The target for intermediate wave (3) fits with a target calculated for minor wave 3.

Minor wave 2 was a sharp deep pullback, so when it arrives minor wave 4 may be expected to be a very shallow sideways consolidation to exhibit alternation. Minor wave 2 lasted 2 weeks, so minor wave 4 may be about the same duration to have good proportion.

SECOND WAVE COUNT

WEEKLY CHART

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This weekly chart is almost identical to the first weekly chart, with the sole exception being the degree of labelling.

This weekly chart moves the degree of labelling for the impulse beginning in March 2009 all down one degree. This difference is best viewed on monthly charts.

The impulse is still viewed as nearing an end; a fifth wave is still seen as needing to complete higher. This wave count labels it primary wave 5.

Primary wave 5 may be subdividing as either an impulse, in the same way that cycle wave V is seen for the first weekly chart.

TECHNICAL ANALYSIS

MONTHLY CHART

A monthly technical analysis chart will be published again when the month of November is completed.

WEEKLY CHART

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It is very clear that the S&P is in an upwards trend and the bull market is continuing. Price does not move in straight lines; there will be pullbacks and consolidations along the way.

Now that resistance has been overcome, expect a possible release of energy and any surprises should be to the upside. Corrections are normal and to be expected; they may be more short term in nature at this stage.

This week again price overall has support from rising volume. A smaller real body for this last weekly candlestick completes a Stalled candlestick pattern, but volume undermines the bearishness of this pattern and it shall be given little weight in this analysis for that reason.

The divergence between price and On Balance Volume is extremely small; On Balance Volume is off its prior high by only the smallest of margins. This is not replicated at the monthly or daily time frames, so it shall be given no weight in this analysis.

DAILY CHART

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There is an upwards trend in place. There will be corrections along the way. On Balance Volume confirms new all time highs in price.

A long lower wick and price closing only 0.01 point off the high for Friday’s session strongly suggests more upwards movement on Monday.

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 the AD line making new all time highs last week, the end of this bull market and the start of a new bear market is very likely a minimum of 4 months away, which is beginning March 2020.

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.

If a bear market does develop here, it comes after no bearish divergence. It would therefore more likely be shallow.

Last week all of small, mid and large caps have made new swing highs above the prior swing high on the 13th of September, but only large caps have made new all time highs. This upwards movement appears to be mostly driven by large caps, which is a feature of aged bull markets. This bull market at over 10 years duration certainly fits the definition of aged.

Mid and small caps have not yet made new all time highs.

This week price moves higher, but the AD line has declined very slightly. Upwards movement this week does not have support from rising market breadth, but this divergence is very slight. This may be an early warning of a more time consuming consolidation which may come in the next one to few weeks.

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.

Short-term bearish divergence noted for Thursday has been followed by a downwards session for Friday. It may be resolved here, or it may yet need another downwards session to resolve it.

On Friday price has moved lower, but the AD line is essentially flat. There is no real divergence here.

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.

The all time high for inverted VIX was on 30th October 2017. There is now over two years of bearish divergence between price and inverted VIX.

The rise in price is not coming with a normal corresponding decline in VIX; VIX remains elevated. This long-term divergence is bearish and may yet develop further as the bull market matures.

This divergence may be an early warning, a part of the process of a top developing that may take years. It may is clearly not useful in timing a trend change from bull to a fully fledged bear market.

This week both price and inverted VIX have moved higher. Price has made new highs, but inverted VIX has not. Long and mid-term divergence remains, but short-term divergence has now disappeared.

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 price has moved lower with a lower low and a lower high, although the candlestick closed green. Inverted VIX has moved higher. This divergence is bullish for the short term.

DOW THEORY

Dow Theory confirmed a bear market in December 2018. This does not necessarily mean a bear market at Grand Super Cycle degree though; Dow Theory makes no comment on Elliott wave counts. On the 25th of August 2015 Dow Theory also confirmed a bear market. The Elliott wave count sees that as part of cycle wave II. After Dow Theory confirmation of a bear market in August 2015, price went on to make new all time highs and the bull market continued.

DJIA: 23,344.52 – a close on the 19th of December at 23,284.97 confirms a bear market.

DJT: 9,806.79 – price has closed below this point on the 13th of December.

S&P500: 2,532.69 – a close on the 19th of December at 2,506.96 provides support to a bear market conclusion.

Nasdaq: 6,630.67 – a close on the 19th of December at 6,618.86 provides support to a bear market conclusion.

With all the indices having moved higher following a Dow Theory bear market confirmation, Dow Theory would confirm a bull market if the following highs are made:

DJIA: 26,951.81 – a close above this point has been made on the 3rd of July 2019.

DJT: 11,623.58 – to date DJT has failed to confirm an ongoing bull market.

S&P500: 2,940.91 – a close above this point was made on the 29th of April 2019.

Nasdaq: 8,133.30 – a close above this point was made on the 26th of April 2019.

GOLD

More downwards movement was expected for Friday, which is what has happened.

The weekly candlestick strongly suggests the main Elliott wave count is more likely.

Summary: The Elliott wave target is at 1,348.

A target calculated from the adjusted triangle is about 1,431.

For the very short term, a new high above 1,514.29 would add some confidence in a more bullish outlook. The target would then be at 1,567, 1,642 or 1,693.

For the bigger picture, the bearish Elliott wave count expects a new downwards trend to last one to several years has begun. The alternate bearish wave count looks at the possibility that one final high to 1,567 is required first.

The bullish Elliott wave count expects a primary degree fourth wave has completed on Friday and the upwards trend has resumed.

Grand SuperCycle analysis is here.

Monthly charts were last published here.

BEARISH ELLIOTT WAVE COUNT

WEEKLY CHART

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It is possible that Super Cycle wave (b) is nearly complete as a double zigzag.

The first zigzag in the double is labelled cycle wave w. The double is joined by a three in the opposite direction, a triangle labelled cycle wave x. The second zigzag in the double is labelled cycle wave y.

The purpose of the second zigzag in a double is to deepen the correction. Cycle wave y has achieved this purpose.

A new low below 1,346.45 would add strong confidence to this wave count. At that stage, the bullish Elliott wave count would be invalidated.

A wide best fit channel is added in light blue. This channel contains all of Super Cycle wave (b) and may provide resistance and support. Copy this channel over to daily charts.

DAILY CHART

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Classic analysis now reasonably supports this wave count.

Cycle wave y may be a complete zigzag. Within both of primary waves A and C, there is good proportion between intermediate waves (2) and (4). Within both of primary waves A and C, there is good alternation in structure of intermediate waves (2) and (4).

Within cycle wave y, there is no Fibonacci Ratio between primary waves A and C.

Draw a base channel on daily charts about minor waves 1 and 2. Draw the first trend line from the start of minor wave 1 to the end of minor wave 2, then place a parallel copy on the end of minor wave 1.

Gold does not always fit neatly within base channels. Occasionally, second wave corrections can be deep and time consuming and can breach base channels. Now that price is back well within the base channel the upper edge may again provide resistance.

ALTERNATE DAILY CHART

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It is possible that the double zigzag for Super Cycle wave (b) may be incomplete and may yet require one more high.

Within cycle wave y, primary wave A may have been over at the last high. Primary wave B may now be complete as a double zigzag. Primary wave B may not move beyond the start of primary wave A below 1,266.61.

Primary wave C would be expected to find strong resistance and end at the upper edge of the blue best fit channel copied over from the weekly chart.

BULLISH ELLIOTT WAVE COUNT

WEEKLY CHART

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This wave count sees the the bear market complete at the last major low for Gold in November 2015.

If Gold is in a new bull market, then it should begin with a five wave structure upwards on the weekly chart. However, the biggest problem with this wave count is the structure labelled cycle wave I because this wave count must see it as a five wave structure, but it looks more like a three wave structure.

Commodities often exhibit swift strong fifth waves that force the fourth wave corrections coming just prior and just after to be more brief and shallow than their counterpart second waves. It is unusual for a commodity to exhibit a quick second wave and a more time consuming fourth wave, and this is how cycle wave I is labelled. This wave count still suffers from this very substantial problem, and for this reason the bearish wave count is still considered because it has a better fit in terms of Elliott wave structure.

Cycle wave II subdivides well as a double combination: zigzag – X – expanded flat.

Cycle wave III may have begun. Within cycle wave III, primary waves 1 and 2 may now be complete. Primary wave 3 has now moved above the end of primary wave 1 meeting a core Elliott wave rule. It has now moved far enough to allow room for primary wave 4 to unfold and remain above primary wave 1 price territory. Primary wave 4 may not move into primary wave 1 price territory below 1,346.45.

Cycle wave III so far for this wave count would have been underway now for 63 weeks. It exhibits some support from volume and increasing ATR. This wave count has some support from classic technical analysis.

The channel drawn about cycle wave III is an adjusted Elliott channel. The lower edge is pulled lower.

Add the wide best fit channel to weekly and daily charts.

DAILY CHART

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Primary wave 4 may be complete as a double zigzag. Primary wave 4 may have lasted 47 sessions, just four more than primary wave 2, which lasted 43 sessions. The proportion remains very good for this part of the wave count.

A target for cycle wave III is calculated also now at primary degree. If price reaches the first target and keeps rising, then the second higher target may be used.

If it continues any further, then primary wave 4 may not move into primary wave 1 price territory below 1,346.45.

TECHNICAL ANALYSIS

MONTHLY CHART

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Overall, this chart is bullish. However, with RSI reaching overbought at the last high, upwards movement may be limited.

The last two months of sideways movement look like a consolidation within an ongoing upwards trend.

Some suspicion regarding the current upwards trend may be warranted by bearish divergence between price and On Balance Volume at the last lows. Also, at the last high price has made a substantial new high above April 2018, but On Balance Volume is flat.

WEEKLY CHART

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When trends reach very extreme, candlestick reversal patterns should be given weight. The Dark Cloud Cover bearish reversal pattern is given more bearish weight from the long upper wick.

This week is very strongly bearish and strongly supports the main Elliott wave count.

DAILY CHART

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Since the last high on the 4th of September, there is now a series of swing lows and swing highs.

After a breakout from the triangle, the target is to be about 1,431.

This chart fairly strongly supports the main Elliott wave count.

GDX WEEKLY CHART

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This weekly candlestick for GDX is very bearish and switches the short-term and mid-term picture to bearish.

GDX DAILY CHART

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This week GDX has made a new swing low. There is now a series of three lower highs and four lower lows from the high on the 4th of September. It still looks like GDX may have had a trend change. This view should remain dominant while the last swing high at 28.18 on the 31st of October remains intact.

US OIL

An upwards swing within a larger consolidation was expected to continue. This is exactly what is happening, so far.

Both Elliott wave counts remain valid.

Summary: The bearish wave count looks most likely to follow a triangle pattern here, with an upwards swing to end short of the upper A-C trend line.

The bullish wave count now also expects a triangle to complete before an upwards breakout.

At this stage, all three Elliott wave counts now expect upwards movement again next week.

MAIN ELLIOTT WAVE COUNT – BEARISH

MONTHLY CHART

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The basic Elliott wave structure is five steps forward and three steps back. This Elliott wave count expects that US Oil is still within a three steps back pattern, which began in July 2008. The Elliott wave count expects that the bear market for US Oil continues.

This Elliott wave corrective structure is a double zigzag, which is a fairly common structure. The correction is labelled Super Cycle wave (II).

The first zigzag in the double is complete and labelled cycle wave y. The double is joined by a three in the opposite direction labelled cycle wave x, which subdivides as a zigzag. The second zigzag in the double may now have begun, labelled cycle wave w.

The purpose of a second zigzag in a double zigzag is to deepen the correction when the first zigzag does not move price deep enough. To achieve this purpose cycle wave y may be expected to move reasonably below the end of cycle wave w at 26.06. When primary wave B may be complete then the start of primary wave C may be known and a target may be calculated.

Cycle wave y is expected to subdivide as a zigzag, which subdivides 5-3-5.

Cycle wave w lasted 7.6 years and cycle wave x lasted 2.7 years. Cycle wave y may be expected to last possibly about a Fibonacci 5 or 8 years.

Primary wave B may not move beyond the start of primary wave A above 76.90.

WEEKLY CHART

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This weekly chart shows all of cycle waves x and y so far.

Cycle wave y is expected to subdivide as a zigzag. A zigzag subdivides 5-3-5. Primary wave A must subdivide as a five wave structure if this wave count is correct.

Primary wave A may be a complete five wave impulse at the last low.

Primary wave B may now be continuing further as a triangle or combination. Both ideas are outlined in daily charts below, and a triangle is labelled on the weekly chart.

When primary wave B may be complete, then a downwards breakout would be expected for primary wave C.

Primary wave B may not move beyond the start of primary wave A above 76.90.

DAILY CHART

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Note that monthly and weekly charts are on a semi-log scale, but the daily charts are on an arithmetic scale. This makes a slight difference to trend channels.

Elliott wave triangles are always continuation patterns. When primary wave B is complete, then a downwards breakout would be expected for primary wave C.

This chart considers a triangle for primary wave B. The triangle may be a regular contracting triangle.

Within a contracting triangle: intermediate wave (C) may not move beyond the end of intermediate wave (A); intermediate wave (D) may not move beyond the end of intermediate wave (B); intermediate wave (E) may not move beyond the end of intermediate wave (C) above 63.38, and would most likely fall short of the (A)-(C) trend line.

Within this contracting triangle, intermediate wave (D) now looks complete. The final sub-wave of intermediate wave (E) looks likely now to be underway. Within the zigzag of intermediate wave (E), minor wave B may not move beyond the start of minor wave A below 51.90.

Intermediate wave (E) must complete as a zigzag, subdividing as a 5-3-5 structure. When minor wave A upwards may be complete, then a pullback or sideways consolidation should unfold over several days for minor wave B.

Minor wave A may subdivide as either an impulse or leading diagonal. Overlapping so far suggests a leading diagonal. Within a leading diagonal, minute waves i, iii and v most commonly subdivide as zigzags although they may sometimes appear to be impulses. Minute waves ii and iv may only subdivide as zigzags.

This diagonal may be expanding. Minute wave v should be longer than equality in length with minute wave iii at 58.24. Minute wave v may end with a very small overshoot of the i-iii trend line, although this is not as common for expanding diagonals as it is for contracting diagonals.

DAILY CHART II

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When an Elliott wave triangle is considered, it is essential that alternates are also considered. Too many times an Elliott wave triangle may look to be completing only for the structure to be invalidated; the correction turns out to be something else, and the something else is almost always a combination.

Primary wave B may be a double combination: zigzag – X – flat. Intermediate wave (W) fits as a zigzag. Intermediate wave (Y) may be unfolding as a flat correction.

Within intermediate wave (Y), minor wave A may be complete. Minor wave B may be an incomplete double combination.

Within minor wave B, minute wave w may be a complete zigzag. Minute wave x may join the double in the opposite direction as a zigzag. Minute wave y may now continue as a flat correction.

Within minute wave y, minuette wave (b) must subdivide as a corrective structure and must retrace a minimum 0.9 length of minuette wave (a) at 62.14 or higher.

When minuette wave (b) has met the minimum requirement and may be a complete corrective structure, then minuette wave (c) may begin and unfold lower to end below the end of minuette wave (a) at 51.00 to avoid a truncation.

The purpose of double combinations is to take up time and move price sideways. To achieve this purpose the second structure in the double usually ends about the same level as the first.

ALTERNATE ELLIOTT WAVE COUNT

MONTHLY CHART

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It is possible that the bear market is over for Oil and a new bull market has begun.

For a bullish wave count for Oil, the upwards wave from the major low at 26.06 in February 2016 must be seen as a complete five wave impulse. This is labelled cycle wave I.

Cycle wave II may be a complete zigzag at 0.679 the depth of cycle wave I.

A target is calculated for cycle wave III to reach a common Fibonacci ratio to cycle wave I.

Within cycle wave III, no second wave correction may move beyond the start of its first wave below 42.37.

WEEKLY CHART

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This weekly chart shows detail of cycle wave I as a five wave impulse.

Cycle wave II does look best as a three. This is the only part of this wave count that has a better look than the main wave count, which sees this downwards wave as a five.

The upwards wave of primary wave 1 within cycle wave III must be seen as a five wave structure for a bullish wave count to work. This movement at lower time frames does not subdivide well as a five; this reduces the probability of this wave count.

Cycle wave III may only subdivide as an impulse. Within cycle wave III, so far primary wave 1 may be complete. Primary wave 2 may be moving sideways as a double combination. Primary wave 2 may not move beyond the start of primary wave 1 below 42.37.

DAILY CHART

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Primary wave 2 may be continuing as a double combination.

The first structure in the double would be complete, a zigzag labelled intermediate wave (W). Within intermediate wave (W), minor wave C ends with a slight truncation for minute wave v. This is acceptable.

The double may be now joined by a complete three in the opposite direction, a zigzag labelled intermediate wave (X).

Intermediate wave (Y) may now be completing as a running contracting or barrier triangle.

Within the triangle of intermediate wave (Y), minor waves A, B and C may be complete.

Within a contracting triangle, minor wave D may not move beyond the end of minor wave B above 63.38.

Within a barrier triangle, minor wave D should end about the same level as minor wave B at 63.38, so that the B-D trend line looks essentially flat. In practice this means minor wave D may end very slightly above the end of minor wave B and the triangle may remain valid.

Minor wave D may be subdividing as a double zigzag. One of the five sub-waves of a triangle normally subdivides as a more complicated multiple; wave D is the most likely to do so.

Finally, for both a contracting and barrier triangle, minor wave E may not move beyond the end of minor wave C below 51.00.

Primary wave 2 may not move beyond the start of primary wave 1 below 42.37.

When the structure of primary wave 2 may be complete for this bullish wave count, then an upwards breakout would be expected.

TECHNICAL ANALYSIS

MONTHLY CHART

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There is now double bullish divergence between price and On Balance Volume. This supports the alternate Elliott wave count.

Overall, price has been moving sideways for a few months now. Within this sideways movement, the downwards month of May has greatest range and volume; this supports the main Elliott wave count.

WEEKLY CHART

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Price is back within a consolidation zone with resistance about 64 and support about 50. On Balance Volume is also range bound. A breakout is required for confidence in a new trend.

Downwards movement comes with increasing ATR and upwards movement comes with declining ATR since the last major high in October 2018. This offers reasonable support to the main Elliott wave count.

DAILY CHART

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For the short term, a very long lower wick and overall support from volume for upwards movement this week suggest more upwards movement next week.

Price remains range bound. There is no clear trend.

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