S&P 500

Upwards movement was expected from both short-term Elliott wave counts yesterday, which is how the session has unfolded.

Summary: Upwards movement to a final target at 3,058 or 3,238 may have just begun. Use the lower edge of the redrawn Elliott channel to indicate where support may be found on the way up.

This bounce that began on 23rd of March is still expected to be a counter trend bounce within an ongoing bear market. When the bounce is complete, then the bear market is expected to resume with strength.

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

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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

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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.

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 downwards. Primary wave B may not move beyond the start of primary wave A above 3,393.52.

Draw a channel about intermediate wave (B) using Elliott’s technique for a correction. Draw the first trend line from the start of minor wave A to the end of minor wave B, then place a parallel copy on the end of minor wave A. Minor wave C may have slightly overshot the lower edge of the channel.

Redraw the channel about primary wave B using Elliott’s technique for a correction. Draw the first trend line from the start of intermediate wave A to the end of intermediate wave B, then place a parallel copy on the end of intermediate wave A. Intermediate wave C may find resistance at the upper edge of the channel. While intermediate wave C unfolds higher, any smaller pullbacks within it may find support at the lower edge of this channel.

ALTERNATE DAILY CHART

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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.

TECHNICAL ANALYSIS

WEEKLY CHART

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A bullish long lower wick suggests upwards movement next week.

DAILY CHART

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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 0.63 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.

Price remains range bound with resistance about 2,950 and support about 2,800. A breakout from this range is required for confidence in the next direction for price.

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.

Breadth should be read as a leading indicator.

Last week’s bullish divergence has not been followed by upwards movement, so it is considered to have failed. This week price completed an outside week, which has closed red. The AD line has declined. There is no new 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.

Last session noted bullish divergence, which has now been followed by upwards movement, so it is considered to have been predictive.

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

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.

Last week’s bullish divergence has not been followed by upwards movement, so it is considered to have failed. This week price completed an outside week, which has closed red. Inverted VIX has declined. There is no new 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.

Last session noted bullish divergence, which has now been followed by upwards movement, so it is considered to have been predictive.

This session both price and inverted VIX have moved higher.  There is no new divergence.

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.

GOLD

A new high invalidates the first two Elliott wave counts and provides confidence in the second. Only two Elliott wave counts now remain valid.

Summary: The target is at 1,795 (bull) or 1,980 (bear). The invalidation point is at 1,693.39.

Grand SuperCycle analysis is here.

Monthly charts were last updated here.

MAIN BEARISH ELLIOTT WAVE COUNT

WEEKLY CHART

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Super Cycle wave (b) may be an incomplete 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 combination 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.

DAILY CHART

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Primary wave C may be an incomplete five wave impulse. Intermediate waves (1) through to (3) within primary wave C may be complete. Intermediate wave (4) may be a regular contracting triangle. Minor wave E within the triangle may now be complete. No second wave correction within intermediate wave (5) may move beyond the start of its first wave below 1,693.39.

The point in time at which an Elliott wave triangles trend lines cross over is sometimes when a trend change occurs. Extend the triangle trend lines from intermediate wave (4) outwards. They may cross over on the 29th of May. A trend change may occur on this date to either down or sideways.

ALTERNATE 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 on 3 December 2015.

If Gold is in a new bull market, then it should begin with a five wave structure upwards on the weekly chart.

Cycle wave I fits as a five wave impulse with reasonably proportionate corrections for primary waves 2 and 4.

Cycle wave II fits as a double flat. However, within the first flat correction labelled primary wave W, this wave count needs to ignore what looks like an obvious triangle from July to September 2016 (this can be seen labelled as a triangle on the bear wave count above). This movement must be labelled as a series of overlapping first and second waves.

Within the first flat correction labelled primary wave W of the double flat of cycle wave II, intermediate wave (B) is 1.69 the length of intermediate wave (A). This is longer than the common range of up to 1.38, but within an allowable guideline of up to 2. The length of intermediate wave (B) reduces the probability of this wave count.

Cycle wave III may be complete. Cycle wave IV may not move into cycle wave I price territory below 1,303.51.

DAILY CHART

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Cycle wave IV may be an incomplete expanded flat correction. Primary wave A within the flat correction may have subdivided as a zigzag. Primary wave B may now be an incomplete zigzag.

Intermediate waves (A) and (B) may be complete. Intermediate wave (C) may have begun. No second wave correction within intermediate wave (C) may move beyond its start below 1,693.39.

The normal range for primary wave B within a flat would be from 1 to 1.38 times the length of primary wave A, giving a range from 1,701.61 to 1,795.98. The target calculated would see primary wave B end right at the upper edge of this normal range.

TECHNICAL ANALYSIS

WEEKLY CHART

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A bullish signal this week supports the Elliott wave counts. The upwards trend remains extreme.

DAILY CHART

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Price has closed above the upper edge of a triangle pattern. A target is at 1,849. However, a lack of support from volume for upwards movement indicates this market may currently be vulnerable to pullbacks. Extra caution regarding risk management is advised at this time.

Overall, this chart is bullish. An upwards trend may be resuming. There is plenty of room for it to continue before conditions again become extreme. The only concern today is volume. This chart supports the Elliott wave counts.

GDX WEEKLY CHART

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A bullish long lower wick suggests more upwards movement next week. It may be limited though because volume does not support upwards movement.

GDX DAILY CHART

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A flag may have completed. A target calculated from the flag pole is at 38.92. The breakaway gap may offer support at 35.45.

US OIL

Upwards movement continues as expected. A new high slightly above 29.14 invalidates the alternate idea and adds confidence to the main Elliott wave count.

Summary: Oil may have found a major sustainable low. Technical analysis supports this view. Confidence in this view may now be had with a new high above 29.14.

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 has completed a three steps back pattern, which began in July 2008. The Elliott wave count expects that the bear market for US Oil may now be over.

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 w. 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 is almost complete, labelled cycle wave y.

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. This purpose has now been achieved. The structure within primary wave C may now be complete.

A channel is drawn about Super Cycle wave (II): draw the first trend line from the start of cycle wave w to the end of cycle wave x, then place a parallel copy on the end of cycle wave w. Price has bounced up off the channel. This trend line is breached, which is a typical look for the end of a movement for a commodity.

Following five waves up and three steps back should be another five steps up. Super Cycle wave (III) may last a generation and must make a new high above the end of Super Cycle wave (I) at 146.73.

Super Cycle wave (III) may only subdivide as a five wave impulse. New trends for Oil usually start out very slowly with short first waves and deep time consuming second wave corrections. Basing action over a few years may now begin.

WEEKLY CHART

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This weekly chart shows all of cycle wave y.

Cycle wave y subdivides as a zigzag.

Primary wave C is now a complete five wave impulse.

Within Super Cycle wave (III): no second wave correction may move beyond the start of its first wave below 10.24.

DAILY CHART

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Primary wave C may now be a complete five wave impulse.

Within a new trend: no second wave correction may move beyond the start of the trend, below 10.27.

Labels are added for Super Cycle wave (III). Although the numbers are placed along the direction arrow, this does not mean that it is expected that Super Cycle wave (III) will move in a straight line. Markets do not move in straight lines; there are counter trend movements along the way.

All of the second wave corrections within Super Cycle wave (III) may be deep and time consuming, particularly intermediate wave (2) and primary wave 2. It is normal for Oil for counter trend movements early on in a new developing trend to be deep and time consuming as price forms basing action. This may take several months to possibly even years for Oil.

ALTERNATE ELLIOTT WAVE COUNT

MONTHLY CHART

The alternate idea is now invalidated with a new high above 29.14, so it is discarded.

TECHNICAL ANALYSIS

WEEKLY CHART

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Now two bullish reversal patterns with RSI reaching oversold and then exhibiting bullish divergence suggest a low may now be in place.

This week sees price close near highs with some increase in volume. More upwards movement may be expected next week.

DAILY CHART

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Price has closed above a small sideways consolidation with a little support from volume effecting an upwards breakout.

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