S&P 500

Overall, for this week the first wave count has expected a pullback or consolidation to continue. A downwards week fits this expectation.

Summary: Downwards movement may continue next week.

The first wave count expects that a pullback or consolidation to last a few weeks is about two thirds complete. It may find support about 3,259, 3,055 (now most likely) or 2,725.

The second wave count considers the possibility that a once in multi-generations trend change may have occurred. Some confidence in this wave count would come with invalidation of the first wave count below 2,191.86.

At this stage, a new all time high above 3,588.11 would be bullish. 

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

Last monthly charts are here. Video is here.

ELLIOTT WAVE COUNTS

FIRST WAVE COUNT

WEEKLY CHART

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Cycle wave V may last from one to several years. So far it has lasted 6 months.

Cycle wave V would most likely subdivide as an impulse. But if overlapping develops, then an ending diagonal should be considered. This chart considers the more common impulse.

Primary wave 1 may be complete. Primary wave 2 may not move beyond the start of primary wave 1 below 2,191.86.

There is already a Fibonacci ratio between cycle waves I and III within Super Cycle wave (V). The S&P500 often exhibits a Fibonacci ratio between two of its actionary waves but rarely between all three; it is less likely that cycle wave V would exhibit a Fibonacci ratio. The target for Super Cycle wave (V) to end would best be calculated at primary degree, but that cannot be done until all of primary waves 1, 2, 3 and 4 are complete. The target at 4,034 is provisional, so it may change.

DAILY CHART

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Primary wave 1 may be over and primary wave 2 may have begun.

Primary wave 2 may be a multi-week pullback or consolidation. Primary wave 2 may not move beyond the start of primary wave 1 below 2,191.86.

For the S&P500, the first multi-week second wave correction within a new trend is not always very deep. Two examples from prior bull markets: after the bear market of October 1987, the first multi-week second wave in the following bull market ended in September 1990 and was only a 0.49 correction of its corresponding first wave, and more recently the last bull market beginning in March 2009 saw its first multi-week second wave correction end in June 2009, which was only a 0.30 correction of its corresponding first wave. 

For primary wave 2, in this instance, the 0.236 Fibonacci ratio at 3,258.59 may provide support and the 0.382 Fibonacci ratio at 3,054.74 is a preferred target. If price falls through that preferred target, then the 0.618 Fibonacci ratio at 2,725.23 would be the next target.

SECOND WAVE COUNT

DAILY CHART

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This wave count is the same as the first wave count with the exception of the degree of labelling within cycle wave V. If the degree of labelling is moved up one degree, then it is possible that cycle wave V to end Super cycle wave (V) to end Grand Super Cycle wave I is complete.

A new low below 2,191.86 would add confidence in this wave count. At that stage, the first wave count would be invalidated.

A new bear market at Grand Super Cycle degree may be expected to last over a decade. It may take price below the start of Super Cycle wave (V) at 666.79 in March 2009.

TECHNICAL ANALYSIS

WEEKLY CHART

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ADX indicates an upwards trend. However, with RSI exhibiting bearish divergence and a bearish candlestick reversal pattern at the high having support from volume, further pullback or consolidation at least for the short term may be expected here.

This week saw a volume spike for options expiration on 18th September. Although volume is pushing price lower, options expiry weakens this signal.

DAILY CHART

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The short-term volume profile is now bearish.

A slightly long lower wick for Friday suggests a bounce up off support may occur on Monday at 3,295. A close below this support level should expect further falls in price to next support. The bearish signal from On Balance Volume and the bearish volume profile suggest overall more downwards movement may be expected for next week.

Look for price to find support while Stochastics is fully oversold. That is not the case yet, but it may be soon. Thereafter, a bullish candlestick pattern would indicate an end to the pullback and possibly the resumption of the upwards trend.

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.

Lowry’s Operating Companies Only AD line has still not made new all time highs. The last high for the OCO AD line was in the week beginning January 13, 2020. There is now 7 and a half months of bearish divergence between price and the OCO AD line. This may now support the more bearish second wave count. It is possible now that a major trend change may occur.

The NYSE All Issues AD line made new highs in the week beginning 1st of June.

This week price has completed an outside week and the AD line has declined. There is no new divergence.

Large caps all time high: 3,588.11 on September 2, 2020.

Mid caps all time high: 2,109.43 on February 20, 2020.

Small caps all time high: 1,100.58 on August 27, 2018.

This rise has been led by large caps, which is a feature of an aged bull market. Only large caps have made new highs above the last swing high of the 11th of August.

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.

For Friday price has made new lows below prior short-term lows of the 8th and 11th of September, but the AD line has not. There is now double bullish divergence suggesting this pullback is short term in nature. This supports the first Elliott wave count and suggests the pullback may be shallow and may end sooner rather than later.

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.

Inverted VIX remains well below all time highs. The all time high for inverted VIX was in the week beginning October 30, 2017. There is nearly 3 years of bearish divergence between price and inverted VIX. There is all of long, mid and short-term bearish divergence.

This week price has completed an outside week and inverted VIX has increased. There is no new short-term divergence.

Comparing VIX and VVIX: This week both VIX and VVIX have declined. VVIX has made a new short-term low below the low of seven weeks prior, but VIX has not. This divergence is bullish for price and supports the first Elliott wave count.

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, but inverted VIX has moved higher. Downwards movement in price has not come with a normal corresponding increase in volatility. Volatility has declined. This divergence is bullish for price.

Comparing VIX and VVIX at the daily chart level: VVIX remains at lower levels than VIX. This short-term divergence is still bullish for price.

DOW THEORY

Dow Theory still concludes a bear market is in place.

Dow Theory confirmed a bear market with the following lows made on a closing basis:

DJIA: 21,712.53 – a close below this point was been made on the March 12, 2020.

DJT: 8,636.79 – a close below this point was been made on March 9, 2020.

Adding in the S&P and Nasdaq for an extended Dow Theory, a bear market was confirmed:

S&P500: 2,346.58 – a close below this point was made on March 20, 2020.

Nasdaq: 7,292.22 – a close below this point was made on the March 12, 2020.

At this time, to shift Dow Theory from viewing a bear market to confirmation of a new bull market would require new highs made on a closing basis:

DJIA: 29,568.57

DJT: 11,623.58

Adding in the S&P and Nasdaq for an extended Dow Theory, confirmation of a bull market would require new highs made on a closing basis:

S&P500: 3,393.52 – closed above on 21st August 2020.

Nasdaq: 9,838.37 – closed above on June 8, 2020.

GOLD

For a fifth week now price has moved sideways in a triangle pattern. There has still been no breakout.

Summary: On Balance Volume suggests an upwards breakout from the triangle may be imminent. The upwards trend may resume.

The next target is now at 2,100.

However, the alternate daily wave count considers a downwards breakout from the current triangle (after possibly a short and false upwards breakout).

A new low below 1,764.12 at any time frame would invalidate the first daily chart and add confidence in an alternate daily chart. At that stage, a sustainable high would be in place and a new downwards trend to last months may be underway.

Grand SuperCycle analysis is here.

Last analysis of monthly charts is here with video here.

FIRST ELLIOTT WAVE COUNT

WEEKLY CHART

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The bigger picture for this first Elliott wave count sees Gold as still within a bear market, in a three steps back pattern that is labelled Grand Super Cycle wave IV on monthly charts. The common range for Super Cycle wave (b) is from 1 to 1.38 times the length of Super cycle wave (a), giving a range from 1,920.18 to 2,252.27. The target would see Super Cycle wave (b) end within this most common range.

Super Cycle wave (b) within Grand Super Cycle wave IV may be an incomplete double zigzag. When Super Cycle wave (b) may be complete, then this wave count expects Super Cycle wave (c) to begin and to move price below the end of Super Cycle wave (a) at 1,046.27.

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.

Primary wave C within cycle wave y may be subdividing as an impulse. Intermediate waves (1) through to (4) within primary wave C may be complete. If it continues any lower, then intermediate wave (4) may not move into intermediate wave (1) price territory below 1,764.12.

We should always assume the trend remains the same until proven otherwise. At this stage, Gold is in a bull market.

DAILY CHART

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The daily chart shows detail of primary wave C as an incomplete impulse.

Intermediate waves (1) through to (4) within primary wave C may be complete. Intermediate wave (4) may be a complete triangle.

If it continues lower, then intermediate wave (4) may not move into intermediate wave (1) price territory below 1,764.12.

The channel is drawn as a best fit. The lower edge may be a guide to where pullbacks find support.

Intermediate wave (2) was a shallow double zigzag, lasting 15 sessions. Intermediate wave (4) may be complete as a triangle, lasting 22 sessions. Triangles do tend to be longer lasting structures than zigzag and zigzag multiples.

The target expects intermediate wave (5) to be relatively brief and short. Fifth waves following fourth wave triangles for Gold are usually surprisingly short.

ALTERNATE DAILY CHART

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It is also possible that a Super Cycle degree trend change has occurred at the last high. However, we should always assume the trend remains the same until proven otherwise. Assume the upwards trend remains in place and the main wave count is correct until the upwards trend is invalidated with a new low below 1,764.12. At that stage, this would become the main wave count.

Intermediate wave (2) may be an incomplete zigzag. Minor wave B within it may be a complete triangle. Minor wave C would be likely to move at least slightly above the end of minor wave A at 2,014.05 to avoid a truncation. Intermediate wave (2) may not move beyond the start of intermediate wave (1) above 2,070.48.

Super Cycle wave (c) would be likely to make at least a slight new low below the end of Super Cycle wave (a) at 1,046.27 to avoid a truncation. If price provides confidence in this wave count with a new low below 1,764.12, then a target would be calculated for Super Cycle wave (c) to end.

SECOND 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 first wave count above). This movement must be labelled as a series of overlapping first and second waves. Ignoring this triangle reduces the probability of this wave count in Elliott wave terms.

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

DAILY CHART

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Cycle wave III may be continuing higher. The daily chart focusses on primary wave 5 within cycle wave III.

Minor wave 4 may be a complete triangle.

If minor wave 4 continues lower, then it may not move into minor wave 1 price territory below 1,764.12.

TECHNICAL ANALYSIS

WEEKLY CHART

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The upwards trend reached very extreme and RSI reached overbought. A Shooting Star and a Bearish Engulfing candlestick pattern appear at the high. Given extreme conditions, these bearish reversal patterns should be given weight; this would support the alternate daily chart. However, it is still possible that further highs may be made before a more time consuming pullback or a 180° trend change may occur.

So far sideways movement of the last 5 weeks has brought RSI down from extreme, but not by much. ADX remains high. If the upwards trend continues here, it may be limited.

DAILY CHART

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Sideways movement of the last few weeks has brought ADX and RSI down from extreme. There is again room for a trend to develop.

A triangle may be forming. While Elliott wave triangles are always continuation patterns, classic triangle patterns may be either continuation or reversal patterns. A breakout of either triangle trend line is required before a target can be calculated. An upwards breakout requires support from volume while a downwards breakout does not. The short-term volume profile suggests a downwards breakout may be slightly more likely than upwards.

A breakout is defined as a close below or above triangle trend lines.

There is a clear upwards breakout from On Balance Volume, suggesting an upwards breakout from price may now come very soon. More weight should be given to this signal from On Balance Volume than the short-term volume profile. This supports the main Elliott wave count.

GDX WEEKLY CHART

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Now two bearish candlestick reversal patterns in a Shooting Star and a Bearish Engulfing pattern indicate a trend change. With RSI reaching overbought at the high, these signals should be given weight. A trend change may be either a 180° change or a change to a sideways consolidation. So far it looks like a sideways consolidation may be forming. With volume declining as price moves sideways for the last 5 weeks, this so far looks like a possible consolidation within an ongoing upwards trend.

This week a weak bullish signal from On Balance Volume supports this view.

GDX DAILY CHART

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A triangle may be forming. A breakout either upwards or downwards is required before a target can be calculated. An upwards breakout requires support from volume for confidence.

A bearish signal from On Balance Volume suggests a downwards breakout from the triangle may be more likely than upwards. This contradicts the signal from On Balance Volume on Gold and now also the bullish signal at the weekly chart level for GDX. The signal here at the daily chart level is stronger and may be given more weight.

There has still not been a breakout of price from the triangle.

US OIL

A bounce this week remains below the short-term invalidation point. Volume supports the Elliott wave count.

Summary: Oil may have found a major sustainable low.

A multi-week pullback is expected to end about 23.05. It is possible the pullback may be deeper than this though; the first major correction within a new trend for Oil tends to be very deep.

When this pullback may be complete, then an upwards trend should resume with increased strength.

ELLIOTT WAVE COUNT

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.

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.

The upper edge of the channel may provide resistance.

Following five waves up and three steps back should be another five steps up; this is labelled Super Cycle wave (III), which may only have just begun. 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 have begun.

WEEKLY CHART

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Super Cycle wave (III) must subdivide as an impulse. Cycle wave I within the impulse may be complete. Cycle wave II may not move beyond the start of cycle wave I below 10.24.

DAILY CHART

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Cycle wave I now looks very likely to be over.

Cycle wave II may subdivide as any corrective Elliott wave structure except a triangle. At this stage, cycle wave II may be an incomplete zigzag that may end close to the 0.382 Fibonaccci ratio. Primary wave B within the zigzag may not move beyond the start of primary wave A above 43.77.

Cycle wave II may not move beyond the start of cycle wave I below 10.24.

FIRST ALTERNATE DAILY CHART

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This first alternate wave count moves the degree of labelling within cycle wave II down one degree.

Cycle wave II may be subdividing as a zigzag. Primary wave A within cycle wave II may be an incomplete impulse.

Intermediate wave (2) within primary wave A may not move beyond the start of intermediate wave (1) above 43.77.

The 0.618 Fibonacci ratio of cycle wave I at 23.05 is a preferred target, but it is possible that cycle wave II may be deeper than this.

SECOND ALTERNATE DAILY CHART

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It is also possible that the degree of labelling at the daily chart level may need to be changed back down one degree. It may be that only primary wave 1 is complete within cycle wave I and the current pullback may be primary wave 2.

Primary wave 2 may last several weeks to a few months.

TECHNICAL ANALYSIS

WEEKLY CHART

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Price has not yet reached support. Stochastics is not yet oversold. There is room for more downwards movement.

DAILY CHART

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This bounce may be a test of resistance after a break below support.

There is a bullish Piercing pattern at the low, but it is weak and lacks support from volume, so it is not convincing.

Conditions did not reach oversold and price did not reach next support on this pullback.

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