Lara’s Weekly: Elliott Wave and Technical Analysis of S&P500 and Gold and US Oil | Charts – December 20, 2019

S&P 500

All week upwards movement has been expected, which is exactly what has happened.

Price is closing in on the target zone of 2 points, which is calculated from a gap and using Fibonacci ratios in the Elliott wave structure.

Summary: The next target is now at 3,238 to 3,240, which now looks reasonable. About this target a fourth wave correction may begin which should last about two weeks or so and may end somewhere within the range of 3,154.26 to 3,070.49 (the upper edge of this range is preferred).

Thereafter, the next target is at 3,302 for a larger fourth wave correction and then 3,336 for an even larger fourth wave correction.

Three large pullbacks or consolidations (fourth waves) during the next 1-2 years are expected: for minor wave 4 (coming soon), then intermediate (4), and then primary 4. Some weakness prior to each of these corrections may be evident in technical analysis. Today there is no weakness, but conditions are becoming extreme. Extreme conditions warrant more careful attention to risk management at this time.

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 alternative wave count which considered an ending diagonal has been invalidated. While it is possible a diagonal may become an alternate wave count in coming weeks or months, at this stage the structure does not fit.

At this stage, cycle wave V may take another one to two or so years to complete.

The daily chart below will focus on movement from the end of intermediate wave (2) 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. It is my judgement that the two weekly wave counts published in this analysis have the highest probability, so they shall be the only wave counts published on a daily 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 has passed 1.618 the length of minor wave 1, and within it minute wave v has passed equality in length with minute wave i. The next target may be about 3,238 where minute wave v would reach 1.618 the length of minute wave i.

At this stage, the structure of minute wave v within minor wave 3 may be very close to completion.

Minor wave 2 was a sharp deep pullback, so minor wave 4 may be expected to be a very shallow sideways consolidation to exhibit alternation. Minor wave 2 lasted 2 weeks. Minor wave 4 may be about the same duration, or it may be a longer lasting consolidation. Minor wave 4 may end within the price territory of the fourth wave of one lesser degree; minute wave iv has its range from 3,154.26 to 3,070.49.

Minor wave 4 may not move into minor wave 1 price territory below 3,021.99.

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. Intermediate wave (3) has now moved beyond the end of intermediate wave (1), meeting a core Elliott wave rule, and it has moved high enough now to give room for intermediate wave (4).

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

Draw an acceleration channel now about intermediate wave (3): draw the first trend line from the end of minor wave 1 to the last high, then place a parallel copy on the end of minor wave 2. Keep redrawing the channel as price continues higher. When minor wave 3 is complete, then this channel would be an Elliott channel and may show where minor wave 4 may find support if it is long lasting or deep enough.

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 still need another year to two or so to complete, depending upon how time consuming the corrections within it may be.

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

TECHNICAL ANALYSIS

MONTHLY CHART

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There are three large consolidations noted on this chart, in shaded areas. After a breakout from a multi-month consolidation, it is reasonable to expect a multi month bullish move may result.

This chart very clearly exhibits rising price on declining volume has now persisted for several years. A decline in volume last month, in current market conditions, is not of concern.

On Balance Volume supports the Elliott wave count.

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.

This chart is overall bullish. There are no signs of weakness in upwards movement.

This week RSI reaches into overbought. That does not mean upwards movement must end here, because it can continue for several weeks while RSI reaches more extreme. RSI reaching into overbought is a warning that conditions are now becoming extreme. A pullback or consolidation will follow and the longer conditions are extreme the closer this will be. However, assume the trend remains the same until proven otherwise. This warning should be heeded by careful attention to risk management.

DAILY CHART

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There is an upwards trend in place. There will be corrections along the way.

Like the weekly chart, this chart is bullish. Divergence between price and RSI has now disappeared. This chart at the end of this week is now more bullish.

With RSI overbought at both daily and weekly time frames, members are advised to pay careful attention to risk management. A larger pullback or consolidation will come to relieve extreme conditions. A bearish signal in the form of a candlestick reversal pattern, a 90% downwards day, strong bearish divergence in On Balance Volume or the AD line, or a combination of these signals, will be looked for. No bearish reversal signs are evident this week.

There is still room for this upwards trend to continue.

The measuring gap at 3,240 remains valid. Now another gap gives a second target at 3,230.

When this market trends, Stochastics may remain overbought for a very long time. Stochastics should be used to identify swings within a consolidation and not extremes of bull and bear trends.

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 mid 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.

All of small, mid and large caps have made new swing highs above the prior swing high on the 13th of September, and this week mid caps have now 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.

Again both price and the AD line have made new all time highs. There is no divergence. Upwards movement has support from rising market breadth.

Large caps all time high: 3,225.54 on 20th December 2019.

Mid caps all time high: 2,069.95 on 20th December 2019.

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.

Breadth should be read as a leading indicator.

On Friday price has moved higher but failed by a very small margin to make a new all time high. The AD line has moved higher to make a new all time high but only by a very small margin. This divergence is bullish, but it is weak.

Again again both price and the AD line have made new all time highs. Upwards movement has support from rising market breadth. This is bullish.

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 price makes new highs, but inverted VIX does not. There is now short, mid and long-term bearish divergence between price and inverted VIX.

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 moved higher, but inverted VIX has remained essentially flat. There is no single day, short, mid and long-term bearish divergence between price and VIX. This is taken as an early warning in this analysis of a deeper pullback or longer lasting consolidation to come, but it is not useful as a timing tool at this stage.

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

Sideways movement has continued all week.

On Balance Volume is squeezed between contracting trend lines. A breakout must now come in a very few sessions. On Balance Volume may either precede a breakout from price or may confirm a breakout from price.

Summary: The downwards trend may resume to new lows. The Elliott wave target is at 1,348.

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

For the very short term, a new swing high above 1,514.29 would add some confidence in a more bullish outlook. The target would then be at 1,567, 1,635 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 1,559 is required first.

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

Grand SuperCycle analysis is here.

Monthly charts were last updated here.

BEARISH ELLIOTT WAVE COUNT

WEEKLY CHART

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It is possible that Super Cycle wave (b) is 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. At that stage, targets for Super Cycle wave (c) would be calculated.

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. Along the way down, the lower edge of the channel may provide support and in turn initiate a bounce.

Super Cycle wave (c) must subdivide as a five wave structure, most likely an impulse. It may last several years. It would be very likely to make new lows below the end of Super Cycle wave (a) at 1,046.27 to avoid a truncation.

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.

If there has been a trend change at Super Cycle degree, then a five down needs to develop on the daily and weekly charts. So far that is incomplete. It will be labelled intermediate wave (1).

Typically, Gold begins new trends slowly with overlapping first and second waves, and then momentum builds through the middle of the third wave and may explode at the end of third waves. So far this overlapping movement from the last high in September looks typical for this market.

Draw a best fit channel about minuette wave (ii) to contain all of this bounce. When this channel is breached by downwards movement, then that shall provide indication that a third wave down is underway. Expect any bounces to find resistance at the upper edge while price remains within the channel.

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 be complete as a single zigzag. Within the zigzag, intermediate wave (C) is just 3.56 short of equality in length with intermediate wave (A). Intermediate wave (B) is a running contracting triangle.

It is possible for this wave count that primary wave B could continue lower as a double zigzag. Primary wave B may not move beyond the start of primary wave A below 1,266.61.

A new low now below 1,446.68 would see primary wave B relabelled as a double zigzag, continuing lower.

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, which is one reason why the bearish wave count is preferred 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 70 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 single zigzag. Primary wave 4 may have lasted 49 sessions, just six 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.

If primary wave 4 is a single zigzag, then there is no alternation in structure with the single zigzag of primary wave 2. There is some alternation within the structures: primary wave 2 as a zigzag has intermediate wave (B) as a zigzag, while intermediate wave (B) within the zigzag of primary wave 4 is a triangle. Primary wave 2 is shallow at 0.43 the length of primary wave 1, and primary wave 4 is close to the same at 0.38 the length of primary wave 3. There is inadequate alternation in depth.

TECHNICAL ANALYSIS

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.

A very strong downwards week with strong support from volume seven weeks ago supports a bearish view.

Since the high in early September, volume offers more support to downwards movement than upwards.  The last six weeks of choppy overlapping upwards movement are unconvincing as a new trend and look more like a counter trend movement.

DAILY CHART

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

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

The downwards breakout from the triangle had strong support from volume pushing price lower, so confidence may be had in the breakout. Now three back tests of resistance at the lower triangle trend line have completed; resistance has successfully held there.

Price has been moving higher since the 12th of November making a series of short-term highs, but On Balance Volume has not been making corresponding short-term highs. This upwards movement looks weak in terms of On Balance Volume, volume and range. This still looks like a counter trend movement.

Price is still at resistance at the lower triangle trend line, and On Balance Volume is again at resistance. A technical principle is the more often support or resistance is tested, the more technically significant it becomes. Resistance here has been tested now about 11-12 times; it is highly technically significant. It looks reasonable here to expect downwards movement sooner rather than later.

GDX WEEKLY CHART

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GDX, like Gold, often begins a new trend slowly with overlapping and flat or declining ATR. From the last major high at 30.96 a few weeks ago, there has been a strong Bearish Engulfing pattern and strong downwards weeks with greater range and volume than upwards weeks. GDX may have had a trend change. However, bullish divergence between price and On Balance Volume is strong and persistent; it contradicts the view of a trend change.

The short term after this week is inconclusive. Volume has not pushed price lower this week.

GDX DAILY CHART

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GDX has made a new swing low. There is now a series of four lower swing highs and four lower swing lows from the high on the 4th of September. It 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.

Some push from volume for the last downwards session suggests more downwards movement for the short term.

US OIL

Upwards movement for the week has continued. Price is now right at the upper edge of a triangle trend line.

Summary: The triangle may again be complete. A downwards breakout may occur next week. This view has support from a Bearish Engulfing pattern on the daily chart, in conjunction with weak volume and declining range in upwards movement of the last week.

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

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 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 may now have begun, 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. 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 wave 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 a complete triangle or may continue further sideways as a 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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This daily chart will now show movement within the triangle from the low of the 7th of August 2019, labelled intermediate wave (B).

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.

Intermediate wave (E) may again be a complete zigzag. Intermediate wave (E) may have ended with a small overshoot of the (A)-(C) trend line. This is not the most common point for E waves of triangles to end, but it is the next most common after an undershoot.

It is still possible that minor wave C may continue higher. Intermediate wave (E) may not move beyond the end of intermediate wave (C) above 63.38.

A new low below 58.11 could not be a second wave correction within minute wave v of minor wave C of intermediate wave (E), so at that point intermediate wave (E) should be over.

DAILY CHART II

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This daily chart begins from the end of minute wave w.

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. More upwards movement for this wave count is still required. The structure of subminuette wave c within minuette wave (b) is still incomplete, and the minimum requirement for minuette wave (b) has not been met.

Within subminuette wave c, micro wave 4 may not move into micro wave 1 price territory below 59.83. If price makes a new low below this point next week,  then this second wave count may be discarded in favour of the first daily chart.

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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This daily chart begins from the end of minor wave A.

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. The structure of minor wave D at this stage for this wave count looks incomplete. It should move higher.

Within minor wave D, the second zigzag labelled minute wave y may be incomplete. Within minute wave y, minuette wave (c) must subdivide as a five wave structure. Minuette wave (c) may be an almost complete impulse. Within the impulse, subminuette wave iv may not move into subminuette wave i price territory below 58.74.

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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A large triangle may be unfolding. Classic triangles may be either continuation or reversal patterns. A breakout is required before they may be acted on and a target may be calculated. A further reduction in range and decline in volume this week is bearish at least for the short term. A slightly long upper wick on the last weekly candlestick is also slightly bearish short term. Resistance should be expected here at the upper edge of the triangle pattern.

DAILY CHART

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Price remains range bound. There is no clear trend.

The Bearish Engulfing pattern fully engulfs the prior two daily candlesticks, with a little support from volume. While Stochastics is extreme and price is at resistance at the upper edge of the triangle on the weekly chart, this pattern should be given weight. It looks more strongly now like a high may be in place, at least for the short term to mid term.

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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.

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