S&P 500

Downwards movement ended the week, which is what the main Elliott wave count had expected.

Summary: It may be safest to assume the downwards trend remains intact while price remains below 2,466.97. The short-term target remains at 2,173.

However, at the last low there is a Hammer reversal pattern that comes while RSI exhibits triple bullish divergence, On Balance Volume has not confirmed new lows, and ADX is now very extreme. Conditions are now set for a strong bounce. Be aware this market is vulnerable to large whipsaws.

A breach of the downwards sloping channel on the daily chart would strongly indicate a multi-day to multi-week bounce may have arrived. A new high above 2,466.97 would provide further confidence.

The final target is now at 1,708.

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

ELLIOTT WAVE COUNTS

MAIN WAVE COUNT

MONTHLY CHART

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The 0.236 and now also 0.382 Fibonacci ratios of cycle wave I have both been passed. The next Fibonnacci ratio in the sequence is used for the next target for cycle wave II to end.

The channel drawn about cycle wave I is drawn using Elliott’s first technique. This channel looks text book perfect. The channel is now strongly breached confirming an end to the bull market, which began in 2009, and confirming a new bear market to follow.

Cycle wave II may not move beyond the start of cycle wave I below 666.79.

Cycle wave II may last about one to two years in total. In the middle should be a B wave bounce or consolidation that may last some months.

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 is now below the 0.382 Fibonacci ratio of cycle wave I at 2,352. 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.

It is possible now that cycle wave II could be complete. This alternate idea may require one or more of the following conditions to be met for confidence in it:

– A 90% up day or two back to back 80% up days within three sessions from today.

– A 6 point rise in Lowry’s short-term index.

– A new high by the AD line.

– A new high above 3,393.52.

– A bullish candlestick reversal pattern with support from volume at the daily, weekly or monthly chart level.

Cycle wave II may not move beyond the start of cycle wave I below 666.79.

DAILY CHART

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Redraw 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.

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 an incomplete five wave impulse. Primary wave B may not move beyond the start of primary wave A above 3,393.52.

Within primary wave A, there is no Fibonacci ratio between intermediate waves (1) and (3). This makes it more likely that intermediate wave (5) may exhibit a Fibonacci ratio to either of intermediate waves (1) or (3). The most common Fibonacci ratio for a fifth wave is equality in length with its counterpart first wave.

FIRST ALTERNATE MONTHLY CHART

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It is also possible that an impulse higher is incomplete and the sharp fall of the last few weeks is wave C of an expanded flat correction for cycle wave IV.

Cycle wave IV may not move into cycle wave I price territory below 2,093.55.

Cycle wave III would be shorter than cycle wave I. This limits cycle wave V to no longer than equality in length with cycle wave III. If cycle wave IV moves lower, then this limit must also move correspondingly lower.

This wave count is possible.

SECOND ALTERNATE MONTHLY CHART

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This wave count is the same as the first monthly chart, but the degree of labelling is moved down one degree. It is possible that the all time high was the end of a Grand Super Cycle first wave, and a huge market crash to historic lows may have just begun.

However, at this time with the data in hand this wave count does not have good support from classic technical analysis: There was non divergence between price and market breadth at the high, and there is currently bullish divergence between both of price and On Balance Volume and the AD line. While this data could change, analysis may only be performed on data in hand at this time.

TECHNICAL ANALYSIS

WEEKLY CHART

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A 32.8% drop in price (high to low) no longer has precedent within the larger bull market.

At the weekly chart level, conditions are now oversold; it is now more possible that a bounce or consolidation may arrive.

DAILY CHART

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There are now eight 90% downwards days in this strong downwards movement.

The following indicators still suggest a low may be in place soon:

– RSI reached deeply oversold and now exhibits short-term triple bullish divergence with price.

– Stochastics reached oversold and now exhibits short-term bullish divergence with price.

– On Balance Volume continues to exhibit double bullish divergence with price. On Balance Volume has failed to confirm the last three days’ lows.

If price bounces here, then it would most likely be a correction within an ongoing bear market and not necessarily the end of the bear market.

At this stage, there is not any evidence of a sustainable low in place.

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 no divergence between the AD line and price at the last all time high, this current bear market now makes a third exception.

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.

This bear market comes after no bearish divergence. It would more likely be shallow, but this is a statement of probability and not certainty. So far it is slightly more than the 0.382 Fibonacci ratio of the bull market it is correcting (beginning March 2009).

Again this week price made new lows below prior lows of August 2019, but the AD line has not. This fall in price does not have support from a corresponding decline in market breadth. This divergence is bullish and supports the view that this bear market may more likely be shallow.

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.

Breadth should be read as a leading indicator.

Both price and breadth have moved lower on Friday. Neither made new lows. There is no new short-term 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.

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. It may now be resolved by this last fall in price, which meets the technical definition of a bear market.

This week both price and inverted VIX moved lower to new lows. 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.

On Friday price has moved lower, but inverted VIX has moved higher. This divergence is bullish.

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

The week ends with mostly sideways movement after reaching somewhat below a target for a short-term bounce on Monday.

Summary: A bounce or sideways movement may end next week. It may be fairly deep. The bounce may be either quick and sharp, or it may be a time consuming sideways consolidation. The 0.618 Fibonacci ratio at 1,602 may be a preferred target.

Thereafter, the downwards trend may resume.

Grand SuperCycle analysis is here.

Monthly charts were last updated here.

BEARISH ELLIOTT WAVE COUNT

WEEKLY CHART

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Super Cycle wave (b) may be a complete 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 wide best fit channel is added in light blue. Copy this channel over to daily charts. Price has now closed back below the upper edge of this channel.

DAILY CHART

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Super Cycle wave (b) may be complete.

The second zigzag in the double, labelled cycle wave y, may be complete. There is no Fibonacci ratio between primary waves A and C.

If there was a trend change at Super Cycle degree, then a five down should develop at daily, weekly and monthly time frames. The first five down at the daily chart level will be labelled intermediate wave (1), and it may be incomplete. Within intermediate wave (1), minor wave 1 may now be complete and minor wave 2 may not move beyond the start of minor wave 1 above 1,701.61.

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. This resolves a previous major problem with the bullish wave count.

Cycle wave II now fits as a double flat. However, a problem arises with the relabelling of this structure. Within the first flat correction labelled primary wave W, this wave count now 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 now 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 III may be complete. Cycle wave IV may not move into cycle wave I price territory below 1,303.51.

Cycle wave II was relatively deep at 0.55 of cycle wave I. If cycle wave IV exhibits alternation in depth, it may more likely be shallow; the first target at 0.382 of cycle wave III would be preferred.

Cycle wave II was a very long lasting double combination. It lasted 119 weeks. Cycle wave IV may most likely be a zigzag, which tend to be quicker structures, but it would still be expected to last several months.

TECHNICAL ANALYSIS

WEEKLY CHART

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The Bearish Engulfing pattern is extreme. The pattern fully engulfs the prior nine weekly candlesticks, and it has some support from volume. This strongly indicates a trend change after the upwards trend reached very extreme and conditions reached overbought and exhibited bearish divergence.

Price does not move in straight lines. Look out for bounces and consolidations on the way down. Price is currently moving sideways above support about 1,450 to 1,455.  Below that is very strong support about 1,375.

A decline in volume this week and a slightly long lower wick suggest sideways movement may continue further or a bounce may develop.

DAILY CHART

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Overall, price continues to move mostly sideways with a decline in range and a decline in volume. This looks like a small pause within an ongoing new downwards trend.

GDX WEEKLY CHART

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GDX is a reasonable distance off new highs. The last signal was very bearish from a strong Bearish Engulfing pattern.

There is support below in a zone about 16.75 to 15.85. Price has bounced up strongly again within this zone.

The last weekly candlestick suggests more downwards movement next week with a bearish long upper wick, but this is contradicted by a weak bullish signal from On Balance Volume. This week is inconclusive.

GDX DAILY CHART

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There has been a trend change to downwards. This trend has support from volume pushing price lower and exhibits strength in increasing ATR.

The 55 day moving average has crossed below the 200 day moving average. This is fairly bearish.

The last three sessions look like sideways movement within an ongoing downwards trend.

US OIL

Price continues to fall toward the final target.

Summary: A short to mid-term target for intermediate wave (3) is at 11.92. Intermediate wave (4) may be a multi-day interruption to the downwards trend. Thereafter, the downwards trend may resume to a final target at 9.77.

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. This purpose has now been achieved. The next thing to look for is a complete structure within primary wave C.

Primary wave C has passed equality in length with primary wave A at 31.11.  The next Fibonacci ratio of 1.618 is used to calculate a target for primary wave C and cycle wave y to end.

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 now looks like it may be over within a few more months.

Within primary wave C, no second wave correction may move beyond the start of its first wave above 65.64.

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. Currently, price is bouncing up off the lower edge of the channel. This lower trend line may provide support and initiate a multi-day or multi-week bounce prior to the next target.

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 C must subdivide as a five wave motive structure, most likely an impulse. Within primary wave C, intermediate waves (1) and (2) may be complete. Intermediate wave (3) may be incompete.

If this analysis is wrong, it may be in expecting intermediate wave (3) to continue lower. It is possible that intermediate wave (3) may end here at support at the lower edge of the large channel copied over from the monthly chart. For confidence in the short to mid-term target on the daily chart below, the lower edge of the channel needs to be breached.

Intermediate wave (4) may not move into intermediate wave (1) price territory above 49.32.

DAILY CHART

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Primary wave C must subdivide as a five wave motive structure, most likely an impulse. Within primary wave C, intermediate waves (1) and (2) may now be complete.

A new target is calculated for intermediate wave (3) to end.

Draw an acceleration channel about primary wave C: draw the first trend line from the end of intermediate wave (1) to the last low, then place a parallel copy on the end of intermediate wave (2). Keep redrawing the channel as price moves lower. Intermediate wave (4) may find resistance at the upper edge of the channel.

When intermediate wave (4) may be complete, then the final target may be calculated at intermediate, primary and cycle degrees. At that stage, the target may change or may widen to a zone.

ALTERNATE ELLIOTT WAVE COUNT

This week the alternate bullish wave count (which was judged to have a lower probability) has been invalidated with a new low below 26.06. There is now only wave count left for Oil.

TECHNICAL ANALYSIS

MONTHLY CHART

Click chart to enlarge. Chart courtesy of StockCharts.com.

When this market trends strongly down, it can reach extreme and yet price can continue for a reasonable distance.

A sustainable low may not yet be in place. Look for RSI to reach more deeply oversold and then to exhibit bullish divergence with price at swing lows.

WEEKLY CHART

Click chart to enlarge. Chart courtesy of StockCharts.com.

This measuring gap gives a target at 22.74, which has now been met and slightly exceeded. A bounce may develop about here.

Overall, expect the downwards trend to continue (but keep in mind price does not move in straight lines).

DAILY CHART

Click chart to enlarge. Chart courtesy of StockCharts.com.

A downwards trend is now in place at all time frames. Both volume and range support this trend.

RSI and Stochastics may remain very extreme for reasonable periods of time when this market trends. ADX may also remain very extreme for reasonable periods of time.

Bullish divergence between price and RSI is too weak to indicate a sustainable low.

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