S&P 500

Price at the end of the week has been unable to break out of a range with support about 3,200 and resistance about 3,280. VIX and VVIX give a slight signal that supports the main Elliott wave count, but two alternates remain valid.

Summary: It is possible that the bounce is over and the bear market has resumed. Slight divergence between VIX and VVIX, and remaining clear divergence between price and RSI, support this main wave count. A new low below 3,127.66 would add reasonable confidence to this view. A new low below 2,965.66 would invalidate the alternate bullish wave count and add strong confidence in a bearish wave count.

Price broke above small bullish flag pattern on Friday. A short-term classic analysis target would be at 3,405. This fits the bullish alternate Elliott wave count, which now has some support from classic technical analysis and should be seriously considered. A new high above 3,393.52 would provide confidence in this wave count. A new high above 3,328.45 would increase probability of a bullish wave count. 

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

Last monthly charts are here. Video is here.

ELLIOTT WAVE COUNTS

MAIN WEEKLY CHART

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This main Elliott wave count expects that the bull market beginning in March 2009 was cycle wave I of Super Cycle wave (V). The trend change in February 2020 may have been only at cycle degree. Cycle wave II may last from one to a few years.

Cycle wave II would most likely subdivide as a zigzag; thus far that looks like what is unfolding. At the end of this week, again both of primary waves A and B may be complete. A target is calculated for primary wave C to end.

As price approaches the first target, if the structure may be complete, then it may end there. But if the structure is incomplete or price keeps falling, then attention would turn to the second target.

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 was fully breached in March 2020 indicating a trend change from the multi-year bull trend to a new bear trend. During the next downwards wave this line may offer some support.

Cycle wave II may subdivide as any Elliott wave corrective structure except a triangle. It would most likely be a zigzag (zigzags subdivide 5-3-5).

Primary wave B may now be a complete double zigzag.

If primary wave A is correctly labelled as a five wave impulse, and if primary wave B continues higher, then it may not move beyond the start of primary wave A above 3,393.52.

FIRST ALTERNATE WEEKLY CHART

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This alternate weekly chart follows the First Alternate Monthly chart. It is best viewed on a weekly chart time frame.

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. The bull market from March 2009 to February 2020 may have been a complete fifth wave labelled Super Cycle wave (V).

A bear market 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 an incomplete double zigzag.

If it continues any higher, then cycle wave II may not move beyond the start of cycle wave I above 3,393.52.

THIRD ALTERNATE DAILY CHART – BULLISH

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This alternate daily chart follows the third alternate monthly chart. It will be published daily because the structure of the current upwards wave is different and so the invalidation point is different. This alternate chart labels the subdivisions of the long bull market differently.

The target for the end of this bull market is provisional. It would best be calculated at primary degree, but that cannot be done until all of primary waves 1 through to 4 are complete. At that stage, the target will be recalculated and will very likely change.

Cycle wave V must subdivide as a five wave motive structure, most likely an impulse. Primary wave 1 within cycle wave V may be nearing completion.

Within primary wave 1: intermediate waves (1) through to (4) may be complete.

The channel drawn about primary wave 1 using Elliott’s technique was no longer showing where price was finding support. The channel is redrawn as a best fit. A strong breach of this channel by downwards movement at this stage may see this wave count discarded. In the first instance, look for support about the lower edge.

Intermediate wave (3) within primary wave 1 is shorter than intermediate wave (1). Because intermediate wave (3) may not be the shortest actionary wave, intermediate wave (5) is limited to no longer than equality in length with intermediate wave (3) at 3,432.15.

When primary wave 1 may be a complete five wave structure, then primary wave 2 should then unfold as a multi-week pullback and may not move beyond the start of primary wave 1 below 2,191.86.

In the short term, invalidation of this wave count by a new low below 2,965.66 would add confidence to a bearish wave count.

This alternate wave count is bullish.

Bearish divergence between price and inverted VIX and RSI do not support this wave count. Weak volume does not support this wave count.

Cycle wave V may last from one to several years.

TECHNICAL ANALYSIS

WEEKLY CHART

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An inside week completes with some increase in volume for upwards movement within it. This is bullish at least for the short term. There is no bearish reversal pattern.

DAILY CHART

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The breakaway gap of 24th February has its upper edge at 3,328.45. A bearish analysis remains reasonable while this gap remains open. If this gap is closed, then a more bullish analysis that would expect new all time highs would increase in probability.

At the high within last week is a Bearish Engulfing pattern. This appears while RSI reached overbought and then exhibited bearish divergence with the prior swing high of the 8th of June. This supports the main Elliott wave count.

However, Friday completed an upwards breakout from a small flag pattern that has support from volume. A target from the flag pole would be at 3,405. This supports the third alternate bullish Elliott wave count.

The Dragonfly doji completed for Friday’s session comes in the context of a consolidation. Importantly, it has not made a new high above resistance, which remains at 3,279. The Dragonfly doji is not a reversal signal, so it is not noted on the chart.

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.

This week the NYSE all issues AD line has made another new all time high, although Lowry’s Operating Companies Only AD line still has not. This divergence is bullish and noted on this chart, but failure of the OCO AD line to confirm this divergence reduces the strength of the signal.

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.

Again, at the end of this week, it is only large caps that have made new swing highs above the prior high of the 8th of June. Small and mid caps have not. The rise over the last several weeks is led by large caps, so it lacks breadth. This is normal of an aged bullish move and supports the main 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.

Bullish divergence has now been followed by an upwards session, so it may now be resolved.

On Friday price has moved higher, but the AD line has declined. Upwards movement does not have support from rising market breadth. This divergence is bearish for the short term.

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. There remains over two years of strong bearish divergence between price and inverted VIX.

Short-term bearish divergence noted in last week’s analysis has not been followed by any downwards movement, so it may have failed.

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

Comparing VIX and VVIX: For the very short term, from weeks beginning 6th to 27th July, price has moved higher and VIX has declined; this is normal. But VVIX has not made a new short-term low and remains slightly elevated. This divergence is bearish for the short term.

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.

Bullish divergence noted in last analysis has now been followed by an upwards session, so it may now be resolved.

On Friday price made a short-term high above the high two sessions prior, but inverted VIX has not. This divergence is bearish for the short term.

Comparing VIX and VVIX: Price has moved higher and VIX has moved slightly lower from the 8th to 31st of June; this is normal. But VVIX remains slightly elevated. This divergence is bearish.

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.

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:

S&P500 – 3,393.52

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

Additionally, neither of DJIA nor DJT have made new swing highs above the prior highs of 8th of June. Only S&P500 and Nasdaq have made mid-term swing highs.

GOLD

The high remains in place although a short-term price point used for confidence has not been breached.

Summary: The target at 1,984 for a third wave to end may not be met. Intermediate wave (3) may be over. A new low below 1,911.71 is required for confidence in this view.

If price continues higher, then the first target would be at 1,984 and the next target would be at 2,175. The next longer-term target is at 2,306 or 2,250.

Grand SuperCycle analysis is here.

BEARISH ELLIOTT WAVE COUNT

MONTHLY CHART

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It is possible to see the large downwards wave labelled Super Cycle wave (a) subdividing as a double zigzag, which is a corrective structure.

If Super Cycle wave (a) has subdivided as a double zigzag, then Grand Super Cycle wave IV may be unfolding as a flat correction. A flat correction would require Super Cycle wave (b) to retrace a minimum 0.9 length of Super Cycle wave (a) at 1,832.79. This minimum has now been met.

A flat correction for Grand Super Cycle wave IV may see Super Cycle wave (b) make a new high above the start of Super Cycle wave (a) at 1,920.18 as in an expanded flat. Expanded flat corrections are fairly common Elliott wave corrective structures, particularly in fourth wave positions. The common range for Super Cycle wave (b) within a flat correction would be from 1 to 1.38 times the length of Super Cycle wave (a) from 1,920.18 to 2,252.27.

There is no Elliott wave rule stating a limit for Super Cycle wave (b) within a flat correction, so there is no rule to apply to determine an upper invalidation point for this wave count.

WEEKLY CHART

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The bigger picture for this main bearish 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.

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 (3) within primary wave C may be complete. 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 for the mid term.

DAILY CHART

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

Intermediate waves (1) through to (3) within primary wave C may be complete.

Intermediate wave (4) may not move into intermediate wave (1) price territory below 1,764.12.

Draw the channel now using Elliott’s first technique: draw a first trend line from the ends of intermediate waves (1) to (3), then place a parallel copy on the end of intermediate wave (2). Intermediate wave (4) may find support about the lower edge.

If price keeps rising next week, then at 1,984 intermediate wave (3) would reach equality in length with intermediate wave (1).

If price reaches the first target and either the structure is incomplete or price keeps rising through it, then the second higher target at 2,175 would be used, which is where intermediate wave (3) would reach 1.618 the length of intermediate wave (1).

ALTERNATE BULLISH ELLIOTT WAVE COUNT

MONTHLY CHART

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This wave count sees the large downwards wave from September 2011 to December 2015 as having the same subdivisions as the prior chart above, a double zigzag, but it moves the degree of labelling within the double zigzag up one degree.

It is possible that the bear market for Gold was over at the low in December 2015 as a double zigzag. This would see Grand Super Cycle wave IV lasting only 4.25 years, where Grand Super Cycle waves may be normally expected to last at least a decade and possibly longer. The  brevity of a Grand Super Cycle wave reduces the probability of this wave count.

If the bear market was over in December 2015, then a new bull market should have begun there. This is labelled Grand Super Cycle wave V.

Super Cycle wave (I) within Grand Super Cycle wave V would be incomplete and would be subdividing as a five wave impulse, the simplest Elliott wave structure. Cycle waves I and II within the impulse would now be complete. Cycle wave IV may not move into cycle wave I price territory below 1,303.51.

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. Ignoring this triangle reduces the probability of this wave count in Elliott wave terms.

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 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 the end of primary wave 5 within cycle wave III.

Draw a channel about intermediate wave (3) using Elliott’s first technique: draw the first trend line from the ends of minor waves 1 to 3, then place a parallel copy on the end of minor wave 2. Minor wave 4 may find support about the lower edge of the channel.

Minor wave 4 may not move into minor wave 1 price territory below 1,764.12.

TECHNICAL ANALYSIS

MONTHLY CHART

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This month effected an upwards breakout to new all time highs for Gold, with support from volume. ADX is now not extreme. RSI is overbought. Extreme conditions may persist when this market has a strong trend; this upwards trend may continue. Look for a bearish candlestick reversal pattern to signal a more time consuming consolidation or a trend change.

WEEKLY CHART

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The upwards trend at this time frame is now very extreme. RSI exhibits double bearish divergence with price (although this has weakened this week). The risk of a trend change or large consolidation here is increasing, but there is still no signal of a trend change.

DAILY CHART

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The short-term picture indicates it is possible a high may be in place, at least for the short term. A consolidation may develop here to relieve extreme conditions. The red daily candlestick and now a long upper wick while RSI is deeply overbought and ADX is very extreme suggest the risk of a trend change is very high at this point.

GDX WEEKLY CHART

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A spinning top after a strong upwards trend indicates caution, but on its own it is not a reversal signal.

GDX DAILY CHART

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A high may be in place. The last gap is now an exhaustion gap. Look for support about 37.5.

US OIL

A downwards week only fits the main daily Elliott wave count, which is the only remaining short-term wave count this week. The two alternates are now invalidated.

Summary: Oil may have found a major sustainable low.

A slow rounded top may have formed. A pullback may now begin to gather strength.

For the mid term, a multi-week pullback may end about 32.67. 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 now be unfolding higher. Cycle wave II may not move beyond the start of cycle wave I below 10.24.

DAILY CHART

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Primary wave 1 within an impulse for cycle wave I may now be complete.

Primary wave 2 may be unfolding as an expanded flat correction. Intermediate wave (A) within the flat may be a complete zigzag. Intermediate wave (B) may have completed as a double zigzag. It would be 1.24 times the length of intermediate wave (A), which is within the common range for intermediate wave (B) within a flat from 1 to 1.38 times the length of intermediate wave (A), giving a range from 40.44 to 42.75.

Intermediate wave (C) may only subdivide as a five wave motive structure, most likely an impulse. If the target is wrong, then it may not be low enough.

A target is calculated for primary wave 2 that expects a common Fibonacci ratio between intermediate waves (A) and (C).

Primary wave 2 may not move beyond the start of primary wave 1 below 10.24.

ALTERNATE DAILY CHART

Last week’s alternate chart considered primary wave 1 continuing higher with an ending contracting diagonal for intermediate wave (5) within it. The diagonal is no longer valid; minor wave 4 would be now longer than minor wave 2, breaching the rule for a fourth wave within a contracting diagonal. The wave count is this week discarded.

TECHNICAL ANALYSIS

WEEKLY CHART

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Resistance about 42 so far is holding. A pullback about here would be a reasonable expectation.

DAILY CHART

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Bearish divergence with price and RSI is clear. The probability of a multi-week pullback remains high.

A rounded top looks to have formed. Volume is pushing price lower on Friday. Watch the trend lines for On Balance Volume carefully for a signal next week.

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