S&P 500

The week ended with new all time highs for both price and market breadth.

Classic technical analysis supports the main Elliott wave count.

Summary: The wave count expects the low of the 30th of October to not be breached for many months or years. A new mid-term target is at 3,785. The next target is at 4,606. The invalidation point is at 3,645.84.

An alternate is considered at the daily chart level. It is judged to have a very low probability. For confidence it requires a new low below 3,645.84 and then below 3,549.85. 

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

Last monthly charts are here. Video is here.

ELLIOTT WAVE COUNT

WEEKLY CHART

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Cycle wave V may last from one to several years. So far it is in its ninth month.

This wave count may allow time for the AD line to diverge from price as price makes final highs before the end of the bull market. The AD line most commonly diverges a minimum of 4 months prior to the end of a bull market.

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 waves 1 and 2 may be complete.

Primary wave 3 may only subdivide as an impulse.

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.

DAILY CHART

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Primary waves 1 and 2 may both be complete. Primary wave 3 may be underway.

Primary wave 3 may only subdivide as an impulse. Within primary wave 3: Intermediate waves (1) and (2) may both be complete, and intermediate wave (3) may be underway and may only subdivide as an impulse. A target is calculated for intermediate wave (3).

Intermediate wave (4) may not move into intermediate wave (1) price territory below 3,549.85.

Primary wave 1 looks extended. The target for primary wave 3 expects it to also be extended.

This wave count now expects that a third wave at three large degrees (minor, intermediate and primary) may have passed through its middle portion. Each successive fourth wave correction must remain above its corresponding first wave price territory.

When third waves extend they do so in price as well as time. Extended waves usually exhibit corrections within them that are more time consuming than those within waves that are not extended.

The best fit channel has provided support for downwards movement. It may now provide resistance to upwards movement, so it may be useful to show where the next pullback may arrive.

ALTERNATE DAILY CHART

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In the interest of always trying to consider all possibilities (so as to not be left without a potential pathway should the main wave count become invalidated) this alternate is considered.

This alternate wave count does not have support from classic technical analysis at this time, so it is judged to have a low probability. However, low probability does not mean no probability. Confidence / invalidation points may be used to judge any change in probability between the two wave counts.

It is possible that primary wave 2 may be an incomplete expanded flat correction.

Intermediate wave (B) may have continued higher as a double zigzag. Intermediate wave (B) is now 1.39 times the length of intermediate wave (A), which is just beyond the common range of up to 1.38.

There is no rule for flat corrections that state a limit for B waves, so it is possible that intermediate wave (B) may extend higher. If intermediate wave (B) were to reach twice the length of intermediate wave (A) at 3,942.28, then the idea of a flat correction should be discarded based upon a very low probability.

TECHNICAL ANALYSIS

WEEKLY CHART

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This chart is bullish and still supports the main Elliott wave count. All of volume, ADX and MACD are bullish. There is no bearish candlestick reversal pattern. Conditions are not extreme. There is room for this upwards trend to continue.

DAILY CHART

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Overall, this chart is bullish and still supports the Elliott wave count. There is a series of higher highs and lower lows from the low on the 24th of September.

Neither ADX nor RSI are yet extreme. There is room for an upwards trend to continue.

The last small pullback looks like it may have been a typical back test of support after a break of resistance. It may now be over. On Balance Volume supports this view.

The signal from On Balance Volume is weak because the resistance line has been recently breached and therefore does not have good technical significance.

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 made a new all time high on the 17th of December. This is a strong bullish signal and supports the main Elliott wave count.

Large caps all time high: 3,726.70 on December 18, 2020.

Mid caps all time high: 2,309.73 on December 18, 2020.

Small caps all time high: 1,122.80 on December 18, 2020.

Again, this week both price and the AD line have made new all time highs. Upwards movement has support from rising market breadth. This is bullish and supports the main daily 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.

Friday completes an outside day that has closed red. A decline in the AD line exhibits no divergence. Neither price nor the AD line have made new short-term swing lows.

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 over 3 years of bearish divergence between price and inverted VIX. There is all of long, mid and short-term bearish divergence. This bearish divergence may develop further before the bull market ends. It may be a very early indicator of an upcoming bear market, but it is not proving to be useful in timing.

Short-term bearish divergence noted last week has been followed by an upwards week, so it is considered to have failed. 

This week price has made another new all time high, but inverted VIX has failed to make a new short-term swing high. This is new short-term bearish divergence.

Comparing VIX and VVIX: VVIX has made a new short-term swing high above the prior high of the week beginning 16th November, but VIX has not. VVIX is increasing faster than VIX. This divergence is bearish for price and supports the alternate daily 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.

Again, price has made a new all time high, but inverted VIX has not. There is all of short, mid and long-term bearish divergence.

Comparing VIX and VVIX at the daily chart level: VVIX has made a new high above the prior high of the 12th of November, but VIX has not. This divergence is bearish for the short to mid term and may offer some support to the alternate daily Elliott wave count.

DOW THEORY

Dow Theory confirms a new bull market with new highs made on a closing basis:

DJIA: 29,568.57 – closed above on 16th November 2020.

DJT: 11,623.58 – closed above on 7th October 2020.

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

Upwards movement this week so far has found resistance at the upper edge of a channel on the daily chart. Price remains within this channel and below the last swing high.

Summary: The first wave count is bearish for the bigger picture, and it has a main and an alternate daily chart. The main daily chart expects a multi-year bear market may be in its early stages to end below 1,046. A short-term target is at 1,645. A long term target is at 657. The alternate daily chart has a low probability and would be invalidated below 1,764.12.

The second wave count is bullish for the bigger picture. It expects a multi-month to multi-year pullback or consolidation (within a larger bull market) may be in its early stages to possibly end about either 1,722.96 or 1,508.27.

A new alternate daily chart for the second wave count considers the possibility that the pullback was over at the last low and the bull market for Gold has resumed to an initial target at 2,182.

Grand SuperCycle analysis is here.

Last analysis of monthly charts is 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. Grand Super Cycle wave IV may be subdividing as an expanded flat pattern.

Super Cycle wave (b) within Grand Super Cycle wave IV may be a complete double zigzag. This wave count expects Super Cycle wave (c) to move price below the end of Super Cycle wave (a) at 1,046.27 to avoid a truncation and a very rare running flat. The target calculated expects a common Fibonacci ratio for Super Cycle wave (c).

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.

A best fit channel is drawn about primary wave C to contain as much of this movement as possible. Copy this channel over to daily charts. This channel is now clearly breached, which suggests the upwards wave labelled cycle wave y may be over.

DAILY CHART

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Within a new bear market, primary wave 1 may be an incomplete five wave impulse.

Primary wave 2 within the new downwards trend may not move beyond the start of primary wave 1 above 2,070.48.

Gold typically exhibits extended and strong fifth waves; this tendency is especially prevalent for fifth waves to end third wave impulses one degree higher. One or more of minuette wave (v), minute wave v and minor wave 5 may exhibit this tendency; there may be one or more selling climaxes along the way down. Minute wave iv and minor wave 4 may be relatively brief and shallow.

Draw an acceleration channel about downwards movement and keep redrawing the channel as price continues lower. 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). When intermediate wave (3) may be complete, then this channel would be drawn using Elliott’s technique about primary wave 1. If the upper edge of this channel provides resistance for minuette wave (ii), then minuette wave (ii) should be over. However, the upper edge of this channel was breached at the end of minute wave ii and yet price continued lower from there; the upper edge of the channel may not perfectly show were price finds resistance.

Draw a small Elliott channel about minuette wave (ii). When this small orange channel is breached by downwards movement, then that may provide reasonable confidence that this bounce is over and the downwards trend may then have resumed.

Minute wave iii may only subdivide as an impulse. Within the impulse: Minuette wave (i) may be over at the last low, and minuette wave (ii) may be complete as a single zigzag. If minuette wave (ii) continues higher as a double zigzag, then it may not move beyond the start of minuette wave (i) above 1,964.66.

A new low below 1,764.12 would add reasonable confidence to this wave count.

ALTERNATE DAILY CHART

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Primary wave C may be incomplete.

Intermediate wave (4) may have continued lower as a double zigzag. Intermediate wave (4) is now grossly disproportionate to intermediate wave (2); intermediate wave (2) lasted 14 sessions, whereas intermediate wave (4) has lasted 82 sessions. This disproportion gives the wave count the wrong look and reduces its probability further.

The wide beige channel is copied over from the weekly chart. Price has now breached the channel. This channel breach further reduces probability of this alternate wave count.

Intermediate wave (4) may not move into intermediate wave (1) price territory below 1,764.12. This is the final price point which would invalidate this wave count.

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 complete.

A best fit channel is drawn about cycle wave III in the same way as the channel as on the first wave count.

DAILY CHART

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Cycle wave III may be complete, and cycle wave IV may be underway.

Cycle wave IV may subdivide as any one of more than 23 Elliott wave corrective structures. It would most likely subdivide as a zigzag. A new bearish trend at cycle degree should begin with a five wave structure downwards at the daily chart level; this would be incomplete. No second wave correction within this first five down may move beyond the start of its first wave above 2,070.48.

Targets for cycle wave IV at this stage may be calculated from Fibonacci ratios of cycle wave III. Cycle wave IV may end at either one of the 0.382 Fibonacci ratio at 1,722.96 or the 0.618 Fibonacci ratio at 1,508.27. Cycle wave IV may not move into cycle wave I price territory below 1,303.51 (this can be seen on the weekly chart).

Primary wave A may be beginning with a series of four overlapping first and second waves: intermediate, minor, minute and now minuette.

Minuette wave (ii) may not move beyond the start of minuette wave (i) above 1,964.66.

ALTERNATE DAILY CHART

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It is possible that cycle wave IV may be over as a double zigzag (labelling of this downwards movement is the same as the alternate daily chart for the first wave count above). 

As a first indicator of confidence in this wave count the best fit channel about cycle wave IV needs to be breached by at least one full daily candlestick above and not touching the upper edge. Thereafter, a new swing  high above 1,964.66 would add reasonable confidence. Finally, a new all time high would add strong confidence to this wave count.

If cycle wave IV is complete, then it would have lasted only 17 weeks compared to 119 weeks for cycle wave II. While it is normal for Gold to exhibit fourth waves that are more brief than their counterpart second waves, a difference this great is unusual. This reduces the probability of this wave count.

TECHNICAL ANALYSIS

WEEKLY CHART

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At the last high were two bearish candlestick patterns with overbought RSI exhibiting double bearish divergence. It is possible there may have been a 180° trend change at the high. A new swing low below 1,671.70 would add confidence in that view.

Downwards movement to the last low has relieved extreme conditions; it is also possible that the bull market for Gold has resumed. A new short-term swing high above 1,966.10 would add confidence in this view.

DAILY CHART

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Next support below is at 1,670 to 1,675.

From the high on the August 7, 2020, there is still a series of lower lows and lower highs, the basic definition of a downwards trend. For this view to change a new swing high above 1,966.10 would have to be seen.

There is now some support from volume for upwards movement. Price is back within a strong zone of resistance and support.

GDX WEEKLY CHART

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Support this week from volume for upwards movement is bullish. If GDX makes a new swing high above 41.81 and On Balance Volume breaks above resistance, then the pullback may be considered over.

GDX DAILY CHART

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Overall, from the high on August 5th, there is still a series of lower lows and lower highs, the basic definition of a downwards trend. For this view to change a new high above 41.81 would have to be seen.

The last gap may be a breakaway gap from a small consolidation, on an upwards day with support from volume and an upwards breakout from On Balance Volume. GDX looks more immediately bullish than Gold at this time.

US OIL

Price continues to move higher as the Elliott wave count and classic technical analysis expect.

The short-term target is now close by.

Summary: An upwards trend may continue. A new short-term target is at 55.67, where a pullback or consolidation to last at least two weeks may begin. Two longer-term targets for a third wave are first at 87.90 and thereafter at 121.43.

Oil may have found a major sustainable low in April 2020.

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.

Following Super Cycle wave (III), which was a correction (three steps back), Super Cycle wave (III), which may have begun, should be five steps up when complete. 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.

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. 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.

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. However, while this is a common tendency, it is not always seen and may not have been seen in this instance. The first reasonably sized pullback may be over already.

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 also now be complete, and cycle wave III upwards may now have begun. If cycle wave II continues lower, then it may not move beyond the start of cycle wave I below 10.24.

DAILY CHART

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Cycle wave II may be a complete zigzag and only 0.3 of cycle wave I in depth, which is possible.

Cycle wave III may only subdivide as an impulse. Within the impulse: Primary wave 1 may be incomplete, and primary wave 2 may not move beyond the start of primary wave 1 below 33.65.

A target is calculated for primary wave 1 to end that expects intermediate wave (5) to exhibit the most common Fibonacci ratio to intermediate wave (1).

When primary wave 1 is complete, then a multi-week pullback or consolidation for primary wave 2 should begin. Use the best fit channel as a guide to when primary wave 1 may be over. When this channel is breached by at least one full daily candlestick of downwards movement below and not touching the lower edge, then it may indicate a trend change.

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 continuing further as an expanded flat. Primary wave B within the expanded flat is now well beyond the common range to primary wave A of 1 to 1.38. The probability of this wave count is further reduced this week.

Primary wave C for this wave count would be extremely likely to move at least slightly below the end of primary wave A at 36.13 to avoid a truncation. Cycle wave II may not move beyond the start of cycle wave I below 10.24.

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 down one degree. It may be that only primary wave 1 is complete within cycle wave I and the pullback may be primary wave 2.

Primary wave 2 may be complete. A target is calculated for primary wave 3.

TECHNICAL ANALYSIS

WEEKLY CHART

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

Price is within a cluster of resistance and support; this may slow it down.

Volume is bullish (note this chart is prepared before NY close, so the last week’s data is incomplete). RSI is not extreme. If the ADX line reaches 15, then it would indicate an upwards trend. That would be a very strong bullish signal from ADX.

DAILY CHART

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RSI and ADX are now both extreme. However, these indicators may remain extreme for some time when this market trends. If ADX reaches very extreme (above both directional lines and above 45) and if RSI exhibits bearish divergence after reaching overbought, then a more time consuming consolidation or a deeper pullback may be indicated. 

Extreme conditions warrant increased caution.

If a bearish candlestick pattern develops in extreme conditions, then it should be given weight.

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