S&P 500

A small range upwards week closes red.

Overall, price continues to move higher towards targets, with normal corrections along the way.

Summary: The current pullback is still expected to be short term in nature. If it continues lower, then it may find support about 3,852.

Both main and alternate wave counts expect the low of the 30th of October to not be breached for many months.

The next targets for the upwards trend are first at 4,072 and then a zone at 4,585 – 4,606. About either of these targets another multi-week pullback or consolidation may develop.

An alternate wave count at the weekly chart level has an about even probability with the main weekly chart.

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

Last monthly charts are here. Video is here.

MAIN WAVE COUNT

WEEKLY CHART

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Cycle wave V may last from one to several years. So far it is in its eleventh 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. A longer divergence is positively correlated with a deeper bear market. A shorter divergence is positively correlated with a more shallow bear market. With zero divergence at this stage, if a surprise bear market does develop here, then it would likely be shallow.

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.

Primary wave 3 has now moved well above the end of primary wave 1. Primary wave 4 may not move into primary wave 1 price territory below 3,588.11.

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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The daily chart focusses on the unfolding impulse of primary wave 3.

Primary wave 3 may only subdivide as an impulse.

Intermediate waves (1) through to (4) may be complete. Intermediate wave (5) may be underway.

Intermediate wave (2) was a very deep zigzag lasting 14 sessions. Intermediate wave (4) was an expanded flat lasting 14 sessions. There is alternation and perfect proportion between intermediate waves (4) and (2).

An Elliott channel is added in beige about primary wave 3. The upper edge may provide resistance and initiate pullbacks, which normally occur within an upwards trend.

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

No second wave correction within intermediate wave (5) may move beyond its start below 3,694.12.

ALTERNATE WAVE COUNT

WEEKLY CHART

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This wave count is the same as the first weekly chart with the exception of the degree of labelling within cycle wave V.

If the degree of labelling within cycle wave V is moved down one degree, then only primary wave 1 may be currently unfolding. When primary wave 1 may be complete, then a multi-week pullback or consolidation may begin for primary wave 2. Primary wave 2 may not move beyond the start of primary wave 1 below 2,191.86.

This wave count is more bullish than the main weekly chart. It expects that cycle wave V may be in an earlier stage and may yet last many more years than the main weekly chart expects it to. These two weekly wave counts are of an even probability. In coming months to years classic technical analysis will be used to judge the probability of these two weekly wave counts.

DAILY CHART

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This wave count is the same as the first daily chart except the degree of labelling is one degree lower within primary wave 1.

The targets for a third wave up to end is the same.

TECHNICAL ANALYSIS

WEEKLY CHART

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

ADX indicates the trend is extreme because the ADX line is above both DX lines, but there is a long way to go before ADX reaches 45 and very extreme. This market has a strong bullish bias and extreme conditions can persist for reasonable periods of time while price travels a considerable distance.

A further decline in volume this week is not of a concern in current market conditions. For years now this market has risen sustainably on light and declining volume, so it may yet be sustained for some more years. Eventually, when a bear market arrives, thin volume below may leave little support, which is concerning, but at this time there is no technical evidence of a bear market being imminent. The bull market continues.

DAILY CHART

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The series of higher highs and higher lows from the low of the 30th of October continues.

ADX is a lagging indicator. The many small pullbacks in this trend are causing it to lag in identifying an obvious upwards trend.

The breakaway gap may provide support for smaller pullbacks at this time. The lower edge of the gap is at 3,872.42. This gap remains open. After a break above resistance on 5th February, price has now curved down for a small pullback to test support. So far this looks like typical price behaviour. Support may hold and price would typically turn up from here.

There is plenty of room for this upwards trend to continue before conditions become extreme.

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 12th of February. This is a strong bullish signal and supports the main Elliott wave count.

Large caps all time high: 3,950.43 on February 16, 2021.

Mid caps all time high: 2,563.15 on February 16, 2021.

Small caps all time high: 1,309.05 on February 16, 2021.

This week price has moved higher although the week closed red and the AD line has moved lower. This divergence is bearish for the short term, but it is weak.

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.

Short-term bearish divergence noted in last analysis has not been followed by downwards movement, so it may yet be before it is resolved.

On Friday both price and the AD line have moved higher but neither have made new highs. There is no new 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.

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.

This week price has moved higher although the week has closed red. Inverted VIX has moved lower. This divergence is bearish for the short term, but it is weak.

Comparing VIX and VVIX: Short-term bearish divergence noted last week has now been followed by an upwards week, so it may have failed or may yet be followed by some downwards movement in the short term. This week VIX has moved higher, but VVIX has moved slightly lower. This short-term divergence is bullish for price.

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.

Short-term bearish divergence noted in last analysis has not been followed by a downwards session, so it may have failed or may yet be followed by some downwards movement. On Friday both price and inverted VIX have moved higher. There is no new short-term divergence.

Comparing VIX and VVIX at the daily chart level:

VVIX has made a new high above the high of October 28, 2020, but VIX has not. This divergence remains bearish for the mid term. On Friday both VIX and VVIX have moved lower as price has moved higher. There is no new short-term divergence.

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.

The following major swing lows would need to be seen on a closing basis for Dow Theory to confirm a change from bull to a bear market:

DJIA: 18,213.65

DJT: 6,481.20

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

S&P500: 2,191.86

Nasdaq: 6,631.42

GOLD

A new swing low at the end of the week adds confidence in the first bearish Elliott wave count and reduces the probability of the second bullish Elliott wave count.

Summary: The first wave count is bearish for the bigger picture and has only one daily chart. This wave count expects a multi-year bear market may be in its early stages to end below 1,046.

Downwards movement may increase in momentum. A short-term target is at 1,645. A long-term target is at 657. Some confidence may be had in this bearish wave count if price makes a new low below 1,766.53. This wave count may be discarded if price makes a new high above 1,957.87.

The second wave count is bullish for the bigger picture but now bearish for the short to mid term. A new target for a reasonably rare triple zigzag to end is at 1,737 to 1,723.

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).

DAILY CHART

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This week the degree of labelling within cycle wave I is moved up one degree.

Within a new bear market, cycle wave I may be an incomplete five wave impulse.

Cycle wave II within the new downwards trend may not move beyond the start of cycle wave I 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 minute wave v, minor wave 5 or intermediate 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.

A best fit channel is drawn as shown. The upper edge may be used as a guide for resistance of any deeper bounces. The lower edge is no longer showing where price is finding resistance or support.

Minute wave ii may be complete as a double zigzag. If minuette wave (ii) continues higher, then it may not move beyond the start of minuette wave (i) above 1,957.87.

A new swing low below 1,766.53 at the end of this week adds reasonable confidence to 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 second weekly chart on prior analysis here). 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 IV has at the end of this week moved a little lower, so it now must be labelled as incomplete. The only structure cycle wave IV may now be unfolding as would be a relatively rare triple zigzag. The rarity of triples reduces the probability of this wave count further.

A target zone is calculated for cycle wave IV based upon two wave degrees.

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

DAILY CHART

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Cycle wave IV may be continuing lower as a relatively rare triple zigzag.

The third zigzag in a triple may now be completing lower. Primary wave Z may now be completing intermediate wave (C).

Intermediate wave (C) must subdivide as a five wave motive structure.

The purpose of multiple zigzags is to deepen a correction when the first zigzag does not move price deep enough. To achieve this purpose multiple zigzags normally have a clear counter trend slope. So far cycle wave IV looks normal with a clear downwards slope.

To achieve its purpose of deepening the correction, primary wave Z may be expected to end reasonably below the end of primary wave Y. The target zone would see this purpose achieved.

SECOND ELLIOTT WAVE COUNT

ALTERNATE WEEKLY CHART

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It is possible for the second wave count that cycle wave III may be an incomplete impulse. Primary wave 4 within the impulse may be continuing lower as a triple zigzag.

Primary wave 4 may not move into primary wave 1 price territory below 1,687.92.

There is alternation between an expanded flat of primary wave 2 and a triple zigzag of primary wave 4. Both are of a similar depth. Primary wave 2 lasted 3 weeks while primary wave 4 so far has lasted 28 weeks and is incomplete. It is unusual for Gold to exhibit fourth waves that are much longer lasting than counterpart second waves. The probability of this wave count is further reduced.

TECHNICAL ANALYSIS

WEEKLY CHART

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

There is a series of lower swing lows and lower swing highs from the last all time high in August 2020. ADX now indicates a downwards trend at the weekly time frame, and this week price has made another important new swing low.

RSI is not extreme. There is plenty of room for a downwards trend to continue.

A downwards trend should now be the dominant view until the trend reaches extreme and then a bullish candlestick reversal pattern is seen.

DAILY CHART

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RSI is not oversold, and the trend is not extreme.

The 50 day moving average has crossed below the 200 day moving average, a “death cross”.

Price has closed below 1,800 but not below 1,765. The last two daily candlesticks suggest indecision, a balance of bulls and bears. Some bounce here about support may occur.

GDX WEEKLY CHART

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This week GDX has broken below support on a downwards week that has some support from volume. Next support is about 31.

GDX DAILY CHART

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Next support below is about 31.

A target calculated from the measuring gap at 32.05 is now close by.

US OIL

The next target for upwards movement to be interrupted was at 61.11. Price this week has passed this target by 1.05.

Summary: A bearish candlestick reversal pattern with support from volume while the upwards trend has reached very extreme (at the daily chart level) suggests the risk of a multi-week pullback or consolidation here is now very high. A target for support is first at 51.33.

A breach of the best fit channel would add substantial confidence in a trend change and the start of a multi-week pullback or consolidation. 

The larger trend remains up.

A longer-term target for a third wave is at 87.90 or 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 (II), 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. If resistance is breached, then the upper edge may provide support for a back test.

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.

There is only one daily chart following this main weekly chart. An alternate is presented below on a weekly chart.

DAILY CHART

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Cycle wave III may only subdivide as an impulse. Within the impulse: Primary wave 1 may be complete at this week’s high, and  primary wave 2 may not move beyond the start of primary wave 1 below 33.65.

Use the best fit channel for confidence in this short-term wave count . At least one full daily candlestick of downwards movement (not sideways) below and not touching the lower trend line would constitute a breach. A breach of this channel would add substantial confidence in a trend change.

The 0.382 and 0.618 Fibonacci ratios would be targets for primary wave 2. The 0.382 Fibonacci ratio is the first target. As price approaches the first target and if the structure may be complete, then it may end there. If price falls through the first target or the structure is incomplete when it gets there, then the second 0.618 Fibonacci ratio may be used as the next target.

Primary wave 2 may be a multi-week pullback or consolidation.

ALTERNATE WEEKLY CHART

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This alternate wave count moves the degree of labelling within the start of the bull market down one degree. It is possible that cycle wave I is incomplete.

The target for primary wave 3 is lower than the target on the first wave count.

A daily chart for this alternate would be the same as the daily chart for the main wave count, except the degree of labelling would be one degree lower. The channel would be the same.

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.

RSI this week remains overbought, but it may become more deeply overbought before a trend ends. ADX is still not extreme; there is room for this upwards trend to continue. This weekly candlestick ends with a long upper wick, which is bearish.

DAILY CHART

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At the daily chart level, this upwards trend is now very extreme and RSI is overbought.

In extreme conditions, now a bearish candlestick pattern in Dark Cloud Cover with support from volume has completed. This should be given weight. 

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