S&P 500

An upwards day was expected from the main Elliott wave count in last analysis.

Summary: The pullback may have continued lower as a triple zigzag. The structure may now be complete; next support may be the 0.382 Fibonacci ratio at 3,667 if it continues lower.

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

The next target for the upwards trend is at 4,606. About this target another multi-week pullback or consolidation may develop.

An alternate wave count at the weekly chart level has a slightly lower 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.

The blue weekly best fit channel is slightly adjusted, so that the lower edge may better show where price may find support. Copy this over to the daily chart.

DAILY CHART

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

Intermediate wave (1) within primary wave 3 may have been complete at the last all time high and the current pullback may be intermediate wave (2).

Intermediate wave (2) may have continued lower as a triple zigzag. While triple zigzags are reasonably rare, they are not the rarest Elliott wave structure and may occur in a second wave position.

Intermediate wave (2) may not move beyond the start of intermediate wave (1) below 3,209.45.

ALTERNATE WAVE COUNT

WEEKLY CHART

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This wave count moves the degree of labelling within cycle wave V down one degree. Primary wave 1 may be incomplete.

This alternate is more bullish than the main weekly chart. It expects that cycle wave V may last many more years than the main weekly chart. This wave count now considers intermediate waves (3) and (4) within primary wave 1 may be complete. Intermediate wave (3) is shorter than intermediate wave (1), which reduces the probability of this alternate wave count.

When primary wave 1 may be complete, then a multi-week pullback for primary wave 2 should begin. Primary wave 2 may not move beyond the start of primary wave 1 below 2,191.86.

DAILY CHART

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Intermediate waves (1) through to (4) within primary wave 1 may be complete. If it continues lower, then intermediate wave (4) may not move into intermediate wave (1) price territory below 3,588.11.

TECHNICAL ANALYSIS

WEEKLY CHART

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Support at On Balance Volume has held and it has turned up.

The doji candlestick this week is not on its own a reversal; it is a sign of a balance of bulls and bears. Doji may occur within downwards trends.

The last swing low of the 29th of January remains intact. A series of higher highs and higher lows remains intact. The last two weeks of downwards movement still looks most likely to be another pullback within an ongoing upwards trend.

DAILY CHART

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

Support at 3,725 has at the end of this week held. The last swing low on the 29th of January remains intact; while this has not been breached, an upwards trend may be assumed to remain in place as a series of higher highs and higher lows remains. Pullbacks are a normal part of an upwards trend.

One or more of the following may be seen in order to have confidence that this pullback is over:

– A 90% up day or two back to back 80% up days following within 4 sessions of a 90% down day or two back to back 80% down days. With no 90% down day nor two back to back 80% down days so far, this set up is not developing.

– A bullish signal from On Balance Volume.

– A bullish signal from the AD line (this is now in place at the end of this week).

– A bullish candlestick reversal pattern that has support from volume.

ADX now indicates a downwards trend and, with RSI well in neutral territory, there is plenty of room for it to run. The last swing low of 29th of January is very important; if this is breached, then this analysis should become more bearish. It is still entirely possible that a low is in place today.

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: 2,581.02 on February 24, 2021.

Small caps all time high: 1,325.66 on February 24, 2021.

This week price has moved lower, but the AD line has moved lower. This divergence is bullish 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.

Both price and the AD line have moved higher. 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 lower, but inverted VIX has moved higher. This divergence is bullish for the short term and agrees with bullish divergence at the weekly chart level between price and the AD line.

Comparing VIX and VVIX at the weekly chart level:

This week both VIX and VVIX have moved lower. There is no new short-term 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.

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

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.  After two weeks of downwards movement, it may now be resolved.

On Friday both VIX and VVIX have moved lower. 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

All week price has continued to fall, although momentum has slowed.

The first wave count continues to be preferred. The target is getting closer.

Summary: The first wave count is bearish for the bigger picture and classic technical analysis supports this view. This wave count expects a multi-year bear market may be in its early stages to end below 1,046.

Downwards momentum may show a further increase. A short-term target is at 1,645. A long-term target is at 657.

The second wave count is bullish. A new upwards wave may now begin. The target is at 2,124.

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 now 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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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.

Draw an acceleration channel about downwards movement. Draw the first trend line from the end of primary wave 1 to the last low, then place a parallel copy on the end of primary wave 2. Keep redrawing the channel as price continues lower. When primary wave 3 is complete, then this would be drawn using Elliott’s first technique and may show where primary wave 4 may find resistance.

Subminuette wave 4 may not move into subminuette wave 1 price territory above 1,777.29.

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 moved lower; it may again be a complete triple zigzag. The rarity of triple zigzags reduces the probability of this wave count further.

If the third zigzag of primary wave Z continues lower, then 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 a complete triple zigzag.

Primary wave Z may again be complete.

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. Cycle wave IV looks normal with a clear downwards slope.

A target is recalculated for cycle wave V. If cycle wave IV continues lower, then this target must again be recalculated.

TECHNICAL ANALYSIS

WEEKLY CHART

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There is a series of lower swing lows and lower swing highs from the last all time high in August 2020. Downwards movement is now beginning to have a steeper slope in the last three weeks. ADX now indicates a downwards trend at the weekly time frame, and price has made another important new swing low.

Neither ADX nor RSI are 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.

This chart supports the first Elliott wave count.

DAILY CHART

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RSI is just now oversold. ADX is extreme. Price can still fall further for a few days before a reversal, but these two indicators are now warning that the trend is vulnerable to a reversal. At the daily chart level, a reversal may be only a short-term consolidation to relieve extreme conditions before the downwards trend resumes.

GDX WEEKLY CHART

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Price is at support, so a counter trend bounce may occur here. If support is breached, then it becomes resistance. This chart is bearish.

If support at 31 is breached, then next support is about 26.3.

This week price has made an important new low: The last swing low within the prior upwards trend was 31.06 within the week beginning June 1, 2020 and this week a new low below this point was made at 30.64. 

GDX DAILY CHART

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A target from the measuring gap is at 30.01. This target may not be met though. Closure of the last gap indicates it is an exhaustion gap, and a Bullish Engulfing pattern suggests a trend change. Now a second bullish candlestick in a Hammer pattern reinforces this view. A counter trend bounce or consolidation may continue here.

US OIL

Upwards movement continues.

A new daily Elliott wave count is used this week.

Summary: A target for upwards movement to end is now at 68.49. The next pullback or consolidation may last several weeks.

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. At the end of this week, price is now at the upper edge of this channel.

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 nearing completion, and primary wave 2 may not move beyond the start of primary wave 1 below 33.65.

Primary wave 1 is relabelled this week after further upwards movement. Upwards movement of the last three sessions looks like a typically strong fifth wave; this may be intermediate wave (5).

The best fit channel is adjusted to contain almost all of primary wave 1. A breach of this channel by downwards movement would provide substantial confidence that primary wave 1 should be over and primary wave 2 should have arrived.

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

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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. A bullish signal from On Balance Volume and a strong end to upwards movement this week suggest the upwards trend may continue further.

DAILY CHART

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At the daily chart level, this upwards trend is now very extreme and RSI is overbought and now exhibits double bearish divergence. This trend is highly vulnerable to a reversal at this stage. However, a bullish signal from On Balance Volume suggests it may continue a little further.

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