S&P 500

The main Elliott wave count expected more upwards movement to end the week, which is exactly what has happened.

Summary: Friday completes a near 90% up day. This suggests the low may be sustainable; however, coming within 3 sessions of an 80% down day, it is not strong enough for strong confidence.

The main Elliott wave count expects a small fourth wave may have ended. The next target for the next wave up is at 4,900.

An alternate Elliott wave count allows for more downwards movement to a first target at 3,980.47. It has a lower probability.

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 fourteenth 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.

A longer divergence between price and the AD line would be expected towards the end of Grand Super Cycle wave I.

It is possible that cycle wave V may continue until 2029, if the 2020s mirror the 1920s. Either March or October 2029 may be likely months for the bull market to end.

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.

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.

Primary wave 1 within cycle wave V may be incomplete. This gives a very bullish wave count, expecting a long duration for cycle wave V which has not yet passed its middle strongest portion.

Within primary wave 1: Intermediate waves (1) and (2) may be complete, and intermediate wave (3) may now be nearing an end.

Within intermediate wave (3): Minor waves 1 and 2 may be complete, and minor wave 3 may be nearing an end.

Intermediate wave (4) may not move into intermediate wave (1) price territory below 3,588.11.

An acceleration channel is drawn about cycle wave V. Draw the first trend line from the end of intermediate wave (1) to the last high, then place a parallel copy on the end of intermediate wave (2). Keep redrawing the channel as price continues higher. When primary wave 1 is complete, then this channel would be drawn using Elliott’s first technique. The channel may then be used to provide confidence that primary wave 1 may be over and primary wave 2 may have arrived; when the channel is breached by downwards movement it would indicate a trend change.

When primary wave 1 may be complete, then a multi-month pullback or consolidation may unfold for primary wave 2. It is possible that primary wave 2 may meet the technical definition of a bear market; it may correct to 20% or more of market value.

Primary wave 2 may not move beyond the start of primary wave 1 below 2,191.86.

DAILY CHART

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The daily chart focusses on minor wave 3 within intermediate wave (3).

Intermediate wave (3) may be extending. Third waves are most commonly extended for the S&P500, so this wave count follows a common tendency. A target is calculated for minor wave 3, which is also expected to be extending.

If it continues lower, then minute wave iv within minor wave 3 may not move into minute wave i price territory below 3,983.87. Minute wave iv may have ended as an expanded flat.

ALTERNATE WAVE COUNT

WEEKLY CHART

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If this pullback is at intermediate degree, then intermediate waves (1), (2) and (3) may all be complete. Intermediate wave (3) is considerably shorter than intermediate wave (1). The S&P500 has a strong bullish bias and a tendency to exhibit extended third waves. Any wave count which expects a third wave is shorter than its counterpart first wave must necessarily have a low probability.

Intermediate wave (4) may be incomplete. It may not move into intermediate wave (1) price territory below 2,191.86.

The channel drawn about primary wave 1 is drawn using Elliott’s first technical for an impulse. Draw the first trend line from the ends of intermediate waves (1) to (3), then place a parallel copy on the end of intermediate wave (2). If intermediate wave (4) is deep, then it may find support about the lower edge of this channel.

DAILY CHART

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Intermediate wave (4) may continue lower as an expanded flat. The first target for this to end may be the 0.236 Fibonacci ratio of intermediate wave (3) at 3,980.47.

If the main Elliott wave count is invalidated with a new low below 3,983.87, then this alternate may be used.

A new all time high next week may see this alternate Elliott wave count discarded.

TECHNICAL ANALYSIS

WEEKLY CHART

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A series of higher highs and higher lows off the low of March 2020 continues. The last short-term swing low is now at 3,723.34. While this remains intact, the dominant view should be of an upwards trend. There is a long way for this trend to run before conditions may become extreme.

This chart has the look of a sustainable bull market in a relatively early stage; there is as yet no evidence that a larger correction should begin here. Although RSI very recently reached overbought, this market has a strong bullish bias and RSI can move deeply overbought and remain there for years prior to the bull market ending.

The long lower wick on this weekly candlestick again suggests more upwards movement next week.

DAILY CHART

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

Pullbacks are a normal and to be expected part of a bullish trend.

One strong signal of a sustainable low in place, after some decline in price, is a 90% down day or two back to back 80% down days followed within 3 or 4 sessions by a 90% up day or two back to back 80% up days. Currently, this description is not met. However, a near 90% up day following only 2 sessions after an 80% down day is still a bullish signal. It is just not as strong as it is preferred for it to be. This still offers some support to the main Elliott wave count.

The decline in price down to the 12th of May may have been sufficient to resolve the double bearish divergence between price and RSI. If ADX again increases, then it would again indicate an upwards trend, and there would be plenty of room for an upwards trend to continue with RSI well into neutral territory now.

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 7th of May. This supports the Elliott wave counts.

Large caps all time high: 4,238.04 on May 7, 2021.

Mid caps all time high: 2,778.84 on April 29, 2021.

Small caps all time high: 1,399.31 on March 12, 2021.

The last new high is found in large caps only. Small caps have been lagging since the 15th of March. Mid caps have been lagging since the 29th of April. This lag from small and mid caps is not precise in terms of timing when a pullback may begin, but it is an early warning sign of some developing weakness. It would be expected that as third waves come to an end some weakness should begin to develop; this situation may fit for either Elliott wave counts.

Both price and the AD line have moved higher this week. There is no new divergence. Upwards movement has support from rising market breadth. This is bullish.

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 today. There is no new divergence.

There is now a cluster of bullish divergence in recent days that supports the main Elliott wave count.

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. 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 both price and inverted VIX have moved lower. There is no new short-term divergence.

Comparing VIX and VVIX at the weekly chart level:

This week both VIX and VVIX have moved higher. 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.

Again, both price and inverted VIX have moved higher. There is no new short-term divergence. Mid-term bearish divergence noted on Thursday remains and supports the alternate Elliott wave count.

Comparing VIX and VVIX at the daily chart level:

Both VIX and VVIX have moved lower. There is no new short-term divergence. Mid-term bearish divergence noted on Thursday remains and supports the alternate 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.

Most recently, on 10th May 2021 both DJIA and DJT have made new all time highs. An ongoing bull market is again confirmed by Dow Theory.

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

Upwards movement finishes the week, but in contrast to last week this upwards movement has weak volume. This supports the first Elliott wave count.

Both Elliott wave counts remain valid.

Summary: The first wave count now expects the bounce is over and a downwards trend to new lows may begin from here. The short-term target is now at 1,646. For the short term, some confidence may be had in this wave count if price breaches the small upwards sloping green channel on the daily chart. A multi-year bear market may be in its early stages to end below 1,046.

A long-term target is at 657.

The second wave count is bullish. A new upwards wave may now have begun. The short-term target is at 1,952. The longer-term target is at 2,094. There is now some technical support for this second wave count.

Grand SuperCycle analysis and last monthly charts are 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 both of minor wave 5 or intermediate wave (5) may exhibit this tendency; there may be one or more selling climaxes along the way down.

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.

Minor wave 4 may be an almost complete flat. It has now breached resistance close to the upper edge of the cyan Acceleration channel. This channel was breached previously in early January 2021 yet price continued lower, so the channel breach on its own is not enough to discard this wave count.

Minor wave 4 may not move into minor wave 1 price territory above 1,849.22. A new high above 1,849.22 would see this bearish wave count discarded.

Draw a trend channel about minute wave c using Elliott’s first technique for an impulse. Draw the first trend line from the ends of minuette waves (i) to (iii), then place a parallel copy on the end of minuette wave (ii). This channel neatly contains all of minute wave c. If this channel is breached by downwards movement, then it may indicate a potential trend change.

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 may 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.

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 calculated for cycle wave V.

Primary wave 1 within cycle wave V may be incomplete.

Within primary wave 1: Intermediate waves (1) and (2) may be complete, and within intermediate wave (3) minor wave 2 may not move beyond the start of minor wave 1 below 1,678.24.

A best fit channel is drawn about cycle wave IV. This channel is breached by upwards movement, which provides a little confidence in this second Elliott wave count.

Minor wave 1 may be an incomplete impulse.

TECHNICAL ANALYSIS

WEEKLY CHART

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Price has closed above prior resistance at 1,800 with strong support from volume. The +DX line has crossed above the -DX line, indicating a potential trend change to upwards, but with ADX declining no clear trend is indicated.

Volume this week shows a further increase, which supports the second Elliott wave count.

DAILY CHART

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There are now two bearish candlestick reversal patterns at the last high: an Advance Block pattern followed by a Bearish Engulfing pattern that fully engulfs the real bodies of the two prior candlesticks (although they are very small). This bearish pattern has support from volume. It is possible that price may now turn down from here. The last upwards session with weak volume supports the first Elliott wave count. Overall, this chart offers a little more support to the first Elliott wave count.

GDX WEEKLY CHART

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Next resistance is at 45.55.

This week may have completed a Hanging Man bearish candlestick pattern, but the bullish implications of the long lower wick mean it requires confirmation with the following candlestick bearish. 

GDX DAILY CHART

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The trend is up. Next strong resistance is about 45.55.

US OIL

An inside week may be closing green.

Sideways movement this week fits both Elliott wave counts.

Summary: At this stage, classic technical analysis now offers slightly more support to the alternate Elliott wave count than the main Elliott wave count. A new high by any amount at any time frame above 67.97 would see the main Elliott wave count invalidated and then the alternate should be used.

The main Elliott wave count expects downwards movement may continue for another two to four weeks to a new target zone at 54.86 – 55.94. Thereafter, the next target is at 46.76 if price keeps falling.

The alternate Elliott wave count expects the upwards trend may have already resumed.

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 to the downside, which is a typical look for the end of a movement for a commodity.

The upper edge of the channel may provide resistance. Price is reacting down from 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. Primary wave 2 within cycle wave III may not move beyond the start of primary wave 1 below 33.65.

DAILY CHART

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Primary wave 2 would most likely subdivide as a zigzag. Intermediate wave (A) within the zigzag may be a complete impulse. Intermediate wave (B) may have continued higher as a double zigzag. If intermediate wave (A) is correctly labelled as a five wave impulse, then intermediate wave (B) may not move beyond its start above 67.97.

Primary wave 2 may last weeks to months.

As price approaches the first target zone at 54.86 to 55.94, and if then the structure is complete and technical analysis indicates a low may be in place, then it may end there. But if price keeps falling and / or the structure of primary wave 2 is incomplete, then the 0.618 Fibonacci ratio at 46.76 would be the next target.

Labelling within primary wave 2 may still change as it unfolds and alternate wave counts for the short-term structure may need to be considered. There are several different structures that primary wave 2 may unfold as.

Primary wave 2 may not move beyond the start of primary wave 1 below 33.65.

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.

Primary wave 3 may have ended at the last high. Primary wave 3 is close to equal in length with primary wave 1; it is 0.79 longer than primary wave 1.

Primary wave 4 may subdivide as any corrective structure. It is possible that primary wave 4 may be a complete triangle; this is now outlined on a daily chart below. If it continues further, then primary wave 4 may not move into primary wave 1 price territory below 43.77.

ALTERNATE DAILY CHART

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It is possible that primary wave 4 may be a brief zigzag.

Primary wave 5 must subdivide as a five wave motive structure, most likely an impulse. Intermediate waves (1) and (2) within primary wave 5 may be complete.

Intermediate wave (3) must subdivide as an impulse. Intermediate wave (3) may be extending, beginning with minor waves 1 and 2, minute waves i and ii and now minuette waves (i) and (ii). Minuette wave (ii) may not move beyond the start of minuette wave (i) below 60.62.

If price makes a new high above 67.97 by any amount at any time frame, then some confidence may be had in this alternate wave count.

TECHNICAL ANALYSIS

WEEKLY CHART

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The short-term volume profile for this week would best be analysed at the daily chart level. Overall, volume has been increasing for the last few weeks as price moves slowly higher.

ADX supports the alternate Elliott wave count slightly; but if the upwards trend is again underway, then it is still extreme.

DAILY CHART

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The short-term volume profile leans more bearish than bullish; since the last swing high on the 5th of May, price has overall moved lower and volume is increasing. Volume is strongest on downwards days.

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