S&P 500

Upwards movement has continued this week as the main Elliott wave count has expected.

Summary: The trend is up. The next target for the next wave up is at 4,900.

For the very short term, a little downwards movement on Monday may end about 4,110.82.

An alternate Elliott wave count allows for more sideways movement to end slightly below 4,601.41, and close to 4,056.88. 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.

Now that minute wave iv may be complete, as it overshot a channel drawn using Elliott’s first technique, redraw the channel now using Elliott’s second technique. Draw the first trend line from the ends of minute waves ii to iv, then place a parallel copy on the end of minute wave iii. This redrawn channel may show where minute wave v may end, either mid way within the channel or about the upper edge. It may then be used to confirm a subsequent trend change, when it is breached by downwards movement.

The channel is overshot, which for this market is acceptable, and price has today moved back within the channel. This market does not always sit neatly within channels as its impulses come to an end. It is possible that as minor wave 3 ends channels may need to be redrawn.

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 sideways as a double flat. The first flat may be complete, an expanded flat labelled minor wave W. The double may be joined by a three in the opposite direction, a zigzag labelled minor wave X. The second flat may be incomplete, labelled minor wave Y.

Minor wave Y may be subdividing as a regular flat, providing alternation with the expanded flat of minor wave W.

The probability of this alternate Elliott wave count is further reduced. Double flats are uncommon structures. I have only ever seen a very few.

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 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.

Now two long lower wicks on two weekly candlesticks are bullish for the short term. 

The bearish signal from On Balance Volume is not as clear as it could be. If On Balance Volume turns up next week, then the signal would be negated and the trend line would need to be redrawn. This week more weight will be given to candlestick wicks than On Balance Volume.

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. An 80% down day followed within a few sessions by an 80% up day is bullish, but it is not strong enough to have confidence in a sustainable low.

The decline in price down to the 12th of May may have been sufficient to resolve the double bearish divergence between price and RSI.

A bullish Hammer pattern coming after a decline on a strong downwards day is reasonably bullish. This supports the main Elliott wave count.

On Balance Volume has turned down from resistance. It remains bearish and supports the alternate Elliott wave count.

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.

Price this week has moved sideways and the AD line has moved higher.

Upwards movement within this week has support from rising market breadth. This is bullish 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.

Both price and the AD line have moved higher. 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 price has moved sideways and inverted VIX has moved lower. This is bearish for the short term.

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.

Both price and inverted VIX have moved higher on Friday. Price has made a new short-term swing high above the prior high of the 14th of May, but inverted VIX has not. This divergence is bearish for the short term. This 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 the chart 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

The week ends higher, which was expected by the main Elliott wave count.

Summary: The main wave count is bullish. For the short term, a consolidation may continue sideways for another few days. The longer-term target is at 2,094.

An alternate Elliott wave count is considered, but it has a low probability. It expects upwards movement to continue here to at least 1,920.42 and likely well above this point. The invalidation point for this alternate wave count is at 2,070.48.

Grand SuperCycle analysis and last monthly charts are here.

MAIN 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.

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.

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.

Minor wave 1 may be an incomplete impulse.

ALTERNATE ELLIOTT WAVE COUNT

WEEKLY CHART

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The bigger picture for this alternate 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).

Super Cycle wave (c) may have begun with a leading expanding diagonal for primary wave 1. Leading expanding diagonals in first wave positions are uncommon, so the probability of this wave count is low. However, it has a good fit and must be considered.

Second wave corrections to follow leading diagonals in first wave positions are usually very deep. Primary wave 2 may be expected to end at least about the 0.618 Fibonacci ratio at 1,920.42, and more likely a reasonable amount deeper than that. Primary wave 2 may not move beyond the start of primary wave 1 above 2,070.78.

DAILY CHART

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Intermediate wave (C) may be subdividing as an impulse. Minor wave 4 within intermediate wave (C) may not move into minor wave 1 price territory below 1,757.92.

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 slight decline as price moves higher, but overall remains relatively heavy. There is no bearish reversal pattern.

DAILY CHART

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The upwards trend is now extreme and RSI is oversold. However, when Gold has a strong trend, these indicators may reach very extreme while price travels a considerable distance.

A red doji that has moved price slightly higher looks like a small consolidation, which was expected after a strong upwards session two sessions ago.

GDX WEEKLY CHART

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Next resistance is at 45.55.

Upwards movement continues. If there is an upwards trend, then the trend would be in its very early stages; there is plenty of room for it to continue.

GDX DAILY CHART

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

A pullback or consolidation looks likely to have begun here. Look for the last gap to provide support at 37.95.

The trend is not yet extreme. RSI only just dipped into overbought at the last high. There is room for this upwards trend to continue. In the absence of a bearish candlestick reversal pattern here, this consolidation may be more short term in nature.

The long lower wick on Friday’s candlestick is bullish.

US OIL

It looks like at the end of this week a Bearish Engulfing pattern may be completing on the weekly chart. There is also a Bearish Engulfing candlestick reversal pattern on the daily chart. This supports the main Elliott wave count.

Summary: The main Elliott wave count expects downwards movement may continue for another few weeks to a 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.

This week the degree of labelling within Super Cycle wave (III) is moved down one. Cycle wave I within the impulse may be incomplete. 

Within cycle wave I: Primary waves 1 and 2 may be complete, and primary wave 3, which may only subdivide as an impulse, may have begun.

Within primary wave 3: Intermediate wave (1) may be complete, and intermediate wave (2) may still be unfolding. Intermediate wave (2) may not move beyond the start of intermediate wave (1) below 33.65.

DAILY CHART

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

Minor wave C may now continue lower for a few weeks. It must subdivide as a motive structure, most likely an impulse.

Intermediate wave (2) may last for several weeks.

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 intermediate wave (2) is incomplete, then the 0.618 Fibonacci ratio at 46.76 would be the next target.

Labelling within intermediate 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 intermediate wave (2) may unfold as.

Intermediate wave (2) may not move beyond the start of intermediate wave (1) below 33.65.

ALTERNATE DAILY CHART

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It is possible that intermediate wave (2) is over as a brief and shallow zigzag.

This wave count must see the downwards wave ending on 23rd of March as a three, but this movement looks best as a five. This reduces the probability of this wave count.

If intermediate wave (3) has begun, then minor wave 1 within it may be a complete leading expanding diagonal. Leading expanding diagonals are less common than impulses. This further reduces the probability of this wave count.

Minute wave ii within minor wave 3 may not move beyond the start of minute wave i below 60.62.

SECOND ALTERNATE WEEKLY CHART

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This second alternate wave count considers the possibility that primary wave 3 may have been over 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 be continuing as a zigzag. The daily chart for this alternate wave count would look the same as the main daily chart above, the degree of labelling would be one degree higher.

SECOND ALTERNATE DAILY CHART

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Primary wave 4 may be continuing further as a zigzag. Primary wave 4 may not move into primary wave 1 price territory below 43.77. This second alternate daily chart is now essentially the same as the main daily chart except the degree of labelling is one degree higher.

TECHNICAL ANALYSIS

WEEKLY CHART

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The Bearish Engulfing pattern supports the main Elliott wave count this week.

DAILY CHART

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There is also a Bearish Engulfing pattern on the daily chart, which has support from volume. This supports the main Elliott wave count.

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