S&P 500

Price continues to rise exactly as this analysis has been expecting.

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

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 fifteenth 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 approaching 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.

No second wave correction within subminuette wave iii may move beyond its start below 4,061.41.

Draw the channel 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 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 for the low labelled subminuette wave ii, which for this market is acceptable, and price has 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.

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 4,056.88. 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 is again overbought, this market has a strong bullish bias and RSI can move deeply overbought and remain there for years prior to a bull market ending.

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

This week has effected an upwards breakout from a small consolidation. Energy may now be released to the upside and momentum may increase.

DAILY CHART

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Thursday effects an upwards breakout with a close at 4,239.18, which is above the prior all time high at 4,238.04. This has been achieved on an upwards day that has some support from volume, which is required for confidence in an upwards breakout. This is a strongly bullish signal that supports the Elliott wave count. It does not mean that price cannot again enter the consolidation zone for more sideways movement, but it does provide support that overall an upwards trend remains intact.

With ADX at low levels and below both DX lines, and RSI still neutral, there is plenty of room for an upwards trend to again develop and continue.

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 8th of June (data is not yet available for the 11th of June). This supports the Elliott wave count.

Large caps all time high: 4,249.74 on Jun 10, 2021.

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

Small caps all time high: 1,417.45 on June 8, 2021.

Small caps are now showing strength. This is very bullish.

This week both price and the AD line have moved higher. Upwards movement has support from underlying rising market breadth; this is bullish and supports the 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. Upwards movement has support from underlying rising market breadth, which is bullish.

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 higher. Price has made new highs, but inverted VIX has not. There is no longer any short-term divergence, but mid-term bearish divergence remains.

Comparing VIX and VVIX at the weekly chart level:

This week VIX has again moved slightly lower, but VVIX has moved higher. Volatility of VIX is elevated. This short-term divergence is bearish 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.

Both price and inverted VIX have moved higher today. There is no longer short-term divergence.

Comparing VIX and VVIX at the daily chart level:

For the second session in a row VIX and VVIX have both moved lower. VIX has made a new short-term low below the prior swing low of the 7th of June, but VVIX has not. Volatility of VIX remains elevated. This divergence is bearish for the short term for price.

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

A mostly sideways week has closed red on a strongly downwards day.

The alternate Elliott wave count is adjusted. The main Elliott wave count remains the same.

Summary: The main wave count is bullish. The next target is at 1,923. The longer-term target is at 2,094 although this may need to be revised higher.

An alternate Elliott wave count is considered. It expects sideways or lower movement here, before the upwards trend resumes.

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. Triple zigzags are not rare structures, but they are not common. The probability of this wave count is further reduced in Elliott wave terms. This is one reason why an alternate is still considered.

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. If this target is wrong for this wave count, then it may be too low. As price approaches the target, if the structure is incomplete, then a higher target may be calculated.

Primary wave 1 within cycle wave V may be incomplete.

Within primary wave 1: Intermediate waves (1), (2) and (3) may be complete.

Intermediate wave (4) may be complete as an expanded flat. It may also continue lower or sideways as a double flat or double combination to find support about the lower edge of the Elliott channel.

Intermediate wave (4) may not move into intermediate wave (1) price territory below 1,739.19.

ALTERNATE ELLIOTT WAVE COUNT

WEEKLY CHART

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The bigger picture for this alternate Elliott wave count sees Gold as 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 reduced. 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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This week the wave count within primary wave 2 is changed.

Primary wave 2 may be subdividing as a zigzag. Within the zigzag: Intermediate wave (A) may be complete at the last high, and intermediate wave (B) may continue sideways as a triangle, combination or flat, or it may also continue lower as a zigzag.

A best fit channel is drawn about intermediate wave (A). Intermediate wave (B) may be contained within this channel, but it may also breach the lower edge. In the first instance look for support at the lower edge.

If intermediate wave (A) is correctly analysed as a five, then intermediate wave (B) may not move beyond its start below 1,677.64.

TECHNICAL ANALYSIS

WEEKLY CHART

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The upwards trend may have ended, for now. There is now a bearish candlestick reversal pattern in a Hanging Man that has bearish confirmation in the following candlestick. 

DAILY CHART

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Price is consolidating with resistance about 1,912 and support about 1,855.  The prior upwards trend reached very extreme. The consolidation may continue until the ADX line is below the DX lines, RSI is further into neutral territory, and Stochastics reaches oversold.

GDX WEEKLY CHART

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Next resistance is at 45.55.

An Evening Doji Star is now followed by another red candlestick that has some support from volume. This is bearish.

GDX DAILY CHART

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The breakaway gap at 39.34 may offer resistance. If the gap at 39.34 is closed and if On Balance Volume breaks above resistance, then confidence in the upwards trend resuming may be had.

US OIL

Last week’s analysis of US Oil expected upwards movement to continue towards the next target, which is exactly what has happened.

Summary: The main Elliott wave count expects upwards movement to continue to a new short-term target at 76.91, with a longer term target at 87.90.

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 Super Cycle wave (III) 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 waves (1) and (2) may be complete. No second wave correction within intermediate wave (3) may move beyond its start below 57.26.

DAILY CHART

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

If intermediate wave (3) has begun, then minor wave 1 within it may be a complete leading contracting diagonal. Following a leading diagonal in a first wave position, the second wave correction is usually very deep. Minor wave 2 is a 0.55 depth of minor wave 1.

A target is calculated for minor wave 3 that expects it to exhibit a common Fibonacci ratio to minor wave 1. Minor wave 4 may not move into minor wave 1 price territory below 66.75.

Draw an acceleration channel about intermediate wave (3). Draw the first trend line from the end of minor wave 1 to the last high, then place a parallel copy on the end of minor wave 2. Keep redrawing the channel as price continues higher. When minor wave 3 may be over, then this channel would be drawn using Elliott’s first technique and may show were minor wave 4 may find support.

TECHNICAL ANALYSIS

WEEKLY CHART

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Volume and On Balance Volume support the main Elliott wave count. This market can sustain extreme trends for a reasonable period of time.

DAILY CHART

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The upwards trend is not yet extreme at the daily chart level. There is plenty of room for the upwards trend to continue.

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Always practice good risk management as the most important aspect of trading. Always trade with stops and invest only 1-5% of equity on any one trade. Failure to manage risk is the most common mistake new traders make.

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