S&P 500

The week closes with a new all time high. Signals today from the AD line and inverted VIX are in agreement on which direction price may take next week.

Summary: The primary trend remains up. Pullbacks are a normal and to be expected part of a bull market.

Targets for the Elliott wave count: mid term 4,922 and long term 5,468.

For the short term, price may continue sideways for another one to three weeks. A new low below 4,289.37 would indicate a slightly deeper pullback, which may end about the lower edge of the green Elliott channel.

Risk management advice: Only the most experienced traders should attempt to trade against the larger trend. Others would best see corrections as buying opportunities when price is close to or at support. The trend is your friend.

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

Last monthly charts are here. Video is here.

MAIN 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 sixteenth 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.

Minor waves 1 and 2 within intermediate wave (3) may be complete. A target is calculated for intermediate wave (3) that expects a common Fibonacci ratio to intermediate wave (1).

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

Within intermediate wave (3), minor waves 1 and 2 may be complete. A target is calculated for minor wave 3 to reach a common Fibonacci ratio to minor wave 1.

A best fit channel is drawn about cycle wave V. Draw the first trend line from the end of intermediate wave (1) to the end of minute wave iii within minor wave 3, then place a parallel copy on the end of intermediate wave (2). The channel may need to be redrawn as price continues higher. The channel may show where price may find resistance and support along the way up.

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). This labelling fits with MACD.

Within minor wave 3: Minute waves i, ii, iii and iv may all be complete, and minute wave v may be extending.

Within minute wave v: Minuette waves (i), (ii) and (iii) may be complete, and minuette wave (iii) exhibits an increased slope. Minuette wave (ii) is labelled as an expanded flat. Minuette wave (iii) is slightly longer than equality in length with minuette wave (i), which has a reasonable probability.

Minuette wave (iv) may now have arrived and may not move into minuette wave (i) price territory below 4,249.74.

Minuette wave (ii) lasted 6 sessions and saw price fall 2.00% of market value. Minuette wave (iv) may last from 3 sessions to about three weeks and would most likely be a shallow consolidation. At this stage, it is labelled as a possible running contracting triangle. This labelling may need to change.

It is also possible that minuette wave (iv) was over at the last small swing low on the 8th of July. If Monday continues with upwards movement, then minuette wave (iv) may be labelled as complete.

Draw an Elliott channel about minor wave 3 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. Along the way up, the lower edge of this channel may provide support. Minute wave v may end about the upper edge.

Draw a smaller Elliott channel about minute wave v using Elliott’s first technique. 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). If minuette wave (iv) continues lower, then it may find support at the lower edge of this channel.

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 4,164.40 on the 18th of June. 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.

On Balance Volume and ADX are bullish.

RSI is now overbought again, but this indicator may reach extremely overbought and remain there for a long time when this market has a strong bullish trend. With no clear and strong bearish divergence between the last two swing highs in price and RSI, it looks unlikely that a larger pullback may occur here.

DAILY CHART

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With the last gap created on Thursday and closed on Friday, it would correctly be viewed as a pattern gap. The pullback following the exhaustion gap may be complete.

On Balance Volume may give an indication of the next short-term direction. An upwards breakout on Monday would be bullish. If it remains constrained, then price may continue sideways before an upwards breakout occurs.

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. There is now a month of bearish divergence between the OCO AD line and price.

Large caps all time high: 4,371.60 on Jul 09, 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.

This rise is led by large caps, which is a feature of an aged bull market. This fits the Elliott wave count that sees a fifth wave to end a third wave completing. This may continue for some time before a larger pullback arrives.

This week price has moved higher, but the AD line has moved lower. There is now a single week instance of bearish 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.

Today price has made a new all time high, but the AD line has not. There is short-term bearish 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. 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, but inverted VIX has moved lower. This is a single week instance of bearish divergence. Mid-term bearish divergence remains.

Comparing VIX and VVIX at the weekly chart level:

This week both VIX and VVIX have moved higher. 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.

On Friday price has made a new all time high, but inverted VIX has not. There is now all of short, mid and long-term bearish divergence.

Comparing VIX and VVIX at the daily chart level:

On Friday both VIX and VVIX have moved lower. There is no new short-term divergence.

On 2nd July VIX made a new short-term low below the 25th of June, but VVIX did not. This divergence is bearish for price for the short term, but it is reasonably weak.

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

An inside day continues sideways movement. Either a pullback or a consolidation was expected for this week; overall, sideways movement fits expectations. The Elliott wave count now focusses on when this consolidation may be over.

Summary: A multi-week to multi-month bounce may have begun. A target for resistance is at 1,814 or 1,853.

For the short term, a B wave may now continue most likely sideways for another one to few sessions. It may remain above 1,752.19.

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.

Cycle wave V may have begun. Within cycle wave V: Primary wave 1 may be over at the last high, and primary wave 2 may not move beyond the start of primary wave 1 below 1,677.64.

DAILY CHART

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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 complete.

Primary wave 2 may be an incomplete zigzag. Within primary wave 2: Intermediate wave (A) may be complete, and intermediate wave (B) may unfold over a few weeks. Thereafter, intermediate wave (C) may continue lower and should make a new low below the end of intermediate wave (A) to avoid a truncation. When the end of intermediate wave (B) and the start of intermediate wave (C) is known, then the Fibonacci ratio between intermediate waves (A) and (C) may be used to calculate a target for intermediate wave (C).

Within intermediate wave (B): Minor wave A may now be complete, and minor wave B may now continue lower or sideways for a few sessions to about two weeks. B waves within B waves are extremely difficult to analyse; the structure of minor wave B may not be known until it is complete. Combinations and expanded flats are common structures for B waves within B waves.

Primary wave 2 may not move beyond the start of primary wave 1 below 1,677.64.

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 cycle wave I. 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. Cycle wave II is deep and the structure may be complete; so far it is following a common pattern. If it continues higher, then cycle wave II may not move beyond the start of cycle wave I above 2,070.78.

DAILY CHART

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A target is calculated for cycle wave III.

Primary wave 1 within cycle wave III may be complete.

Primary wave 2 may last weeks to months. Targets for resistance are the 0.382 Fibonacci ratio at 1,814.54 and the 0.618 Fibonacci ratio at 1,853.07.

Primary wave 2 may not move beyond the start of primary wave 1 above 1,915.42.

Primary wave 2 may be subdividing as a zigzag. Intermediate wave (B) within primary wave 2 may now continue sideways most likely as a triangle. B waves are the most difficult to analyse as they exhibit the greatest variety in Elliott wave structure and price behaviour.  It is usually not possible to know which structure a B wave has sub-divided as until it is complete.

TECHNICAL ANALYSIS

WEEKLY CHART

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Volume declines this week as price moves higher and On Balance Volume is at resistance. Price may react downwards next week.

DAILY CHART

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Upwards movement has not yet reached resistance and Stochastics is not yet overbought. An upwards swing may overall continue until price reaches resistance about 1,850 and Stochastics is overbought. Price is unlikely to move in a straight line though; there may be pullbacks along the way.

GDX WEEKLY CHART

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There is no bullish reversal pattern at this last low, but now two bullish long lower wicks suggest at least a little more upwards movement ahead.

GDX DAILY CHART

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An inside day does not have support from volume. If support at 33.2 can be breached by price closing below it, then price may fall to next support about 31.

US OIL

An outside week closes red. Price remains well above the invalidation point and within the channel on the daily chart.

Summary: The Elliott wave count expects upwards movement to continue to a short-term target at 86.40, with a longer term target at 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 has now been breached by upwards movement. This trend line may now provide support for any deeper pullbacks along the way up.

This week a new high above the high at 76.90 from October 2018 has been made. This is a significant new high and was expected from this wave count. Further confidence in a bull market for Oil may be had.

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 be underway.

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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Within intermediate wave (3), minor wave 1 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.

When a first wave subdivides as a leading diagonal, then the third wave is almost always extended. The target expects this common scenario.

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.

Only minute wave i within minor wave 3 may be complete.

This wave count is very bullish. It expects a third wave at minor, intermediate and primary and minute degree may have just begun. A strong increase in upwards momentum may be expected if this wave count is correct.

Minor wave 4 may not move into minor wave 1 price territory below 66.75.

TECHNICAL ANALYSIS

WEEKLY CHART

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This market can sustain extreme trends for a reasonable period of time. Despite weak bearish divergence between price and RSI, price continues higher. Divergence is weakening.

DAILY CHART

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A Bearish Engulfing candlestick pattern comes while the trend was not extreme and there was no clear bearish divergence between price and RSI. In these circumstances a larger trend change may not be the most likely result and may only indicate another short-term pullback. The pullback may now be over.

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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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