S&P 500

For the very short term, a little upwards movement was expected to a short-term target. The short-term Elliott wave target is almost met.

Summary: There is a reasonably strong cluster of bearish signals from the AD line and short-term weak quadruple bearish divergence between price and RSI. Closure of the last gap with a new low below 4,369.87 would add confidence that a high is in place. Four Elliott wave counts are considered in order of probability:

1 – A minor degree fourth wave may continue for another two to five weeks. For the very short term, a little more upwards movement to a target at 4,445 may occur before a downwards swing to end below 4,233.13.

2 – The pullback is over and the upwards trend resumes to the next target at 4,922 (first alternate).

3 – An intermediate degree fourth wave on the weekly chart may move suddenly lower to find support about the lower edge of the Elliott channel, which sits about 3,956 (second alternate).

4 – A primary degree second wave may begin. It may meet the technical definition of a bear market in that it may correct to 20% or more of market value at its eventual low. Also, it may find support about 3,044 and may not make a new low below 2,191.86 (third alternate).

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 seventeenth 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. There is now only eighteen days of divergence.

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.

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

Within intermediate wave (3), minor waves 1, 2 and 3 may be complete. Minor wave 3 may be shorter than minor wave 1 by 70.64 points. This limits minor wave 5 to no longer than equality in length with minor wave 3. Minor wave 4 may not move into minor wave 1 price territory below 3,950.43.

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.

DAILY CHART

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Minor wave 2 subdivided as a double zigzag and lasted 12 sessions. Minor wave 4 may last about 3 to 6 weeks and may most likely subdivide as a flat, triangle or combination, which are often longer lasting than zigzags. Flats, triangles or combinations are choppy sideways movements with swings from resistance to support and back again. Price does not move in a straight line during these swings, so it will not be possible to know which of several Elliott wave structures minor wave 4 has subdivided as until it may be over.

The most likely structure for minor wave 4 at this stage looks like an expanded flat, which is a very common structure. Minute wave c within minor wave 4 would be likely to make at least a slight new low below the end of minute wave a at 4,233.13 to avoid a truncation and a very rare running flat.

Draw an Elliott channel. Draw the first trend line from the ends of minor waves 1 to 3, then place a parallel copy on the end of minor wave 2. Minor wave 4 may find support about the lower edge of this channel.

Minor wave 4 may be unfolding as an expanded flat, which is a common structure. When minute wave c arrives, it would be extremely likely to make at least a slight new low below the end of minute wave a at 4,233.13 to avoid a truncation and a very rare running flat.

Minor wave 4 may not move into minor wave 1 price territory below 3,950.43.

If minor wave 3 is over, then it would be 70.64 points shorter than minor wave 1. This limits minor wave 5 to no longer than equality in length with minor wave 3, so that the core Elliott rule stating a third wave may never be the shortest is met.

FIRST ALTERNATE

DAILY CHART

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This alternate wave count has a lower probability than the main Elliott wave count based upon bearishness in classic technical analysis. It is named first alternate mostly because we should always expect the trend remains the same until proven otherwise. With new all time highs this week, the S&P is still within an upwards trend. However, the cluster of bearish signals puts this wave count behind the main wave count at this stage.

If the degree of labelling within minor wave 3 is moved down one degree, then only minute wave i within minor wave 3 may be complete.

Minute wave ii within minor wave 3 may be over at the last low. A third wave up at minute, minor and intermediate degree may have begun.

Targets are calculated for minor wave 3 and intermediate wave (3) that expect common Fibonacci ratios.

No second wave correction within minute wave iii may move beyond its start below 4,233.13.

SECOND ALTERNATE

WEEKLY CHART

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This weekly chart is again considered.

It is possible that intermediate wave (3) is over at the last high. However, it may also continue a little higher.

Intermediate wave (4) may last from three to several weeks and may find support about the lower edge of the Elliott channel. Intermediate wave (4) may not move into intermediate wave (1) price territory below 3,588.11.

Intermediate wave (3) is shorter than intermediate wave (1) by 182.97 points. It is unusual for third waves to be shorter than first waves for the S&P, particularly of a higher degree such as intermediate. This reduces the probability of this alternate wave count.

This alternate wave count is considered because the bearish divergence between price and the AD line is increasingly strong.

THIRD ALTERNATE

WEEKLY CHART

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This third alternate Elliott wave count is considered because it is technically possible. However, primary wave 2 may correct to the 0.618 Fibonacci ratio, which would be a 31% reduction in market value and meet the technical definition of a bear market. This is possible but has a very low probability as there is only 24 days of bearish divergence between price and the AD line. Within the last (almost) 100 years, only three bear markets have occurred following less than 4 months bearish divergence between price and the AD line. If this wave count is correct, then it would exhibit bearish divergence of less than 4 months a fourth time in almost 100 years; the probability of this alternate is rather low.

Primary wave 2 may last one to a few months. It may not move beyond the start of primary wave 1 below 2,191.86.

TECHNICAL ANALYSIS

WEEKLY CHART

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Bearish divergence between price and RSI has weakened this week. Sometimes when divergence between price and RSI is weak, it can just disappear. If a pullback or consolidation develops in response to this divergence, then it would most likely be short term and shallow.

DAILY CHART

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It is possible that the weak short-term quadruple bearish divergence between price and RSI up to July 29th has been resolved by a short-term pullback to the low on August 3rd. If divergence weakens further, then the bullish case would be strengthened.

It is possible that another consolidation has completed and the bullish trend has resumed. If ADX reaches 15, it would give a strong bullish signal.

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 almost two months of bearish divergence between the OCO AD line and price. This supports the main and second alternate Elliott wave counts but not the third alternate Elliott wave count.

There are only 24 sessions of bearish divergence between the NYSE All Issues AD line and price. This supports the main and second alternate Elliott wave counts but not the third alternate Elliott wave count.

Large caps all time high: 4,440.82 on Aug 6, 2021.

Mid caps all time high: 2,780.08 on May 10, 2021.

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

With 3 months of weakness in mid caps and 2 months of weakness in small caps, some pullback or consolidation may result soon. 

Price for the third week in a row makes a new all time high, but the AD line does not. This adds to the small cluster of bearish divergence 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.

The NYSE All Issues AD line made its last all time high on July 2nd, 2021. There is just over one month of bearish divergence. This suggests the market is currently vulnerable to a short-term pullback within the ongoing upwards trend. This is what the main Elliott wave count expects.

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. It may support the third alternate Elliott wave count.

Price and inverted VIX have moved higher this week. Price has made a new all time high, but inverted VIX exhibits all of short, mid and long-term bearish divergence. This supports the main or second alternate Elliott wave counts.

Comparing VIX and VVIX at the weekly chart level:

Both 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.

Short-term bullish divergence may now be resolved.

Inverted VIX has made a new short-term high, but mid and long-term bearish divergence remains.

The cluster of bearish short and mid-term divergence remains and supports either the main or second alternate Elliott wave counts.

Comparing VIX and VVIX at the daily chart level:

Both VIX and VVIX have moved lower today. 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.

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

Downwards movement again has unfolded as expected for both the first and second Elliott wave counts.

The second (preferred) Elliott wave count has expected an increase in downwards momentum and Friday’s strong downwards session fits this expectation perfectly.

Targets remain the same. Invalidation points may be moved lower.

Summary: Both the main and alternate Elliott wave counts expect downwards movement to a target at 1,731 or 1,568.

The second Elliott wave count is still preferred. Now that price is moving strongly lower the wave count has further support from classic analysis and price action.

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.

Double flats are fairly rare structures. The probability of this wave count is further reduced.

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. Intermediate wave (B) within primary wave 2 may be a complete double combination.

Intermediate wave (C) should make at least a slight new low below the end of intermediate wave (A) at 1,752.19 to avoid a truncation. At 1,731 intermediate wave (C) would reach 0.618 the length of intermediate wave (A).

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 2 may be a complete double combination. Primary wave 3 downwards may have just begun. Primary wave 3 must move beyond the end of primary wave 1, so it must move below 1,752.19.

No second wave correction within primary wave 3 may move beyond its start above 1,830.87.

At 1,568 primary wave 3 would reach 1.618 the length of primary wave 1.

Gold often exhibits swift strong fifth waves, particularly fifth waves to end third wave impulses one degree higher. Any one or more of minute wave v to end minor wave 3, minor wave 5 to end intermediate wave (3), or intermediate wave (5) to end primary wave 3, may exhibit this tendency and may end with selling climaxes. Primary wave 3 may last a few months.

TECHNICAL ANALYSIS

WEEKLY CHART

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Price this week has convincingly broken below support at 1,800. Stochastics is not yet oversold, so there is room for price to fall further here. Next short-term support is at 1,750 and below that 1,675.

DAILY CHART

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This chart strongly supports the Elliott wave analysis. Moving averages, volume, On Balance Volume, and ADX are all bearish. There is plenty of room for a downwards trend to continue before conditions with ADX and RSI reach extreme. When this market has a strong downwards trend, RSI can reach extreme and remain there for a few days while price can move a considerable distance.

GDX WEEKLY CHART

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There is still no clear trend at this time frame. Price is range bound. 

GDX DAILY CHART

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Price is consolidating with resistance about 35 and support about 33.0. A breakout is required before confidence in the next direction may be had.

ADX today indicates a potential trend change to downwards with the -DX line crossing above the +DX line. If the black ADX line turns up, then a downwards trend would be indicated. On Balance Volume, ATR and volume suggest a downwards trend may be developing.

US OIL

Downwards movement this week remains within the channel and above the invalidation point on the main Elliott wave count. The lower edge of the channel is providing support, so far.

The alternate Elliott wave count this week has a little support from classic technical analysis, particularly ADX, volume and candlesticks.

Summary: The main Elliott wave count expects upwards movement to resume to the next target at 112.79.

An alternate Elliott wave count allows for more downwards movement to end at support at the lower edge of a channel on the daily chart.

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 have provided support for the last pullback; if the current pullback is surprisingly deep, then this trend line may again be expected to provide strong support.

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 may only subdivide as an impulse.

Intermediate waves (1) and (2) within primary wave 3 may be complete. Minor wave 2 within intermediate wave (3) may not move beyond the start or minor wave 1 below 57.26.

Draw an acceleration channel about primary wave 3. 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. The lower edge of the channel may provide support for pullbacks along the way up. On the weekly chart the channel is drawn on a semi-log scale, and on the daily chart below it is drawn on an arithmetic scale. Use the channel on both scales.

DAILY CHART

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Minor wave 1 within intermediate wave (3) may be complete at the last high. The last pullback may be minor wave 2. Minor wave 2 may have ended about support at the lower edge of the acceleration channel.

Minor wave 3 may only subdivide as an impulse. Minute wave ii within the impulse may not move beyond the start of minute wave i below 65.09.

This wave count is very bullish. It expects a third wave at minor, intermediate and primary degree may have just begun. An increase in upwards momentum would be expected.

When third waves extend their subdivisions are also extended and take more time. It is normal to see the middle of an extended third wave begin with a series of first and second waves.

ALTERNATE WEEKLY CHART

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It is possible that primary waves 1, 2 and 3 within cycle wave I are complete. If primary wave 3 was complete at the last high, then the last pullback may have been the start of primary wave 4.

Primary wave 3 exhibits no Fibonacci ratio to primary wave 1. Primary wave 3 at 43.32 is longer than primary wave 1, which was 33.53.

Primary wave 2 lasted 10 weeks and subdivided as a single zigzag. Primary wave 4 may subdivide as any Elliott wave structure; so far it will be labelled as a possible double zigzag, but this labelling may need to change as it unfolds.

Primary wave 4 should last a few more weeks to be in better proportion to primary wave 2. Primary wave 4 may not move into primary wave 1 price territory below 43.77.

Draw an Elliott channel about the impulse of primary wave 3. Draw the first trend line from the ends of primary waves 1 to 3, then place a parallel copy on the end of primary wave 2. Primary wave 4 may find support about the lower edge of this channel.

When the channel is drawn about primary wave 3 there is an overshoot at the upper edge for intermediate wave (1). It is normal to see an overshoot of the trend channel on the side of the direction of the trend, but it is normally the third wave within the third wave as this is normally the strongest portion of a third wave impulse. This wave count does not have a normal look with the channel.

ALTERNATE DAILY CHART

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Primary wave 4 may unfold as any one of more than 23 possible corrective Elliott wave structures. So far it will be labelled as a possible double zigzag to move lower to find support about the lower edge of the Elliott channel, but it may also continue sideways as a combination, flat or triangle.

It would be most likely that primary wave 4 would not be over at the last low. It would look too brief in comparison to primary wave 2.

If primary wave 4 unfolds as a double zigzag as labelled, then it may end about support at the lower edge of the channel, which may be about 64.

TECHNICAL ANALYSIS

WEEKLY CHART

Click chart to enlarge. Chart courtesy of StockCharts.com.

At the last high, there was bearish divergence between price and RSI, ADX had reached extreme, and a bearish candlestick pattern in an Evening Star developed. A pullback or trend change would be expected given these conditions.

A Hammer candlestick pattern suggests the pullback may be over; this favours the main Elliott wave count. When this market has a strong trend, then extreme conditions may be sustained for a reasonable period of time while price moves a great distance.

A downwards week this week with support from volume suggests another test of support about 65 may occur.

DAILY CHART

Click chart to enlarge. Chart courtesy of StockCharts.com.

The pullback continued until Stochastics reached oversold and price moved below support, to then turn up strongly. A Hammer candlestick pattern at the low suggests the pullback may be over. This supports the main Elliott wave count.

Now a downwards trend is indicated after price tested resistance at 74.3 and Stochastics almost reached overbought. RSI is neutral; there is plenty of room for a downwards trend to continue. If price closes below support at 65, then confidence in a downwards trend may be had. Both Elliott wave counts will remain possible while price remains above this point.

This chart slightly favours the alternate Elliott wave count this week.

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