1 P a g e. Executive Summary

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1 Executive Summary Our standard sub division (SSD) Elliot Wave count for the S&P500 continues to track the market well, and we ll keep it as is until the market will tell us different. We continue to expect the market to reach SPX2370 +/- 5p for micro 3. However, since the micro-count on the S&P500 is getting a bit muddled at this stage, which happens when the final 4 th and 5 th wave are wrapping up (e.g. will there be one more wave higher yes or no?), we refer in this update to the technicals on the DOW and the Fib-extensions on the NYA to better guide us. What we can observe from studying those two indices is they support our preferred POV that we could get one marginal higher high in our ideal target zone around SPX2375, before a larger correction than the one from this past week, occurs. This marginal higher high is not necessary, though it would fit beautifully. All gains this week were made on Friday when the market dropped to SPX2353 and then rallied to SPX2367 to close for the week. As such, market internals are weakening, but still relatively strong. The CPCE spiked to low 0.70s on Friday despite an all-day rally; which normally suggests a low, but our CPCE/VIX ratio is more suggestive of the stock markets being closer to a top then a bottom. This fits with the latest AAII sentiment survey which shows that last week many individual now jumped aboard the Bull train, see below, wrong as usual again. With the DOW s extremely high daily-rsi5 reading (3 rd to 4 th highest since 1990), the NYA very close to the 1.382x extension of its intermediate-i wave, and the S&P500 on a micro-scale likely in its final 5 th wave up to SPX ; before embarking on a small correction to SPX , we find it most likely to expect a Micro-3 market top soon. The recent 1-day decline from SPX2368 to SPX2353 is in our opinion too short in time and price to label it as Micro- 4. We therefore find the short-term upside reward to have decreased significantly, while short term downside risk has increased. We remain, however long term bullish with a SPX2500+ target for the S&P500 by summer of next year. Note there will be bigger and bigger corrections in between now and then (minor 4, intermediate iv, major 4). 1 P a g e

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3 Elliot wave updates This week the S&P500 reached our next preferred target zone of SPX and got stuck there; signaling its importance. But, as the market is now wrapping up its final 4 th and 5 th waves up for the current leg up it becomes a bit unclear if we can expect one more marginal higher high or not. This week we did get a nice a-b-c correction into the SPX2353 low on Friday, with a picture perfect c=a relationship. Although we continue to expect a Micro-4 correction, a 1-day correction that fell well short of even the minimum target (SPX2342), while Micro-2 lasted two weeks and retraced a perfect ~50% of Micro-1, we have a hard time labeling the SPX2353 low as Micro-4. Instead it may simple be another Nano-4 or Pico-4 wave. Although we also have a hard time counting the advance off the SPX2353 low on Friday as an impulse, but if we assume it is then we have a small 1 st wave (likely a leading diagonal) from SPX2353 to SPX2361 (8p); then a small 2 nd wave to SPX2357, and wave 5 of these small final waves up would then ideally reach: SPX depending on a or 2.00x extension target for the 5 th wave. Bingo!? This notion fits well with our >10p is a wave notion (See insert). We d then now be in the 13 th wave up to complete a 13-wave impulse off SPX2267 low. Impulses are always 5, 9, 13, 17, etc waves depending on subdivisions. Figure 1. Preferred counts: Micro 3 complete or close to complete; a 13 th wave up would be ideal 3? 1? 2? 4? 3 P a g e

4 Technical Market update The notion of a marginal higher high to complete all of Micro-3 can be supported by the negative divergence building on the daily RSI5, and a decreasing MACD-histogram. The rally is losing momentum. Support is now at SPX2350, the upper black trend line (SPX2340), the S1 at SPX2335, followed by the 20d SMA at (SPX2320, and rising). These levels coincide well with our ideal Micro-4 target zone of SPX Note the lower Bollinger Band is starting to point back up, and price is moving away from the upper Band: momentum is weakening Figure 2. SPX daily chart. Negative divergence starting to build. TIs momentum decreasing. 4 P a g e

5 When there s increased uncertainty in tracking one particular index (S&P500) it helps to look across many other indices to determine the weight of the evidence. Here we ll look at the DOW and NYA to see if our preferred POV of the S&P500 is correct (Micro-3 to top in the SPX zone; to be followed by Micro-4). First up; the DOW. The most striking observation is the extremely overbought RSI5 reading. It s only surpassed by a smidge with that from mid-december When we go back in time, starting with the current chart, to see how the DOW behaved after peak RSI5 readings, we can observe three such occasions (blue vertical lines). Of those 3, the Mid-July 2016 setup appears most similar as the Bollinger Band set-up is similar (flat lower Band, increasing higher Band; red circles). If history is to repeat itself, it would suggest the DOW may retrace back to its 20d SMA over the next few sessions before rallying again. This supports our POV. Going further back in time (to 1990), we only observed 3 other occasions with a similarly high peak RSI5 reading: late-1992, late-1997 and mid The market then went sideways, lost 4.5%, and increased 5.5% first to then lose >17% next. Thus this is a wash. Figure 3. DOW daily TI chart. RSI5 is extremely overbought. Short term upside therefore very limited. 5 P a g e

6 Next up; the NYA. The most striking observation on this chart is that price is getting very close to the 1.382x extension of (red) intermediate-i measured from intermediate-ii. As indicate on the chart; this Fib-extension is typical for either a 3 rd wave extension or a 3 rd of a 3 rd wave extension. The latter would support our POV, but we ll let the market decide which it will be eventually. In the first case (red) intermediate iv should then retrace, ideally, up to 38.2% of all of int.-iii (~$11,800); and in the case of a minor 3 top (green) minor 4 should then retrace, ideally, up to the 38.2% of all of minor-3 (~$11,250). A marginal higher high to ~$11,630 would set up negative divergence on the daily RSI5, and firm up the negative divergence on the daily MACD. Note that the On-Balance-Volume indicator is not diverging telling us money keeps pouring into the market and we should expect higher prices after the correction. This chart also supports our preferred POV. Figure 4. NYA daily TI chart. Close to reaching the ideal 1.382x extension; sell signals setting in. 6 P a g e

7 Market breadth The McClellan Oscillator for S&P500 (SPX-MO) reached >60 again this week, telling is this rally has longer term legs. However, breadth is now lower than it was 2 weeks ago. The SPXSI (summation index of the SPXMO) remains therefore on a buy after the buy signal from Friday 2/10. We continue to keep an eye on negative divergence (red dotted line) similar development of the SPX-SI as in June last year. Figure 5. SPX-MO firmly positive, but decreasing. SPX-SI remains on buy. 7 P a g e

8 Miscellaneous Nothing to add, take this as a FYI that adds weight to the evidence, supporting our view of the markets short to long term! Our long-term Simple Moving Averages only chart (LT-SMA, for trend followers and long term investing) continues to be 100% bullish: the long term trend remains up. This chart remains in line with our overall view of the market and where it will head over the next several months. Our short term chart (ST-SMA, for traders to swing traders) also continues to be 100% bullish. Please note that these charts are reactionary to price and don t foretell any price swings. They do tell us that the chances of continued higher prices are much higher than lower prices Figure 6. LT-SMA chart 100% bullish ST-SMA chart 100% Bullish. Below is how a 100% bullish chart look likes, everything points up. Price > fastest SMAs > slowest SMAs. The Ebola scare correction in 2014 didn t even register on the LT chart! 8 P a g e

9 The CPCE (put/call ratio) our contrarian indicator at extreme levels- increased on Friday to 0.72; despite the all-day rally off the opening low. When we plot the VIX, CPCE and price in one chart we can observe that significant market lows (black) coincide with a high VIX (red) and high CPCE (blue) (Figure 7a). Currently, the CPCE is relatively high, but the VIX is very low; thus this doesn t support the idea that Friday s low was a significant low. When we plot the CPCE:VIX ratio (Figure 7b), we observe that low ratios (often <0.035) coincide with important market lows (red dotted vertical lines) and that higher bottom ratios are noise (blue vertical lines), while market tops coincide with an up trending ratio (red EMA-13) and a mostly with a ratio-reading >0.05. The latter is currently the case: high ratio and high EMA-13. Hence, all though this is only 3 rd to 4 th tier data, these charts suggest to us that a top is closer than a bottom. Figure 7. CPCE and VIX support idea a top is closer than a bottom. 9 P a g e

10 All Bradley Turn Dates for 2017 January 18 (50/100 Long Terms Power) January 30 (55/100 Middle Terms Power) March 20 (100/100 Long Terms Power) April 3 (31/100 Declinations Power) April 17 (19/100 Bradley Siderograph Power) April 19 (59/100 Middle Terms Power) April 29 (19/100 Bradley Siderograph Power May 5 (30/100 Declinations Power) June 9 (61/100 Long Terms Power) June 21 (100/100 Bradley Siderograph Power) June 30 (100/100 Declinations Power) July 4 (100/100 Middle Terms Power) August 19 (17/100 Bradley Siderograph Power) September 5 (17/100 Declinations Power) September 7 (29/100 Bradley Siderograph Power) October 7 (48/100 Middle Terms Power) December 3 (23/100 Bradley Siderograph Power) December 6 (100/100 Long Terms Power) ALOHA Soul, Ph.D. 2017, Intelligent Investing. This copyrighted weekly periodical is published on non-stock market trading weekend days by Intelligent Investing, and is intended solely for use by designated recipients. No reproduction, retransmission, or other use of the information or images is authorized. Legitimate news media may quote representative passages, in context and with full attribution, for the purpose of reporting on our opinions. Analysis is derived from data believed to be accurate, but such accuracy or completeness cannot be guaranteed. It should not be assumed that such analysis, past or future, will be profitable or will equal past performance or guarantee future performance or trends. All trading and investment decisions are the sole responsibility of the reader. Inclusion of information about managed accounts, program positions and other information is not intended as any type of recommendation, nor solicitation. For more information, contact intelligent investing at intelligent_investing@yahoo.com. We reserve the right to refuse service to anyone for any reason. 10 P a g e