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Monday, 22 November 2010

18:16 GMT - Blog Update

I started this blog nearly 6 months ago in response to a challenge by a trading buddy to run my own blog for 6 months in return for a new laptop. Well, how could I resist, especially when he agreed to set it all up and all I needed to do was post!

Well, we're just a few trading days off the 6 month mark, but over the weekend, he, I and the rest of our small trading circle decided we'd take-off for a few weeks for some winter sun. We've spent most of today looking for the right deal.The only dates we could get to suit us all are later this week. So, my trading buddy who issued the challenge has agreed that I've done enough to win the challenge since I did alot of posts at weekends, which wasn't part of the original deal. So, I get my latptop!

As far as the blog is concerned, I've decided that 6 months worth of blogging is enough for me. I would never have started my own blog if it hadn't been for the challenge and the reward offered. I know it sounds abit mercenary, but the offer of a new laptop was the only reason I took up the challenge. So, the weekend's post was my last.

So, to all who visited, hope you found something useful. Good luck in your trading.

By the way, if anyone would like to buy an external graphics card that uses a PCMCIA card slot (found on older laptops and some PCs), I have one for sale. Its a VTBook by Villagetronic. You can read about it by clicking here.


Its a great bit of kit for adding an extra monitor, but the new laptop I'm getting only has the new express card slot which doesn't take the VTBook card  so it won't be of any use to me anymore.

I'm looking for $95 plus postage (about $20 to the US) or £65 plus postage (about £6.70). Anyone interested, please email me at gi61et at gmx dot com (obviously, replace the "at" and "dot" with the symbols). Payment by paypal only.

Thanks all.

Saturday, 20 November 2010

15:28 GMT - SPX Update

With only one bearish count remaining after Friday's action, (see Chart 1 in Friday's end of day update) I thought I'd better see what other bearish possibilities might exist, especially with the bearish count I'm left with being quite close to its invalidation point at 1207.43. So, here's what I'm looking at as the alternate bearish count in the event that we exceed 1207.43:

SPX 10 min bearish alternative:



The chart shows the main count from yesterday's end of day update, but I've added the the alternate which counts 5 waves down from the high at 1127.08 to the low at 1173.

Here's the close up:

SPX 1 min - bearish alternative close up:


Its not the best looking 5 waves, with wave [4] being so much smaller than wave [2], so there isn't a nice channel for it. However, that doesn't invalidate the possibility. A better channel is produced if I count wave [4] as a more complex correction that ended just before the little dive that the market took in what I've labelled as the end of wave X. So, that low labelled X would be wave [5] on this further possibility, ending in a truncation. The move up from there would be a single zig zag rather than the double zig zag I've labelled.

For the moment, I'll go with the alternate as labelled on the chart. It won't be invalidated unless we take out the high at 1127.08.

Friday, 19 November 2010

21:24 GMT - SPX End of Day Update

The bearish count as labelled in my previous post was invalidated in the last few minutes, so as mentioned in that previous post, I've relabelled it to show a double zig zag up from the low at 1173. For this count to remain valid, we need to stay below the high at 1207.43

Here's the bearish count (labelled as if Option 2 on the 60 min counts page is playing out):

Chart 1: SPX 1 min - bearish count:


Really, until we see a clear impulse to the downside,  I think further upside has to be expected and we could end up seeing this count invalidated also. So, an impulse down now would be the first sign that this labelling could be playing out. Even better if we take out 1189.44 in the process, followed swiftly by 1175.87 However, in reality, until we take out 1173, the bearish count is lower odds.

Here's the bullish count (labelled as if Option 3 on the 60 min counts page is playing out - but note there are 4 interpretations of it and the chart below shows the 3rd one as the main labelling):

Chart 2: SPX 1 min - bullish count:


The alternate labelling shown previously was invalidated with the move above 1199.36. However, the new alternate is the one previously noted on the chart, that 1173 was only wave (iv) of [iii] (its also possible that it was wave [iv]). For this count to remain valid, we'd need to stay above the 1173 low, but it will become very questionable if we take out the low at 1175.87.

On the main labelling, we could just about have completed the second zig zag. However, we need to take out the low at 1189.44 in order to negate the possibility that the move up from there is only wave (1) of [C] rather than the whole of [C].

So, after today's action, the levels I'm keeping an eye on are 1207.43 (which has to hold in order to keep the bearish count valid), 1189.44 (taking that out could be an initial sign that more downside, perhaps in the bearish count, is to come) and 1175.87 (taking that out would increase confidence in the bearish count, though it would also be consistent with the main and alternate bullish counts).

Have a great weekend!

19:30 GMT - SPX Update

The bearish count remains valid as labelled for the time being. The labelled count will be negated above 1199.36, but the possibility of a [1]-[2]-(1)-(2) will remain until we exceed the high at 1207.43 (I'd be labelling it as a double zig zag as shown on the chart of the bullish counts below). If the labelled count is to remain valid, we really need to start declining soon:

SPX 1 min - bear count:



For the bullish counts, all are still on the table, though the alternate (that we're in a i-ii for wave (c) down) is, like the bearish count, just about hanging on. Its invalidation point is the same as on the bearish count:

SPX 1 min - bullish count:



If we make a new high above 1200.29, that would give us  what looks like 5 waves up from 1173 and would make the further alternate (see the pink note) that 1173 was wave (iv) of [iii] start to look like more of a possibility, though it may be that we're just seeing a 5 wave wave a of (x) instead of the double zig zag I've labelled for it currently.

As I said in yesterday's end of day update, while we're above 1183.56, more upside is the most likely outcome. However, now, taking out today's low in an impulsive manner could be an initial sign that the bearish case may be gaining strength.

14:52 GMT - SPX Update

On the bearish count, I'm watching that high at 1183.56. As mentioned in yesterday's end of day update, taking that out will help the bear case (though it doesn't exclude the bullish possibilities):

SPX 1 min - bear count:


For the bullish case, a number of possibilties still remain, (see yesterday's end of day update) including a completed (x) wave during yesterday's sessions where I have the "or ii" label. If that or the alternate bullish count is playing out, I'd expect to see 1173 get taken out fairly soon:

SPX 1 min - bullish count:





Thursday, 18 November 2010

21:15 GMT - SPX - End of Day Update

The picture hasn't changed too much since my last post. The bearish count is still valid with the high at 1207.43 not yet having been taken out. The bullish counts also remain intact. Assuming we decline from around current levels, its a matter of waiting to see how that decline behaves and what levels it reaches. If we continuing moving up from here, we have to wait and see whether the high at 1207.43 continues to hold to keep the bearish count (and the alternate bullish count) alive.

As usual, the context for these smaller timeframe charts can be found on the 60 min counts page.
Here's the bearish count:

Chart 1: SPX 1 min - bear count:



I've moved the high for the rally from 1175.87 to the high at 1199.36, so a truncated 5th wave. That's because the decline from 1209.29 isn't obviously an impulse, so I'll assume it was part of wave iv of C of (2). From the 1199.36 high, we have what may be the start of a larger impulse down. We'll have to see how it develops.

As I mentioned in the last post, I'd have more confidence in the bearish count if we can now take out the high at 1183.56 in an impulsive manner. That would start to reduce the likelihood of one of the bullish possibilities mentioned below.

Here's the bullish count:

Chart 2: SPX 1 min - bullish count:


For the main bullish count, I've re-labelled the move up from 1173 as a double zig zag, with today's high as wave [A] of the second zig zag. However, its possible that wave (x) also topped today using the count shown on Chart 1 above. If it has, or if we're in the alternate bullish count labelled, we should see an impulsive decline taking out 1173 fairly quickly, much as we'd expect to see on the bearish count, assuming we're going to see another zig zag for wave (y) on the main bullish count.

As I mentioned in my last post, the further alternate bullish count shown in the pink note at the top of Chart 2 remains a possibility until we take out the high at 1183.56. Its odds will be reduced if we do that and will be virtually eliminated if we then take out the low at 1175.87. It will be invalidated if we take out the low at 1173.

So, for the way I've labelled the bearish count, 1199.36 now has to hold for it to remain valid. If we take that out, then the next level to watch remains 1207.43. If that gets taken out, the bearish count will be invalidated. To the downside, taking out the high at 1183.56 will help to increase confidence in the bearish count.

For the bullish count, the main count is looking for a further high to complete wave (x). However, if the alternate is playing out or we topped in wave (x) today, we should see a quick decline that will take out 1173. While we're above 1183.56, the possibility of the further alternate bullish count remains on the table and would imply a new high above 1127.08, probably over the course of the next few days, before any substantial down move is seen.
 

17:50 GMT - SPX Update

The alternative bearish count was duly invalidated, but the main bearish count currently remains intact:

SPX 1 min - bear count:




Its possible to count 5 waves up from the 1175.87 low so I've changed the labelling from W-X-Y to A-B-C for wave (2) of [3].

The retracement so far has reached the 78.6% level. We really need to start dropping now if this count is correct. The invalidation point is at 1207.43.

An impulsive decline from around here would be a start, but I'd then want to see a quick move taking out the A wave high at 1183.56 to provide a degree of confidence. Until we see an impulsive decline, I'd have to say that the wave count probably isn't complete and the risk of further upside remains high.

Both the main and alternate bullish counts are also still intact.

SPX 1 min - bullish count:


Both of these would suggest a decline should be due if the wave count is complete. However, for the main bullish count, its possible that wave (x) could form a more complex pattern. An impulsive decline from here could reduce the odds of that.

Note the pink note at the top of the chart - this further alternate would make 1173 a wave (iv) of [iii] low, with the current rally being part of wave (v) of [iii] up. If we take out the high at 1183.56 on the next decline, the odds of that further alternate count would be reduced.  Taking out 1175.87 would pretty much eliminate it (though really, its only invalidated below 1173). While the market is positioned to make 5 waves up from 1173, this further alternate count remains on the table and would imply a new high above 1127.08 is likely quite soon.

14:44 GMT - SPX Update

The main bearish count is looking on track. Now we just have to stay below 1207.43 for this to remain valid. The alternate bearish count is still valid at the moment, but could be quickly negated by a move above 1194.08:

SPX 1 min - bear count:



The main bullish count is also looking OK. This will be the most likely count if we do take out the high at 1207.43 and negate the main bearish count. The alternate bullish count is still a possibility, but it too will be negated above 1207.43:

SPX 1 min - bullish count:

Wednesday, 17 November 2010

21:11 GMT - SPX End of Day Update

After a big drop, we had the consolidation today.  This wasn't entirely unexpected given where we're at on the daily chart (see my earlier post here). The sideways to up nature of the move looks corrective at the moment, suggesting that the odds would favour further downside to come.

Please refer to the 60 min counts page for the bigger picture showing how the following charts fit into the counts that I'm following.

Here's a close up of the bearish count:

SPX 1 min - bearish count close up:


I think that odds favour that this correction isn't wave 4 of (1) - counting it as such doesn't break any rules, but it doesn't seem to look right. So, while its still a valid count, it would be my least preferred right now.

The two that I prefer are as labelled. The main labelling puts us in wave (2) of [3]. It would, ideally, retrace more than it has done so to date, to the area mentioned in yesterday's end of day update, 1190 to 1194. However, it would still be a perfectly valid 2nd wave if today's high marks its end.

The alternate labelling is equally as valid, making yesterday's low wave [3] and the move off yesterday's low wave [4]. Wave [3] is just over 1 point longer than wave [1]. Often, where the 1st and 3rd waves of an impulse are about equal, the 5th wave extends.

If we do just drop from here without getting up to the ideal level for a wave (2) retracement on the main count, I don't think we'll be able to tell immediately whether we're in wave (3) of [3] or in wave [5], especially if we get an extended decline. I think it may only become obvious once we complete such a decline and then retrace back up. Then if the low at 1173 gets taken out, we'll know that the decline couldn't have been wave (3) of [3] because the retracement that follows it would have to stay below 1173. If we decline from here, but the decline is weak, the chances will increase that its a 5th wave, not wave (3) of [3].

Here's a close up of the bullish count:

SPX 1 min - bullish count:


There are various ways that the decline from 1127.08 can be labelled. For the moment, I'm assuming a complete zig zag down to 1173. This could be all of wave [iv], but this wouldn't be my favourite count, so I've changed the main labelling to show this zig zag as only wave (w) of [iv].  This means that we're now in  a wave (x) up and will then see further downside in wave (y), towards the 38.2% retracement level that I mentioned in yesterday's end of day update, at about 1156. This could still apply even if we take out 1173, since wave (x) could just be forming an expanded type correction.

However, if we decline strongly from today's high in an impulsive manner below 1173, I'd be looking at the alternative labelling, that 1173 is only wave i of (c), so wave (c)  would then achieve the deeper retracement that I'd prefer for wave [iv] (remember also that the other interpretations of Option 3 on the 60 min counts page could entail a significantly deeper retracement).

For the moment, I'm watching the low at 1173. If that gets taken out, it opens up the door to more bearishness, especially if its taken out in 5 waves from today's high. However, taking it out in 3 waves from today's high would favour it being part of an on-going upward correction. 

If there's more upside to come, then, for the bearish count, we need to stay below 1207.43 for the main count to remain valid and 1194.08 for the alternate count to remain valid. Taking out 1207.43 may not be a guarantee of news highs for the rally from the August low occurring imminently since we could simply be seeing a wave (x) as part of a continuing downward correction of that rally in accordance with one of the bullish counts (see Chart 2 on the 60 min counts page for these).

16:07 GMT - SPX Update

At the moment, its unclear whether we've made a wave (1) low on the bearish count or whether we're still in wave 4 of (1):

SPX 1 min - bear count:



So far, we've got 3 waves up from the low that I've labelled as wave (1) of [3]. We've only retraced about 38.2% of wave (1) and if that remains the case, I'd be inclined to consider today's move up as part of wave 4 of (1) rather than as wave (2) of [3].

For the bullish count, its the same isse, whether we've bottomed in wave (c) of [iv] (or wave (w) of [iv]), or whether we still have a further low to come:

SPX 1 min - bullish count:



If we see 5 waves down from today's high, then I think that today's high is more likely to have been a 4th wave on these counts. If we see 3 waves down, even if it takes out 1173, we could well be seeing an expanded correction in progress for wave (2) of [3] on the bearish count or part of wave (x) on the alternate bullish count (which would mean that 1173 was a wave (w) not (c) on the bullish count).

While we're above yesterday's low, the chances are that we'll see more upside in wave (2) on the bear count and in at least a wave (x) on the bullish count.

 

14:41 GMT - SPX Update of the daily chart

The downside that the daily chart seemed to be suggesting at the end of last week (see my post at the weekend) has transpired. However, we're now at an area where there may be a bounce or at least a pause:

SPX Daily:



This is a close up of the daily chart posted at the weekend. You can see that we've reached the bottom of the area of support that I had highlighted and we're also in the vicinity of the lower line of the blue pitchfork and the 50ma.

These reference points would be a logical place for at least a pause in the decline. However, if things are really bearish, we could see price just slice through these areas just as it has sliced through and arrived at the bottom of all that congestion that should have been support.

Such a move wouldn't be too surprising since the indicators on the chart don't suggest that a significant bounce is likely as yet. Still, with these reference points so close by, its just as well to be prepared for a bounce from around the area of these reference points or at least some sideways consolidation before any further downside suggested by this chart can occur.

Tuesday, 16 November 2010

21:11 GMT - SPX End of Day Update

On the bearish count, I'm counting the high at 1227.08 as the end of the rally from the August low. The chart of the bearish count is labelled as if Option 2, shown on Chart 1 on the 60 min counts page, is playing out and if that's correct, then we should see a fairly substantial decline in a wave Y (or it may be a wave C).

I'm counting a [1]-[2]-(1) down from the 1227.08 high for this bearish count. Here's a close up of the move from that high:

Chart 1: SPX 1 min - bear count from the 1227.08 high:




As you can see I have us in the process of completing wave (1) of [3] down. If this count is correct, the next rally for (2) of [3] will have to stay below the wave [2] high at 1207.43. If that gets taken out, then we're either still in wave [2] as an expanded type correction, or the bullish count shown below may be playing out.

The bullish count is labelled as if Option 3 shown on Chart 2 on the 60 min counts page is playing out. As you can see from that chart, if we completed 5 waves up from the August low there are various ways to interpret what that may be. It should be noted that one of those interpretations is bearish (number 4). For the close up chart below, I've assumed that 5 waves up from August  completes wave [iii] of A simply because, of the bullish interpretations, that's the one that will be invalidated quickest, by a drop below 1129.24 because wave [iv] can't end below the high of wave [i].

Here's the close up showing the move from the 1227.08 high:

Chart 2: SPX 1 min - bullish count from the 1227.08 high:




As you can see, the labelling shows a near complete (a)-(b)-(c) from the high. This could be the whole of wave [iv], but it might look better timewise if it lasted longer and perhaps went to the 38.2% retracement level at about 1156. So, its possible that the (a)-(b)-(c) labelled is of a lesser degree and is part of a larger corrective pattern.

If one of the other two bullish interpretations of Option 3 is playing out then this decline will be a second wave of some degree (see the 1st and 2nd interpretations on the 60 min counts page), so I'd expect it to go much deeper, to the 1134-1112 area (the 50% to 61.8% retracement level). So, it would be more than likely that the decline so far is only part of a larger retracement of the rally from the August low, possibly part of a double zig zag.

So, if, on the next retracement up we take out the high at 1207.43, the odds will favour that one of the bullish counts is playing out. Although it would still be possible that, on the bearish count, wave [2] is just forming an expanded type correction, this may be the least likely possibility since the move down from 1207.43 does seem to count nicely as a 5 wave move so it couldn't be a B or X wave in an expanded correction.

Ideally, if the bear count is playing out, a retracement of the decline from 1207.43 should end at around the 50% to 61.8% retracement level which is between 1190 and 1194, assuming that today's low at 1173 is the end of wave (1) of [3]. However, today's gap down starts at 1197 and may get filled.

If we take out 1207.43, focus will switch to the bullish counts, but it won't necessarily mean that a new high above 1227.08 is imminent. We may just be forming an X wave before further corrective downside action to complete the retracement of the rally from the August low, whether its wave [iv] of A, or a second wave on one of the more bullish interpretations of Option 3.
 

16:47 GMT - SPX Update

On the bear count, we may be nearing a low of some sort. I have it as wave 3 of (1) of [3], but it may well be the end of wave (1). Here's the chart updated from earlier:

SPX 1 min bear count:



On the bullish count, I'm definitely preferring the count that has 5 waves up from the August low complete at 1227.08 (which brings it into line with the bear count). This chart is Chart 3 on the 60 min counts page showing the up to date action:

SPX 60 min - Option 3 top at 1227.08:

As you can see, the uptrend channel has been broken and re-tested from below. That tends to support the count shown which assumes the end of the uptrend delineated by that channel. 

The chart labels show two of the ways to interpret what the end of 5 waves means on Option 3 - the 60 min counts page sets out the others. Which one is playing out will determine whether the high at 1227.08 is only a temporary high which will eventually be taken out or whether its something more bearish.
Here's the close up:

SPX 1 min - bullish count:


I've labelled it as if the 5 waves up from the August low is wave [iii] of A, only because this is the interpretation that will be invalidated first - we have to stay above 1129.24 for this to remain valid.

15:01GMT - SPX Update

For the bear count, I've left off the alternate that I've been showing (see yesterday's end of day update) and also put the bullish counts on a separate chart because I'm running up against stockchart's annotation limit. 

This chart shows the main count, with the possibility that we still have another leg up in wave [2] to come, as explained in yesterday's end of day update. I've also moved the current label for wave [2] to the 1207.12 high, so its a double zig zag, not a triple:

SPX 1 min - bear count:

If we've started wave [3] down then there may be more to go before we complete wave (1).

If we have another up leg for wave [2], then I'll be looking for it to end in the 1210 - 1214 area as previously mentioned.

On the bullish count, I'd put us in wave c or y of (iv):

SPX 1 min - bullish count:




As noted on the chart, if 1227.08 was a 5th wave high from the August low (which, as previously mentioned, is the count I prefer), then this decline may be something more substantial then wave (iv) (see the 60 min counts page under Option 3 which lists the 4 ways to interpret what 5 waves up from the August low may be under Option 3).

Monday, 15 November 2010

21:19 GMT - SPX End of Day Update

The status of the move down from 1227.08 remains unclear at the moment. It could be 5 waves down to Friday's low or it could be a double three corrective pattern. The move off Friday's low continues to look more corrective than impulsive, suggesting that there should be more downside to come. 

For the bearish case, the main count has us in wave [2] up, with wave [1] down having been completed at Friday's low. The bearish alternate is that we're in wave [3] down. For the bullish count, the 5 waves down from 1227.08 would be wave a of (iv) (or a higher degree 4th wave if 1227.08 completed 5 waves up from the August low) or is a double three still in progress. The bullish alternate is that wave (iv) completed at Friday's low and we're now in wave (v) up to complete the rally from the August low.

Here are the 10 min charts for the bearish and bullish counts (you can see a bigger picture view of these for context on the 60 min counts page):

Chart 1: SPX 10 min - bearish count:


Chart 2: SPX 10 min - bullish count:



Here's a close up of the bullish and bearish counts showing the move from the 1227.08 high:

Chart 3: SPX 1 min - close up: 



For the main bearish count, I've labelled a complete triple zig zag with a truncated (Z) wave (the Dow did make a new high).  Bear in mind that we could still be in wave [2]since, where I've labelled it, we've only retraced 38.2% of wave [1].  Its possible to label a single zig zag up from Friday's low to today's high (where I have the (Y) label), so we could now be seeing an (X) wave before another move up, perhaps to the 50% retracement level at about 1210 or the 61.8% level at about 1214.

If we instead take out Friday's low at 1194.08 in a clearly impulsive decline, then either wave [2] is over or the alternate bear count could be what's playing out, with Friday's low being wave (1) of [3] and today's high being wave (2) of [3] (it would be a 61.8% retracement of wave (1) of [3], counting wave [2] as being the 1215.45 high). Either count would imply more downside to come.

Taking out Friday's low would eliminate the alternate bullish count which labels that low as the end of wave (iv). However, the main bullish count which has us still in wave (iv) would still be in play along with the bearish counts. Whether its the bullish or bearish counts that are playing out would then remain to be determined. We'd have to see how far the decline takes us and then watch the retracement.

If we've completed wave [2] on the main bearish count, then we now have to stay below the high at 1207.22 (where I have the (Z) label). If we take that out, then the main bearish count would be that wave [2] is still underway and may move up to the 1210 or 1214 area. 

So, I'll be watching that high, along with Friday's low at 1194.08. For the bearish count as currently labelled, that high must remain intact and that low at 1194.08 must be taken out. If we take out that low, the alternate bullish count will be eliminated, but the main bullish count will stand, along with the bearish counts.

17:05 GMT SPX Update

The count that I had mentioned in the green note on the last chart has been invalidated and the count that was shown as the main labelling in that chart has become highly unlikely. So, this is what I'm left with for now:

SPX 1 min - close up:



The alternate bearish count shown in the red note will be invalidated above 1215.45.

For the main bearish count, I've labelled a double zig zag in progress but it could just as easily be labelled as a triple zig zag.

For the bullish count, the move up from Friday's low doesn't look obviously impulsive at the moment, so that suggests that we're in b of (iv) rather than Friday's low being all of (iv). However, it could yet develop into an impulse, so this is something to watch for.

 

15:18 GMT SPX Update

All of the counts shown on Chart 1 in Friday's end of day update, bullish and bearish, remain valid at the moment. Remember, there are four possibilities for the bearish count as shown by the main labelling and the red, green and blue notes on the chart:

SPX 1 min close up:




On the main labelling, wave 4 of (5) looks a bit out of proportion to wave 2. It may well be that the counts in the green or red notes should be preferred. On the green count,  today's high would still be wave 4 of (5), so the next low below Friday's low could be the end of wave (5) and [1]. On the red count, Friday's low would be wave (1) of [3] and today's high could be wave (2) of [3].

If we fail to take out Friday's low, the count in the blue note becomes more likely for the bearish case, and of course, the bullish case would also be looking quite good.

Saturday, 13 November 2010

13:19 GMT - SPX Weekly and Daily charts

As you can see from the 60 min counts page and the intra day updates, I can count the rally from the August low as complete at 1227.08 or that high can be counted as only the 3rd wave up from the August low, so after a pullback in a 4th wave, we'd see a new high above 1127.08 before the rally is complete.

Personally, I prefer the first interpretation. However, in terms of wave behaviour, as I said in yesterday's end of day update, although I can count an impulse wave complete or nearly complete at yesterday's low, that move down from 1227.08 could just as easily be counted as a double three, which favours more upside. Further, in terms of price, we haven't yet breached any levels that would weight the odds in favour of the bear case. Indeed, the price levels that would really start to favour the bear case are so far below us that unless we get a stunning collapse, it could be a while before we can really begin to think that the bearish case could be the one that's playing out.

As you can see from the 60 min counts page, there are a number of ways to interpret what an end to the rally from the August low might be.

If we've topped in wave X or B on Option 2, then we could well see a fast and furious decline very soon.

If Option 3 is playing out, then, in reality, until we take out the low at 1039.70, the three bullish (of varying degrees) interpretations of that Option will remain very much on the table, though the least bullish one would be eliminated if we were to take out 1129.24.

Still, there are reasons to think that we may be in for a decent pullback soon, if we haven't already started it.

SPX Weekly:


Looking at the weekly chart, Friday's close meant no follow through to what was a very bullish bar the previous week which closed pretty much at its high. Its rarely a good sign when a bar that closes at its high or low fails to follow through on the next bar.

As you can see, that failure occurred at the median line of the green and blue pitchforks and the week closed below both. However, the question is whether that's a terminal failure (at least near term) or whether we're just coming back down to test the 200 ma that was broken above on the prior week's bar.

Well, the weekly indicators may, in the main, be suggesting that more of a pullback could be on the cards. The CCI is still rising, but could just be double topping below the zero line. There's bearish divergence in the RSI and the MACD histogram printed a lower high bar after the prior week's bar had managed a higher high. The stochastic is also more consistent with a pullback coming than with more significant upside.

However, by the end of next week, I'd really want to see the CCI actually turn down from the zero line, the MACD also start to turn down and the stochastic break down below the 80 line, with the RSI continuing on a downward path and the MACD histogram printing another lower high bar. I'd want to see this with another negative close for the week that closes below this week's bar.

The daily chart seems to suggest that this is possible:

SPX Daily:


The green and blue forks are those shown on the weekly chart. You can see more clearly here how price has bled up along the median line of the blue fork. To me, that does make the failed break above it seem even more bearish.

The indicators would suggest that more downside should be seen into next week, with bearish divergences showing up against the April high and/or within the rally from the August low itself.

However, if we do see further declines next week, these indicators really do need to confirm, with the CCI heading down quickly to below zero, the RSI breaking below 50, the MACD descending down to, and preferably below, the zero line and the RSI breaking down below its 50 line.

I wouldn't want to see such moves in the indicators occurring while price only moves sideways. I'd consider that to be more bullish than bearish.

Essentially, what it comes down to is that the weekly bar now has to do what the prior weekly bar failed to do, namely, follow through. 

The problem is that, as you can see from the daily chart, we're right at an area of price support which coincides with the 20 ma (as well as the 200 ma on the weekly) - see the yellow highlighted area on the daily chart. It may take a gap down to break through that support and that would certainly begin to look pretty bearish. However, while we hold that support, the benefit of the doubt, logically, must be given to more upside, whatever the indicators on the weekly or daily charts might be suggesting.
 

11:50 GMT - 60 min counts page updated

I've updated the 60 min counts page commentary to clarify a couple of points with regard to the two Options shown:

First, in relation to Option 2, if the waves labelled W and X are actually A and B, we'd be looking for a 5 wave move down in wave C rather than a 3 wave move down in wave Y. I'm not sure it makes much difference to the ideal target for the end of the decline once we've topped in the rally from the August low (which we may have done at 1227.08). However, its something to be aware of if we do get a large 3 wave decline which looks like wave Y since, if its actually a C wave, there'd be more downside rather than immediate upside.

Second, in relation to Option 3, I've listed four ways to interpret this Option. I'd previously listed three, but within the first one, there were two possibilities mentioned, namely that the rally from the August low is either wave (i) of [iii] of A or wave [iii] of A. I've simply listed the second one as a seperate interpretation since its considerably less bullish than the first one.

Friday, 12 November 2010

21:13 GMT - SPX End of Day Update

A strange thing happened this week - we actually had some downside follow through. In addition, its possible to count 5 waves down from the high at 1127.08. Yes, I know its not the best 5 waves down and it also counts well as a double three. Still, with the possibility that its 5 waves down, there's a chance at least that we've put in a top for the rally from the August low.

There are various possibilities for what this top may be - the ones that I've been following are set out on the 60 min counts page. The count shown as Option 2 would be pretty bearish if we have topped. Under Option 3, there are three interpretations, as listed, with varying degrees of bearishness, but two are ultimately bullish.

Its also possible, however, whether looking at Option 2 or Option 3, that the high at 1127.08 is only the 3rd wave of the rally from the August low, so following some very near term downside (which may, in fact, be over today), we'll see another rally that will likely take out the 1127.08 high before the August rally is complete. This is shown on Chart 2 on the 60 min counts page and as the alternate count on Chart 1 below.

Here's the close up chart I've been posting showing the move from the 1227.08 high:

Chart 1: SPX 1 min - close up:



As you can see, the main bearish count has us completing wave [1] down. This could come with the next decline below 1194.08. As stated in the blue note on the chart, we may have bottomed at today's low. However, looking at the move up from there, it looks very corrective at the moment, so the odds favour that we have a further low to come.

If this is correct and we see a decline that starts to look out of proportion in the context of  wave (5) as a whole, then the possibility referred to in the green note on the chart may be in play. This would have us in a subdividing wave (5) (this is actually what I labelled in yesterday's end of day update) which would be a little more bearish than the main labelling.

The other alternative for the bear count, which would be even more bearish, is referred to in the red note. It suggests that we had a wave [1] low at 1206.04 and that the high that I've labelled as wave (4) would actually be wave [2] so we'd now be in wave [3] down. If this leg down were to get to about 1181 (a 1.618 extension if wave [1] is at 1206.04)  and the next retracement stayed well below 1206.04 and we then made a further leg down, then I'd certainly look at this more closely.

The bullish count shown by the alternate labelling assumes that the high at 1127.08 was only a 3rd wave in a 5 wave rally from the August low and that we're now in or completing the 4th wave. We'd then see a further rally above the 1127.08 high. The bigger picture for this count is on Chart 2 on the 60 min counts page.

I think if we start to break above the 1219 area on the next rally, then the chances increase that we saw a 4th wave low on this bullish alternate. That area is where I'd expect a wave [2] rally on the bear count to stop. If we see a 5-3-5 up into that area and  then stay above the high of the first 5 waves up, that may give an early warning that the bullish alternate is playing out (since in an impluse wave, the high of the first 5 waves up has to hold on the second retracement (which would be the 4th wave of the impulse) whereas if its a wave [2] correction, that high would quickly be taken out once the 5-3-5 is complete).

Here are the 10 min charts of the bear and bull counts shown in Chart 1 above, just for some context:

Chart 2: SPX 10 min - bear count:


Chart 3: SPX 10 min - bullish count:


So, this is what I'm watching:

1) if we're in wave 4 of (5) as the main bearish labelling suggests, I want us to stay below 1203. If we don't, I'll start to think that we bottomed in wave (5) and, therefore, wave [1] at today's low;

2) If we stay below that level and drop from here, I'll be on the alert for the end of wave (5) and [1];

3) if that decline starts getting out of proportion to the rest of wave (5) as labelled, I'll be thinking that the subdividing wave (5) alternative (green note) might be playing out or, that we had a wave [1] low at 1206.04 and would now be in wave [3] down (red note);

4) if this current rally or the next one makes a 5-3-5 up into the 1219 area, I'll be watching the next move down: if it stays above the high of the first 5 in that sequence, I'll consider it likely that the bullish count is playing out with a wave (iv) low made today or at the next low. So, I'd be looking for the high at 1127.08 to get taken out.

Have a great weekend!

18:37 GMT - SPX Update

I'm looking for wave 4 of (5) on the bearish count, but it may be just as well to be prepared for today's low to be wave (5) and, therefore, wave [1] down:

SPX 1 min - close up:



I think if we get much above the wave iv of 3 high at 1203.51, I'll start to think that we've seen the end of wave (5), especially since we've hit the lower channel line. If we are in wave 4 of (5), a 23.6% retracement would take us to about 1199 and a 38.2% retracement would be about 1201.

The alternate labels reflect the bullish count shown in the last post.

17:31 GMT - SPX Update

The subdividing wave (5) that I suggested in the last post does now appear to be the most likely count on the bear case:

SPX 1 min close up:



The bullish count labelled as the alternate on the above chart is getting more and more unlikely even though it won't be invalidated unless we take out 1194.53. However, I'm inclined to consider it out at this stage. Still, its not all bearish - for the bull case, I'd put us in wave (iv) as shown on this 60 mim chart of the bullish case:

SPX 60 min bullish count - Option 3:




The further we drop away from the blue channel the more likely it becomes that we completed 5 waves up from the August low at 1227.08, as shown by the alternate label at that high on the 60 min chart. You can also see more information on that count on Chart 3 on the 60 min counts page. That page also lists various ways to interpret the completion of those 5 waves under Option 3 and the levels that might be important in determining which might be playing out.

15:47 GMT - SPX Update

I'm beginning to prefer something along these lines for the bear count (see the main labelling) over the count I was following yesterday (see yesterday's end of day update):

SPX 1 min close up:


Wave (5) might be subdividng, with the waves marked 3 and 4 being waves i and ii of wave 3.

For the bullish count (the alternate labelling on the above chart) we only need 5 waves down from the high labelled B to complete wave (Y). Again, the possibly subdividing wave from the 1215.45 high mentioned above, could also apply here.

So, basically, I'm looking for 5 waves down from 1215.45 to complete wave (5) on the bear count and wave c of (Y) on the bullish count. Its quite possible that the low at 1201.96 is it. If there's more downside, for the bullish count, we have to stay above 1194.53 to keep it valid.

Thursday, 11 November 2010

21:24 GMT - SPX End of Day Update

Lots of possibilities still open for the market at this stage.

At the moment, for the bear count, I'll stick with the sub-dividing wave (5), but it wouldn't surprise me if we made the wave (5) low at 1206.04, where I've labelled 1 of (5)  to complete wave [1] down and we're currently now in wave [2] up. 

On the bullish count, I think it probably looks best as requiring a further leg down for c of (Y) to compete wave [4]. I've excluded the possibility that yesterday's rally was wave (1) of [5] and today's decline was wave [2] because the Dow went below yesterday's low which invalidates such a count on that index.

Here's the close up chart showing the above possibilities (you can see the slightly bigger picture for this chart on Charts 2 and 3 in yesterday's end of day update and the even bigger picture on the 60 min counts page):

SPX 1 min - close up:


As you can see, I've re-drawn the blue channel so it touches waves (2) and (4) rather than (1) and (3) of the bear count. Its interesting that today's move up stopped at that line. For the bear or bull count, the lower line might provide a potential target area for the end of wave (5) (bear count) or c of (Y) (bull count).

For the bear count, wave 3 of (5) should take us well below 1204.49. If wave 2 of (5) ended at today's high, then a 1.618 extension of wave 1 would take us to around 1195. For this count to remain valid, we have to stay below 1218.75 and take out the low at 1204.49.

If we're in fact in wave [2] for the alternate bear count, then we're likely to stay above the low at 1204.49 and, in order to achieve more of a retracement of wave [1], we could see another zig zag form to take us perhaps to the 61.8% retracement level at about 1219. The decline from today's high would probably be the x wave preceding the next zig zag.

On this alternate bear count,  its not impossible that the move up today was the whole of wave [2] - it retraced nearly 50% of wave [1] at today's high. However, I think that in terms of time when compared to the time taken by wave [1], it probably doesn't look right. So, if its wave [2] that we're in, then I'd expect more upside, which would also give it a better look in terms of time.

On the bullish count, wave c of (Y) should take out the low at 1204.49 before wave [4] is complete. It does, of course, have to stay above the 1194.53 level I've been mentioning, which is the high of wave [1]. If we do this and then move back up and take out the low at 1206.04 without making a further low, then this count will look like its higher odds since a move back above 1206.04 in the circumstances described would invalidate the main bear count because it would mean there'd be overlap between what would have been waves 1 and 4 of (5) on the main bear count. 

If we take out 1194.53, then the question will still be whether the high at 1127.08 was the top for the rally from the August low or whether, as shown in Chart 3 in yesterday's end of day update, and Chart 2 on the 60 min counts page, that high was only the 3rd wave up in that rally. So, taking out that low doesn't guarantee that the bear count is playing out.

So for the moment, the main levels to watch on these labellings are 1218.75 (to keep the main bear count alive this musn't be exceeded), 1204.49 (this has to be taken out on the bear count and ought to be taken out on the bullish count) and 1195.43 (this musn't be taken out if the bullish count is to survive).