Wednesday, 30 June 2010

21:49 BST - SPX Update

An exciting end to an otherwise quiet day. Here's how things look on the counts I'm following (see the 60 min counts for context)

Option 1 - Wave (ii) of [iii] topped at 1131.23

6 min chart:

Its looking very much like the alternate count which has wave [4] topping at 1085.95 is the correct count, making today's sideways action wave (4) of [5]. This means the new low today is all or part of  (5) of [5]. Once it ends, it will complete wave i of (iii) down. 

Wave (5) is currently 1.382 x wave (1). The level of  about 1025 is a 1.618 extension (and it may well get there since it does not look like 5 waves down from today's high is complete).

Option 2 - Wave [ii] topped at 1131.23

6 min chart:

On this count, we probably saw wave (4) of [3] of v at today's high.

If wave (4) ended at today's high (a 23.6% retracement), we are now into wave (5) of [3] down. This could bottom anywhere below 1035.18 - just keep an eye out for 5 waves down - it doesn't look lke a complete 5 from today's high, so there may be more to go to the downside. At 1025 approximately, wave (5) would be 1.618 x wave (1).

Option 3 - Wave [iv] of an ending diagonal completed at 1131.23

6 min chart:

On this count, I can't decide if we've seen  wave [4] or wave iv today.

The main count is that it was wave [4] that topped today and we are now in wave [5] of iii. Its currently a 2.618 extension of wave [1], but it doesn't look like 5 waves down have completed, so could still have more to go. The lower line of the elliott channel may be a target. Wave iii would be a 2.618 extension of wave i at about 1016.

If we saw wave iv of (v) top today. then the next 5 wave decline is likely to be the end of wave (v) and, therefore, wave [v] of the leading diagonal. 

Remember, it has to end above 999.83 to remain shorter than wave [iii].

Option 4 - Wave [b] of minor Y within intermediate [X] topped at 1131.23

15 min chart:

On this count, its seems unlikely that we had wave ii of (iii) today. I think it would probably have to be counted as part of wave (4) of i, taking the form of a running flat. That would put us now in wave [5] of i down. Wave [5] would be 2.618 x wave [1] at about 1027.

Option 5 - Minor wave X within intermediate wave [X] topped at 1131.23. Now in minor Y down

8 min chart:

On this count, it seems most likely that we are still in wave iii of (iii). 

Today's action was likely wave (4). The next 5 wave decline would be wave [5] of iii, leading to a rally in wave iv.  Wave [5] of iii would be equal to wave [1] at about 1022 which is just about where it would hit the lower line of the elliott channel. The larger extensions are shown on the chart.

In respect of all the above counts, as noted, the decline from today's high does not yet look like 5 waves. If we rally above today's highs without making 5 waves down, we may have an expanded flat 4th wave on our hands - something to watch for.

20:03 BST - SPX Ichimoku Update

This 5 min ichimoku chart illustrates the struggle that SPX has faced today, to overcome resistance and push higher (the flattening of out of the cloud from early on in the session was a sign that the market was likely going to move sideways):

SPX 5 min ichimoku chart:

Although it got through the cloud in the morning, it couldn't take the lagging line (green) with it. So, when price pulled back, the lagging line was unable to stay above the price line, even though it and price were above the cloud.

Now they have both dropped through the cloud and although they are trying to recapture it, the turning line (blue) is now below the standard line (red) and this, as well as the cloud, will act as resistance to price. It doesn't mean it can't get above them, but the odds have turned against it for the time being.

18:24 BST - Dollar Update

The dollar had better start pedaling hard if its to maintain the uptrend that its been trying to establish for the last couple of days. Since my earlier post, its continued to find support from the cloud, but it just hasn't been able to move up and away from it:

Dollar 60 min ichimoku chart:

Its looking a little more hopeful right at this moment, with price moving back above the turning (blue) and standard (red) lines, but the turning line needs to get above the standard line too. Also, that lagging line (turquoise) needs to get back above price. Its encouraging that its found support from the standard line , but so far, its had resistance from the turning line, so is stuck between them and below the price line.

I've tentatively labelled waves (1) and (2) of [3] up on the elliott wave front, but price now needs to prove this is the correct count. The 85.215 level remains the level to watch for the moment for this count.

17:21 BST - SPX Update

You'll see from the charts I posted earlier that I have us either in a 4th wave retracing the drop from 1082.60 to 1035.18, a 2nd wave retracing that same drop, or a 2nd or [b] wave retracing the drop from 1131.23 to 1035.18 or something much more bullish which will take out the 1131.23 highs.

At the moment, the market isn't giving any real clues as to which of these options is playing out. Currently, the move off yesterday's low is weak enough to be nothing more than one of the 4th wave options. Its just managed to retrace about 23.6% of the decline from 1082.60 to 1035.18. If we make new lows now, those will become the likely counts.

Still, from little acorns, as they say, so bears can't get complacent. The market is quite capable of turning what is looking like a shallow retracement into something much larger.

Even if we are only in a 4th wave retracement of the decline from 1082.60, there could still be more upside to come. Here's a 1 min chart showing the decline from 1082.60 and the move off the 1035.18 low, based on the main count on the chart of Option 5:

SPX 1 min chart:

This looks like a double zig zag forming, with the C leg of (Y) to come.  However, I've marked the alternative, which is a single zig zag which could count as complete at today's high (the (B) wave would be a double three).

Hopefully we'll know by the end of today which of the counts is the most likely to be in play.

14:19 BST ES Update - 60 min Ichimoku Chart

This 60 min ichimoku chart of ES paints a very bearish picture:

Notice how even with the overnight rally, price was unable to get anywhere near the cloud and the lagging line (green) showed no sign of getting above price. All this despite the Slow Stochastic getting to overbought.

Price has now fallen back below the turning line (blue), which, by the way, never got above the standard line (red) and the overall picture suggests more downside to come.

Things can change quite quickly, so I'll be keeping a close eye on this.

14:06 BST - Dollar Update

I've adjusted the elliott wave count on the dollar - today's pullback was too deep for the 4th wave I was expecting. It represents a 61.8% retracement of the rally from 85.215, so chances are its a 2nd wave. That's how I've labelled it. Its still got room to drop, but if it takes out the 85.215 low, then it invalidates the count and puts the focus on one of the more bearish alternatives mentioned on the chart, though until 85.025 is taken out, the bullish possibility remains:

Dollar 60 min Elliott Wave chart:

And here's the 60 min ichimikou chart:

The wave [2] pullback (if that's what it is), brought price back to the cloud and below the turning (blue) and standard (red) lines. It also brought the lagging line (turquoise) below the price line. This wouldn't be unexpected in a 2nd wave retracement, so nothing to worry about too much, provided that price can now recover above the turning and standard lines and the turning line can get above the standard line. Also, the lagging line needs to get back above the price line.

These things should happen if we are now starting wave [3] up. If they don't, its a big warning that there is more downside. If we break 85.215, this bullish count will be off the table for the moment. Breaking 85.025 takes it off completely.

13:33 BST - ES Update

The zig zag down from the 21 June high is gone now. That leaves the nested ones and twos count that I have on the SPX Option 5 chart (though the degrees are different). Here's the 5 min chart of ES:

ES 5 min chart:

Wave 4 of (3) may have happened overnight, but its possible its not complete yet and we've just had the a or w wave of 4. If we're still in wave 4, it can't exceed the wave 1 low. If it does, it may mean that wave (3) bottomed yesterday and we are in wave (4). That can't exceed the wave (1) low. If that happens, then we're probably in one of the counts that shows 5 complete waves down at yesterday's low (see, eg the chart for Option 1 on SPX)

11:24 BST - SPX Update: Summary of the counts from 1131.23 and the implications for each Option

I've updated the 60 min counts page and in the process of doing so, thought it would be useful to review and summarise the various counts for the move down from 1131.23.

I'm showing different counts on the chart for each Option,  (I've changed a couple from last night's update) but they are interchangeable and what each count means has to be interpreted in the context of each Option.

Chart of Option 1 showing a completed 5 waves down or nearly complete, with one more up/down:

Chart of Option 2 showing an extending 5th wave down with 3 sets of nested ones and twos:

Chart of Option 3 showing an extending 5th wave with 2 sets of nested ones and twos with the 5th wave either complete at 1035.18 or requiring one more up/down to complete (this count is more suitable to this Option given the limit on the length of wave [v]):

Chart of Option 4 showing a complete 1st and 2nd wave down, with the 3rd wave extending (this is a new count):

Chart of Option 5 showing nested ones and twos (this count was previously shown on the chart of Option 3):

So, the various counts show different stages of a 5 wave move down from 1131.23.  At one extreme, 5 waves down are complete while at the other, there is a long way down to go before 5 waves down complete.

Looking at what 5 waves down from 1131.23 means for each of the Options I'm following (please refer to the 60 min counts for context):

For Option 1, it would be wave i of (iii) of [iii] down. 

On Option 2 it would be wave (i) of [iii]. 

On Option 3 it would be either all of wave [v] (in which case, expect a potentially substantial rally back up) or, if wave [v] is going to be three waves, (a) of [v]. 

On Option 4 it would be all of [c] to complete minor wave Y and, therefore, intermediate wave [X] (in which case we would now launch up in minor A of another zig zag up from March 2009) or it would be (i) of [c] of minor Y. 

On Option 5 it would be all of [a] of minor Y (in which case, expect a rally in minute [b]) or (i) of [a] of minor Y.


10:30 BST - 60 min counts page updated

See here

Tuesday, 29 June 2010

22:51 BST - SPX Update

A nice decisive move today which eliminated the immediately bullish counts from Options 2 and 5 from yesterday.

Here are the 5 counts. With today's decline eliminating the previous bullish counts, all of the counts shown apply to all of the Options, although what they imply for each Option may vary (for example, a complete 5 waves down on one Option may mean the first wave of an impulse is complete, whereas on another it may mean the end of a wave A in a corrective move).

Option 1 - wave (ii) topped at 1131.23

SPX 6 min chart:

I've got two possibilities on this chart, depending on where wave [4] ended. 

First, if wave [4] was a triangle ending at 1082.60, its possible that today's low marked the end of wave [5] and i of (iii). We would therefore have to expect a bounce in wave ii which could retrace back up to anywhere between 1071 (38.2%) and 1094 (68.2%). It could go higher, but that wouldn't be expected if we are in wave (iii) of [iii] down.

Second, if wave [4] ended at the 1085.95 high, today's low may have been the end of wave (3) of [5] of i. That would mean a brief rally in wave (4) and then a new low in wave (5) to complete wave [5] and i.  Wave (4)  can't end above 1071.81, the wave (1) low on this alternative count. If it did, this alternate would have to be abandoned and the main count would apply.

Option 2 - wave [ii] completed at 1131.23:

SPX 5 min chart:

The potentially near term bullish count that had us still in wave (c) of [ii] up has been eliminated today. This means on this count we are in wave [iii] down.

The count I'm showing on this chart puts us in an extending wave v of (i) of [iii]. Today's low may have marked the end of wave (3) of [3] of v. A wave (4) rally would now be expected but cannot end above 1071.81, the low of wave (1). If it does, then the count will have to be reviewed.

Option 3 - wave [iv] of a leading diagonal completed at 1131.23:

SPX 5 min chart:

I've retained the nested ones and twos on this chart. The main count here is that wave 2 completed at 1082.60 with a truncated  C wave within y. That would likely make today's low wave 3 of (3). If so, we should see a wave 4 rally before new lows are made, but it can't end above 1074.63, the wave 1 low. The wave 4 rally ought to be limited to about the 38.2% area, at about 1053.

 If we we exceed the 1074.63 low, then it may be that the alternative shown on this chart is in play, with today's low being wave (3) of [3]. That would mean a rally in wave (4) should be next. Wave (4) can't end above the wave (1) low at 1085.31, so if the rally gets there, the alternative count is also wrong.

Option 4 - wave [b] of minor Y within a wave [X] completed at 1131.23:

SPX 15 min chart:

I've kept the count from yesterday showing a completed wave [1] at 1074.63, but obviously, wave [2] wasn't playing out as an expanded flat! I'm showing it as a double three and have changed the degrees of the labels.  I have us completing a wave (i) of [c] down. at today's low. This means we should expect a rally in wave (ii) which could take us back up to anywhere between 1071 (38.2%) and 1110 (78.6%). The main resistance area seems to be between 1071 and 1082.

There is a greater upside risk on this count if today's low actually represents the whole of wave [c] of Y and therefore, completes the intermediate wave [X]. 

At today's low, wave [c] would only be a 70.7% extension of wave [a].  Since this appears to be a wave [c] in a second zig zag, it would look better as a zig zag if [c] ended substantially below wave [a], as the count I have suggests it will - currently, it counts as a zig zag but looks like a flat. Its not impossible for [c] to have ended today, so we need to be alert to it since it could result in a substantial rally as we start minor A up.

Option 5 - we completed minor wave X at 1131.23. We are now in minor wave Y down:

SPX - 8 min chart:

The bullish count from yesterday was invalidated with the sell-off today.

As mentioned previously, taking out the low at 1042.17 may just mean we ended  a minor X wave at 1131.23 and that the drop from 1219.80 is forming a double zig zag rather than the single zig zag previously shown.  That's how I am labelling it now.  It would mean more downside near term, but longer term, would be bullish.

I've shown a completed wave [a] of minor Y at today's low. This means we should now rally in wave [b] - the 38.2% to 50% (1072-1083) area might be a good target and its the main area of  resistance. Taking out today's low before a substantial rally would suggest that wave (v) of [a] is extending further and/or that the whole decline may be extending (as suggested by the count shown on the chart of Option 3).

19:36 BST - SPX Update

That drop to the low of the day does look like three waves, suggesting it was part of a corrective move. So, I think we're still in a 4th wave here, despite the new low (which would be the B wave of wave iv in this chart):

SPX 5 min chart:

Remember from the earlier post, the low marked iii could be 3 and this correction could be 4. The levels to watch for invalidation of these counts are 1074.73 (invalidates the wave iv count) and 1074.63 (invalidates the wave 4 count).

16:36 BST - SPX Update

On this count for SPX which I've updated from last night, we're in a 4th wave of some degree following today's sell-off, depending on where wave 2 of (3) ended:

SPX 5 min chart:

If wave 2 ended at 1082.60, then we maybe in wave iv of 3 of (3); if wave 2 ended with a y wave triangle at 1080.52, then we maybe in wave 4 of (3).

Whichever is correct, the invalidation points for the counts are very close together - those wave 1 and i lows which wave 4 or iv, respectively, cannot be breached, otherwise, the count will have to be reviewed.

16:15 BST - VIX Update

The vix is certainly doing what the bears would want it to do, as outlined in my post on 23rd June.

Here's an updated 60 min ichimikou chart showing how the picture has become more bullish (bearish for the market) as those early signs of a trend change have solidified:

Vix 60 min ichimoku:

Pullbacks are fine and to be expected, but in an uptrend, I wouldn't expect pullbacks in the vix to cause the lagging line (green) to drop below the price line. I would also expect the first lines of support for price, namely the turning and standard lines, to provide good support. I wouldn't want to rely on support from the cloud this early on, but  if price drops that low, for me, it will be important to see the lagging line stay above price.

Let's see how it goes.


13:49 BST - ES Update

The overnight drop in the futures still leaves open various interpretations of the elliott wave count. Here's a 5 min chart of ES showing one of them:

ES 5 min chart:

I've changed it from yesterday (which had us looking for a possible 2nd wave bounce), to the more bearish nested ones and twos I showed in the Option 3 chart of SPX last night. This implies a long way down to go.

However, there are less bearish possibilities which could mean that after a quick drop to complete a 5th wave down, which may be all but done in the futures, we see a large retracement up in a 2nd wave - see Option 1 for SPX.

On the more bullish count, see the alternate shown on the above chart, the overnight decline would be wave (C) of [Y] of ii, completing a second zig zag down from the 21 June high. If that is the correct count, the 21 June high is likely to be taken out, even if we are only completing wave [ii] up (as Option 2 on SPX suggests). See Option 5 on SPX for an even more bullish count which implies new highs above 1219.80.

So I'm going to be on the alert for signs that this decline marks the end of the decline from 21 June and may lead to a more significant rally than we have experienced since then. I'll be watching all of those levels identified in last night's SPX update and keeping an eye out in particular for that 1042.17 level which is currently so important to the more bullish counts.

12:48 BST - Dollar Update

The overnight action in the dollar is a bit more encouraging if  you're looking for another rally to take out the high of 7 June.

Here's the 60 min chart:

I've labelled a sub dividing impulse wave up for wave (iii), but its still in its very early stages and there is no way of knowing at the moment whether the rally from the low of 85.215 is a new impulse that will take us above the 7 june high, or whether we are still in a corrective wave down, with this rally being part of the (x) or (b) wave.

At least now we have a couple more levels to watch that should not be taken out at this stage if this is wave (iii) up. 85.789 is the first level to watch since i'm looking for a wave iv of 3 of (3) and wave iv should not take out that high. If the current high is actually wave 5 and (3), then we'd expect now to see a wave (4). That shouldn't take out the high of wave (1), so that level, 85.474, is the next level I'm watching. After that, there's the low at 85.215 which obviously shouldn't be breached at this stage of we are in wave (iii).

For anyone interested, here's the 60 min ichimoku chart:

The picture here, too, has improved overnight, with all the components above the cloud. I still want to see the blue outline of the cloud get above the red outline and for the cloud to start sloping upwards. 

Of course, it could all fall apart, so what I want to see on any pull back in price, is for the lagging line to stay above the price line and for price to find support from the turning line (blue) and/or the standard line (red). A failure on any of these fronts may be an early warning that all is not well with this latest rally.

10:43 BST - DAX Update

On 24 June, the Dax looked like it might have topped in wave [ii] and started a wave [iii] down.

While the bullish possibilities mentioned in that last post still remain, here is a potentially bearish count that could mean that the Dax is about to play catch up with the other major indices:

Dax 15 min chart:

This count puts it in wave [3] of i of [iii] down as of today. I've put in a label for wave (1) of [3], but its not clear that wave (1) is finished.

Here is the count on a 60 min chart with the ichimoku overlaid, showing how the bullish picture as late as 17 June has just turned around now with all the ichimoku components below the cloud. There was a test of the underside of the cloud by the lagging line (turquoise), but, for the time being, it has failed to recapture the cloud and is headed firmly down:

Dax 60 min ichimoku:

You can see that for a time, while price tested the underside of the cloud and the turning line (blue) on 24 June, the lagging line looked like it would find support on top of the cloud (see what it was doing on 21 June - 26 periods back from the price action mentioned). However, it was unable to do so and as prices fell, it finally broke below the cloud too. Yesterday's wave [2] action in price caused a retest by the lagging line of the underside of the cloud, but today's gap down brought about a failure of that retest.

Of course, the level of 5634.64 mentioned in my last post has not been taken out, and until then (and even after that, as mentioned in my last post)  there remains the risk that this decline is just part of a correction in an on-going uptrend that will eventually take prices above the recent high.

Given the remaining risk of an eventual bullish outcome, this index needs to be watched closely as the price action develops, for early clues that this bearish count may be failing. I find that often, the ichimoku chart provides early clues of a trend change, so I'll be keeping a close eye on it. If the lagging line manages to get above the price line during any rally in prices, that may be the first warning signs (though obviously not conclusive) of a trend change and would suggest caution on the short side until it becomes apparent whether any such move will be sustained.

Monday, 28 June 2010

22:23 BST - Dollar Update

The dollar is suggesting, for the moment at least, that it may hold the support area highlighted at the weekend.

Here is an updated daily chart. Note the slight bullish signs showing in the RSI, MACD histogram and Slow STO. However, it still has a lot of work to do if it really is starting a rally that will take it above the 7 June high of 88.708.

Here's the 60 min ichimoku chart:

Its managed to break above the cloud (just) and is above the turning and standard lines (blue and red, respectively). Also, the turning line is above the standard line. The lagging line is stuck below the cloud at the moment. Really, it needs to get above the cloud (as do the turning and standard lines) for me to have any confidence in a more sustainable rally.

I also need to see the first leading line (the blue outline of the cloud) get above the second leading line (the red outline) to get the cloud sloping upwards. At the moment, the rally that we saw today isn't entirely convincing and that's reflected in the position of the components of this chart.

Here's a 60 min elliott wave chart with a highly tentative count suggesting we've seen the low of the correction from the 7 June high:

As I've said above, its not completely convincing at present, so that low at 85.215 needs to be watched closely. A fall below it would probably mean there is more downside to go, as suggested by the alternative counts mentioned on the chart.

21:45 BST - SPX Update

Another rather sideways day today meaning there are still a myriad of counts on the table, both bullish and bearish.

Here are the 5 counts (see the 60 min counts for context). Remember that the counts shown in Options 1, 3 and 4 are interchangeable. There remain so many ways to count the decline from 1131.23, so I've just used each of those options to illustrate different bearish counts:

Option 1 - wave (ii) topped at 1131.23

SPX 6 min chart:

For this count, we either had a brief wave [4] rally which ended at 1085.95, followed by a (1), (2) representing part of wave [5] down, with (2) likely topping at today's high of 1082.60 and we're now starting wave (3) of [5] down, or wave [4] has formed a triangle which topped at 1082.60 and we are now in the early stages of wave [5] down. On either of those counts, the 1082.60 high is the invalidation point and may mean that wave [4] is still in progress.

Option 2 - wave i of (c) of [ii] complete at 1131.23:

SPX 5 min chart:

This count shows a completed wave ii correction and the start of wave iii up within wave (c) of [ii]. Wave ii retraced 70.7% of wave i. The invalidation point for this count, as labelled, is the wave ii low at 1067.89.

The alternative is that we are forming a double zig zag from 1131.23 and we had a triangle (B) wave that completed at 1082.60. 

If the triangle completed at 1082.60, then we may have seen a small 1,2 down (wave 1 being a leading diagonal, perhaps). It has to stay below 1082.60 for this count to remain valid, otherwise, either wave (B) is still on going or the more bullish count, that we have started wave iii, is in play.

Obviously, any further decline can't take out the start of wave i at 1042.17.

Also remember that its possible that 1131.23 was the end of wave (c) of [ii], in which case, the counts in Options 1, 3 or 4 may be applicable and we'd be in wave [iii] down.

Option 3 - wave [iv] of a leading diagonal completed at 1131.23:

SPX 5 min chart:

I've retained the nested ones and twos on this chart. I've changed the count slightly to show wave 2 completing at today's high with a truncated  C wave within y and we've possibly started wave 3 down. If we take out the wave 2 high at 1082.60, then this count as labelled is invalidated, but it would still be possible that wave 2 is in progress, as long as it stays below the wave (2) high at 1099.64.

Option 4 - wave [b] of minor Y within a wave [X] completed at 1131.23:

SPX 15 min chart:

This shows a completed wave [1] at 1074.63, with an expanded flat wave [2] in progress. I've changed the count slightly to show wave (B) of [2] as a triangle - the triangle may still be in progress, or may have completed at today's close (I've labelled it complete there). If that's right, we'll need to rally pretty much from the start tomorrow in order to avoid invalidating the triangle. If we're in wave E of the triangle, it can't go below the wave C low at 1071.45.

We still need to take out the (x) wave low at 1052.25 before its confirmed that we're in wave [c] of Y. 

For Options 1, 3 and 4, there is also the extending 5th wave count. I've moved the wave 2 high to 1082.60, but even if that gets taken out, it could still be forming  wave 2 provided it stays below the wave (2) high at 1085.95. If it takes that out, it may be we are still in wave (2), subject to the high of 1099.64  remaining intact:

Option 5 - we completed wave (i) of [iii] at 1131.23:

SPX - 8 min chart:

The picture here is the same as shown on the chart for Option 2, but I've only shown the bullish count which puts us at the start of wave (iii) up. If we take out the wave (ii) low, then it'll probably mean that the double zig zag count shown on the chart for Option 2 is playing out.

As before, if it takes out the low at 1042.17 (the end of wave [ii]) then this particular count will go but it may just mean we ended  a minor X wave at 1131.23 and that the drop from 1219.80 is forming a double zig zag rather than the single zig zag that completed at 1040.78. It would mean more downside near term, but longer term, would be bullish.

19:23 BST - SPX Update

The count I have that shows a wave [1] bottom at 1074.63 and putting us now in wave [2] up to around 1095 - 1109 (see the Option 4 chart), also may have a triangle in the position of the (B) wave of [2]:

SPX 1 min chart:

If the E wave is correctly placed, we need to stay above that and make a new high for the (C) wave of [2]. If we're still in the E wave, it can't drop below the low of wave C at 1071.45 - that would invalidate the triangle.

17:59 BST - SPX Update

The possible triangle I pointed out in my last post, which would be a 4th wave applicable to the counts shown in Options 1, 3 and 4, is also relevant to the more bullish counts, Options 2 (if wave [ii] hasn't already topped at 1131.23) and 5, where it would be a (B) or [B] wave in a second zig zag. Here it is on the Option 2 chart:

SPX 1 min chart:

The invalidation point for the triangle is, again, 1083.56.

16:21 BST - SPX Update

On the count shown on the chart of Option 1, where I'm looking for a wave [4] (if it hasn't already completed at 1085.95), we may be forming a triangle:

SPX 1 min chart:

We would be in wave (E), so couldn't take out the wave (C) high at 1083.56. That would invalidate the contracting triangle.

13:54 BST - Dollar Update

The dollar is also not giving very much away at the moment.

Its holding here, possibly for the reasons set out in my weekend post, but it hasn't really launched into a 3rd wave. This means, the risk of further downside remains for the time being.

Heres the 60 min chart:

I've marked on it some levels to watch. If we take out 85.215, the risk that we are in a double zig zag down or a larger single zig zag (see the alternate counts) will increase, though only taking out the low at 85.025 would rule out the main (i), (ii) count.

Taking out the high at 86.119 might be an early indication that wave (iii) up has started and that will strengthen if we take out the 86.415 high and the upper red channel line. Its no guarantee since we could still be in a (x) or (b) wave, but it would be a start and we could use a higher low as a warning that its not really wave (iii).

Here's the 60 min ihchimoku chart:

We've got a bullish cross of the turning line (blue) above the standard line (red) and price is above both and the lagging line has moved above the price line. However, its all still below the cloud, so its only a weak bullish signal at this stage. There's alot of work to do to establish a new uptrend.

13:28 BST - ES Update

Here's a 60 min ichimoku chart of ES showing a bullish cross of the turning line (blue) above the standard line (red), with price moving above both and the lagging line (green) above the price line. These bullish crosses occurred below the cloud, so were weak buy signals and price has failed to follow through so far, in particular, failing to get above the cloud. 

ES 60 min ichimoku:

It paints a fairly neutral picture at the moment, but looking into the future (26 periods out), the cloud is showing signs of turning negative if the red outline goes below the blue outline.

So, the initial bullish signs from earlier are in danger of failing. I'm watching the lagging line in particular since if it can't get above the cloud, (its struggling to overcome resistance at the standard line currently) it'll be a warning that something may be wrong with any rally that takes place. If it falls below the price line, that's bearish.

13:14 BST - ES Update

There's nothing decisive either way in ES at the moment, so all counts shown for SPX on Friday would seem to be still in play.

Here's a 5 min chart of ES:

Its pretty much the same count as I posted on Friday before the open, except I've changed the labelling of the siedways move from the wave i low to W-X rather than A-B, but it could be either.. This count lines up with Option 4 on SPX posted on Friday and suggests some more upside before we head down in a 3rd wave. However, beware of the counts I've shown on SPX on Friday that have more immediate downside potential, because we are either in a 5th wave down (see the alternative on the Option 1 chart and the extra 1 min chart) or (even more bearish) in nested ones and twos to the downside (see the Option 3 chart)

The alternative double zig zag count relates to SPX Options 2 and 5 (see Friday's charts here) and requires a bit more upside before we move down in wave (C) of [Y], but as suggested on the main counts for those Options, a single zig zag may have completed already, in which case, I wouldn't expect any further downside. So, Friday's low is, for the moment, the level to watch here.


11:55 BST SPX 60 min Counts page update

Updated the 60 min counts page to the close on 25 June.

Saturday, 26 June 2010

15:43 BST Dollar Update

The dollar is at a fairly important position right now, in my view: is it going to turn back up from current levels to confirm that its been in a 4th wave of some degree (as in options 1A, 2A and B and 3 of the counts I'm following - see the counts and the charts on the dollar page), or is it going to decline further in a continuation of an intermediate wave (2)?

Obviously, I don't know the answer - sorry! - I can only look at the evidence as displayed in the charts.

This is one of the charts on the dollar page which I've updated for the close on 25 June:

Dollar Daily chart:

You can see why I think it is at an important level - there is price support which is also the area of a prior 4th wave and its at the 38.2% retracement of wave [iii], as well as being in the area of the 50 day ma. Its just broken down out of the elliott channel, but if I were to draw in the base channel by connecting the low of wave [ii] to the low of wave 2 and placing a parallel line over wave 1, price is currently at the mid line of that channel - a point at which a 4th wave often ends if it fails to stop at the bottom of the elliott channel.

In addition, you can see the support line I've drawn under the RSI. This indicator has found support at its current level on each of the important pullbacks in price during this uptrend.  The MACD histogram is making higher lows and there is in fact a subtle bullish divergence in that the lowest low of the histogram came on 18 June. Friday's histogram bar (though slightly lower than the previous day) is higher than the bar of that day yet price closed lower than it did on 18 June. So, a lower close in price, than on 18 June, but no lower low in the histogram.

All of these points would suggest that the odds favour a reversal back up very soon, perhaps confirming one of the 4th wave counts.

So what else? Well there's those ichimoku charts that I like looking at. Here's the daily chart:

Dollar Daily ichimoku:

You can see that there are some bearish signs appearing on this chart, yet there are also reasons why price could well turn back up from around here.

The bearish signs are that the turning line (blue) has crossed below the standard line (red) and price is below both. Also, the lagging line has just slipped below the price line. These features I would take as warning signs of a potential trend change.

However, On the plus side, price is very close to the cloud which, as well as being an indication of the trend, also acts as support and resistance. Its more obvious than in most other forms of charting, but clearly, that support or resistance is an area, not a specific price point, so price could slip into the cloud and even down through it yet still reverse and continue the larger uptrend. (you can see that happened in Decmber 2008). 

I've mentioned previously, that I watch the behaviour of the lagging line most closely. Look at that action in December 2008 when price declined through the bottom of the cloud (and the turning line fell below the standard line and price was below both). You can see that the lagging line also dropped (remember, you have to compare the lagging line 26 periods back from price). The lagging line stopped on the top of the cloud, ie it found support on the cloud, even though price did not. That's the point at which price reversed back up.

Currently, the lagging line is close to the turning line. In trends, the turning line can also provide support or resistance. I've highlighted on the chart the occasions when during the downtrend from March to December 2009, the lagging line found resistance at the turning line and those occasions when it has found support there during the uptrend. 

Then there is the weekly ichimoku chart:

Dollar Weekly ichimoku:

This is currently painting a pretty bullish picture with all of the components of the chart in a buliish configuration. 

The decline in price looks, at the moment, like its coming back to the turning line, as it would do with a conventional moving average when it strays too far from it (except in runaway trends, of course). So nothing to cause concern here so far. The turning line should provide support to price - another reason to think we might get a reversal back up in the dollar fairly soon.

The chart also explains why price pulled back from the 7 June highs, in both conventional TA terms as well as in ichimoku charting terms.

None of this will preclude a drastic fall in price which takes the lagging line with it, after all, all trends have to end or are suspended temporarily. However, these ichimoku charts, coupled with the points I've made above with regard to the more conventional TA, suggest reasons to think that the dollar could turn back up from around these levels.

So finally, here's the elliott waves on a 60 min chart:

Dollar 60 min chart:

I've labelled it in accordance with the daily chart shown above, which is my favoured count at the moment (the other counts are on the dollar page).

I've labelled a complete wave [iv] on 20 June, followed by waves (i) and (ii) of [v]. You can see that there's not much more room for wave (ii) to drop - its at the 78.6% retracement level. Its possible to count the c wave of (ii) complete or very nearly complete on Friday (you can just about make out 5 waves on this timeframe, but on a smaller timeframe, it probably needs another small push down).

The alternative is that we're into a second zig zag (where I have wave (i) up would be wave (x)) or (as marked on the chart) the (c) leg of a larger single zig zag.

So, the elliott wave count could have us at a point where wave [v] of minor 3 is about to start. If you were to trade to the long side now, the risk would be fairly limited (you'd know you were on the wrong side if the low marked [iv] is taken out), provided we don't just gap down on Sunday night.  

However, there are more bearish possibilities too, so with reference to the wave count, its not possible to say that the decline is over.  Its the techincals referred to above that hint at an end now or soon to the downward move since 7 June.  However, clearly, we need to be prepared for more downside - was the rally from the 21 June low just a kiss goodbye to the elliott channel, or will it double bottom and turn back up? If we do get more downside, we'll have to review the wave count and the technicals to see what they tells us at that stage.