Thursday, 24 June 2010

22:12 BST - SPX Update

After yesterday's sideways action, we got some nice moves today. It was bearish, but not enough to rule out all potential bullish possibilities. Its also added a couple of counts for the bearish side because we didn't get a decisive enough retracement up that could be called a 2nd or 4th wave.

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. Its just that there are 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:

I showed yesterday what was possibly the start of wave (5) of [3] down and today we did, indeed go on to complete a 5 wave move down that would be wave [3] on this count. The rally that followed was a 23.6% retracement of wave [3] - enough for a wave [4], but I might have expected it to get to the 38.2% retracement level to be certain. 

The fact that it didn't raises the possibility that the rally was only wave 4 of (5), so we still have 5 of (5) to come (well, it seems to be well underway!). This means we would expect a wave [4] maybe sometime tomorrow. 

Another alternative is that wave [4] is playing out as an expanded flat so after today's decline into the close, we would expect a rally, perhaps up to the 38.2% level at about 1093.

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

 SPX 5 min chart:

This count makes the current decline wave ii of (c). I've amended the count given today's action, to show a single zig zag with a possible ending diagonal wave [C]. Obviously, it depends on wave (i) of [C] being a three - I think the waves are ambiguous enough to cater for that!

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'm still showing 5 waves down complete to 1085.31. This expanded flat count, which is updated from earlier, isn't out of the question, so I'll keep it on as a possibility (but obviously, the counts shown for Options 1 or 4 would go equally as well).

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

SPX 15 min chart:

I've got two counts on this chart.

The first has wave [1] bottoming at 1074.63 and we are now forming an expanded flat for wave [2]. 

The alternative is what I showed earlier, that we are in a series of ones and twos down. I showed two sets this morning, and this had developed  into three sets this afternoon. This count would be invalidated by a move above 1099.64, although it could then be we were still in a [1],[2],(1),(2), but with (2) being an expanded correction (as shown in Option 3). That would only be invaildated by a move above 1116.67.

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, bear in mind the additional count I showed this afternoon, with wave [5] extending. Here it is updated to the close:

Taking out 1185.95 would begin to cast doubt on it. Taking out 1099.64 would invalidate it.

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

SPX - 8 min chart:

The count I showed for this yesterday, putting us in wave iv of (i) up was invalidated with the move below 1077.74. However, until we drop below the wave [ii] low at 1042.17 this bullish option remains and I've changed the count to show wave (i) of [iii] complete and the drop from 1131.23 as wave (ii) of [iii].

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.