Friday, 30 July 2010

21:27 BST - SPX Update

The Options shown in the 10 min charts below are the different ways to count the move down from 1219.80. There are 5 that I'm following and you can see the larger context of each on the 60 min counts page.

Options 1, 2, 4 and 5 imply that the rally from the 1 July low is correcting the decline from 1131.23 only, so will  be invalidated above 1131.23. On the count on the chart of Option 3 that rally is correcting the whole decline from 1219.80, not just the decline from 1131.23. 

On the charts of Options 1, 2, 4 and 5 I have labelled a complete double zig zag count from the 1 July low ay 1010.91.

If it did complete at 1120.95,  then for Options 1 and 2 we have started a 3rd of a 3rd wave down at various degrees - both very bearish. For Option 4, we have started wave (iii) of [c] of minor Y down - temporarily bearish. For Option 5, we have started wave (iii) of [c] of minor Y down - again, temporarily bearish. 

On the chart of Option 3 I've labelled a single zig zag which  would be minute [c] of  minor 2 up. This has had to be re-labelled with today's action and currently has us either in wave [b] of minor 2 or just starting wave [c] up. However, note, the double zig zag count could also be applied here since that has retraced a sufficient amount of the decline from 1219.80 to be a minor 2 correction of that drop.  If that completed at 1120.95 and we apply it to the chart of Option 3, it means that we have started minor 3 down now.

Here's how things stand after today: 

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

10 min chart:

Five waves down from 1131.23 on this Option represents wave i of (iii) of [iii] of minor 1. The double zig zag I have labelled from the 1010.91 low would be wave ii of (iii), so implies that we would be in wave iii of (iii) once the correction of the decline from 1131.23 is complete.

As mentioned above, if we had a double zig zag up from the July low, it counts as complete at 1120.95.

So, I'm counting the decline from 1120.95 as the start of  wave iii of (iii) of [iii] of minor 1.

This 1 min chart shows two possibilities. Either we have completed wave [1] down or we are in a (1)-(2)-1-2.

SPX 1 min - wave [1] down from 1120.95 or (1)-(2)-1-2:

If today's decline was wave (5) to complete wave [1] down, the rally from today's low would be a wave [2] retracement. This would have to stay below 1120.95 for the count to remain valid. A 61.8% retracement would be in the 1108 area, while a 78.6% retracment would take us up to the congestion around the 1113 level. So far, we've retraced just over 50%  and it could be counted as complete as a (W)-(X)-(Y) at today's high.

If the decline is a (1)-(2)-1-2 down, the invalidation point for this is the wave (2) high at 1115.90. If that is taken out, then the likelihood is that we did complete wave [1] at today's low and that remains valid unless we take out 1120.95. 
On the downside, the main level to watch is initially today's low at 1088.01. Obviously, that has to be taken out once we complete wave [2] (or 2) if we are in a larger 3rd wave down.  After that, with the revised count for the single zig zag (see the charts under option 3), the next level to watch is way down at 1010.91. In the meantime, we could have more confidence in this count being correct even before 1010.91 is taken out, if we were to see large impulsive declines that are not retraced immediately and significantly.  Until then, the risk of  new highs remains.

Option 2 - Wave [ii] topped at 1131.23

10 min chart:

For this Option, five waves down from 1131.23 represents wave (i) of [iii] of minor 1 down. The double zig zag up from 1010.91 would be wave (ii) of [iii], so, assuming its complete, we would now be in wave (iii) of [iii] down.

This is the same labelling as on the chart of Option 1 for the rally from 1 July and the move down from the 1120.95 high (although the wave degrees are different), so please refer to the comments and 1 min chart posted under that Option.

Option 3 - Ending diagonal complete at 1010.91

10 min chart:

For this Option, 5 waves down from 1131.23 to 1010.91 would be  wave [v] of a leading diagonal down from 1219.80 and, therefore, minor wave 1.  

It places us now in minute [c] of minor wave 2 up.  

Yesterday it looked like we were in wave (iv) of [c], but today, the decline from what was labelled wave (iii) at 1120.95, took out the wave (i) high at 1088.96, so the decline from 1120.95 could no longer count as wave (iv).

However, the possibility that we are still in a single zig zag from the July low remains by reverting to the count I had been following until 22 July. It makes the 1120.95 high wave [a] of minor 2. Today's decline would be all or part of wave [b]. Wave [b] would certainly look better on the larger time frames if it pulls back rather more than it has so far. 

Here's the chart from the July low:

SPX 1 min - minor 2 from the July low:

I've shown wave [b] complete at today's low, but note the alternate count which would entail further downside in wave [b] before we move up in wave [c].

Here's a close up of the action from the 1120.95 high (wave [a]) which shows wave [b] as complete:

SPX 1 min - wave [b] of minor 2:

This count will remain a possibility until we take out the July low at 1010.91.

Timewise, this count looks OK if the larger count shown on the chart of Option 3 (see the 60 min counts page for perspective) is correct, with minor wave 1 completing at the 1 July low. To the 1120.95 high, wave 2 would only have lasted .382 x the time it took for wave 1. If the count in the above charts is  the correct one, it will allow wave 2 to use up more time, without being out of proportion in terms of time, to wave 1.  The count probably would not look as proportionate timewise on any of the other Options.

As mentioned above, its possible to apply the double zig zag count to this Option given how far that has retraced. If we do that and that double zig zag did complete at the 1120.95 high, then minor 2 should be over and we should now have started minor 3 down.

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

10 min chart:

For this Option, 5 waves down from 1131.23 would be wave (i) of [c] of minor Y and the double zig zag up from 1010.91 would be wave (ii) of [c]. With that complete, we would now be in wave (iii) of [c] down.

However, as mentioned previously, counting a complete 5 waves down to 1010.91 does bring in the possibility that wave [c] of Y is done so we have also completed intermediate wave (X) - see the 60 min counts page. That would put us now in a minor wave A rally and eventually take us to new highs. If wave (X) did end at 1010.91, the possible counts for the move up from there are shown on the 60 min chart of the bullish alternate count for Option 4 on the 60 min counts page which shows a [i]-[ii]-(i)-(ii)-i up from the July low. Alternatively, it may just be a [i]-[i]-(i)-(ii) as shown on this chart:

SPX 1 min - Impulse from July low:

For the moment, I've assumed we completed a double zig zag for wave (ii) of [c] at 1120.95. Please refer to the comments and 1 min chart posted under Option 1 above.

If we take out 1131.23, then the bullish possibility mentioned above is likely to be playing out, assuming Option 4 is the correct count on the bigger picture.

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

10 min chart:

On this Option, 5 waves down to 1010.91 would be wave [a] of minor Y down and the retracement would be wave [b]. If its over, we would now be headed down again in wave [c] to complete minor Y.

This is the same double zig zag shown for Options 1, 2 and 4, so please see the comments and 1  min chart posted under Option 1 above.

Have a great weekend!