Tuesday, 20 July 2010

21:35 BST - SPX Update

On the counts that imply the rally from the 1 July low is a corrective one (Options 1, 2, 4 and 5) I've labelled completed double/single zig zags ending with a truncation at 1099.08, followed by 5 waves down to today's low at 1056.88, with today's rally being a double zig zag.

On the count that places us in a 5 wave move off the 1 July low (Option 3), which would be part of a larger correction up,  I've labelled the high at 1099.46 as wave (iii) and today's low as wave (iv)

The Options are the different ways to count the move down from 1219.80. There are 5 that I'm following and they are set out on the 60 min counts page

The question whether the rally from 1 July has completed a corrective move or whether its only all (or maybe, part) of a larger correction up remains to be answered.

Here's how things stand after today:

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

15 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 a wave iii of (iii) decline to follow.

I've labelled a complete 5 wave decline from 1099.08 to today's low at 1056.88 to complete wave [1] of iii of (iii) down.

The 1099.08 high remains the invalidation point for the completion of wave ii on the double zig zag as labelled.
Option 2 - Wave [ii] topped at 1131.23

15 min chart:

For this Option, five waves down from 1131.23 represent 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 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 subsequent decline (although the wave degress are different), so the invalidation point is  the same.

Option 3 - Ending diagonal complete at 1010.91

15 min chart:

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

It places us now in minor wave 2 up.  I've labelled the start of 5 waves up from the 1010.91 low, on the assumption that we will get a zig zag type move up for wave 2, since we  would be retracing the whole decline from 1219.80, not just the drop from 1131.23.

I'm showing us having completed wave (iii) (at 1099.46) of what I'm assuming at the moment will be a 5 wave move for wave [a] of minor 2.  This would mean the pullback to today's low was wave (iv) of [a].

Today's action looks like it completed wave (iv), putting us now in wave (v) up to complete minute [a] of minor 2 - taking out today's low will invalidate that.

The alternate labelling assumes that the 5 waves down from 1131.23 is only wave (a) of [v] and that the retracement back up was wave (b). Assuming its complete, we'd now be in wave (c) down and the count shown on the charts of the other Options would likely be in effect.

Remember, if there is further downside  to come, we must stay above 999.83 for the leading diagonal count to remain valid. 

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

15 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].

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, then the impulse wave I have labelled on the chart of Option 3 would apply here.

For the moment, I've assumed we are starting wave (iii) of [c] down  from  the 1099.08 high. The 5 waves down to today's low would be wave i of (iii)  of [c] and today's rally would be wave ii. 

The invalidation point is the same as for Options 1 and 2.

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

15 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.

I've labelled a single zig zag on this chart for wave [b], but its end point is the same as for Options 1, 2 and 4, namely, the high at 1099.08, so that would be the beginning of wave [c]. 

I'm counting the 5 waves down from that high to today's low as wave (i)  and today's rally as wave (ii) of [c]. The same invalidation point stated for  options 1, 2 and 4  apply here.

Here's an update of the chart I posted earlier showing the 5 waves down to today's low and the subsequent rally:

SPX 1 min:

The degree labels used relate to Option 2. If it is a 2nd wave retracement, it should be done about now or very nearly done. The second zig zag is about 1.618 x the first zig zag at today's high and the retracement is 61.8% of the first wave.

Obviously, we can't ignore the fact that it can also be counted as an impulse wave up from today's low, which could mean that the continuing double zig zag previously identified could be playing out and that these 2nd waves up from 1010.91 are retracing higher.

SPX 1 min - double zig zag still in progress:

The other possibility, if 1098.66 is taken out, would be that the count on the chart of Option 3 is playing out, so we would have to expect a substantial rally which would very likely take out the high at 1131.23.

So, the immediately bearish count, the moderatley bullish count and the very bullish count all remain on the table. The immediately bearish counts will be invalidated above 1099.08, in which case, focus will then switch to the more bullish options.