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Tuesday, 31 August 2010

21:30 BST - SPX End of Day Update

The market continues to behave in a way that means both bullish and bearish counts remain feasible, with all of the levels I'm watching to invalidate one or other still intact.

I updated the bullish counts earlier (see here) so won't deal with them again in this update. If you want to see those counts and the following charts in context, please go to the 60 min counts page.

So, here is the position on the bearish counts:

Chart 1: SPX 1 min - from the 1129.24 high, i-ii-[1]-[2]-[3]-[4]:



The main labelling puts us in wave [5] of iii down from 1129.24. As shown in my earlier post, it may be that wave [5] and, therefore, wave iii, ended at the low of 1040.88 that we saw today, with a slight truncation. In that case, we'd now be in wave iv up. 

However, for the moment, I'm assuming that we are still in wave iii because I think it would make more sense if wave iii reaches something like a 1.382 extension of wave i rather than being more or less equal to it. Still, if we take out the high at 1065.21 without a 5 wave decline preferably below 1039.83, the truncated 5th within wave iii would certainly be an option to consider.

I've re-labelled today's action from earlier to show us still in wave (2) of [5]. Its possible that wave (2) topped at 1055.14 as shown earlier and we've had a 1-2-i-ii down since, but for the moment, with that late rally, I'll assume more upside unless we take out the 1044.02 low without taking out the 1053. 75 high first (you can see more detail of this on chart 2 below).

I think that the alternate count shown on this chart, that has us still in wave ii in the form of an expanded flat, is becoming less likely as time goes on, as mentioned in my earlier post, but it remains a valid possibility.

Here's a close up of the above chart showing the main count as well as as the possibility that wave iii has already bottomed:

Chart 2 - SPX 1 min from the 1081.58 high:



If we've had a wave iii low, there are two places where it may have occurred, as you can see from the chart. The only difference it makes is that if it was at today's low, we probably have a bit more time to use up for wave iv so could see more upside for longer. Whichever low might be right, the fact is that if we are now in wave iv, it has to stay below 1069.49, which is the wave i low, otherwise the possibility would be eliminated.

If we take out that level or the 1065.21 level, invalidating the counts shown above, then, for the bearish case, I'll be looking at the other bearish counts I'm following which imply more upside above 1065.21 and probably also above 1069.49:

Chart 3 - SPX 1 min: from 1129.24, i-ii-[1] or wave i down:


The main count on this chart shows a subdividing wave iii down and puts us currently in wave [2] of iii (I've moved the (W) and (X) labels since yesterday).  As I said in yesterday's update, wave [2] of iii may have completed at the 1065.21 high, but I think its best to assume more upside to a higher retracement level, say, 50% for this. This count is invalidated if we take out the wave ii high at 1100.14.

The alternate count shown has us only having completed wave i down, so puts us now in wave ii up. We'd be retracing the entire decline from 1129.24, so the upside on this count could be substantial.

With both these counts, there remains an issue as to whether the low of wave [1] or i occurred on 25 or 27 August. Again, it doesn't affect the invalidation points. It simply means that we may have more time to use up than we have so far in wave [2] or ii if the low was on 27 August.

If the wave [1] or i low was on 27 August, here's what we might be seeing:

Chart 4: SPX 1 min - from the 1100.14 high:



I've labelled the move up from the 27 August low as  an (A)-(B)-(C) correction, but it could be an (W)-(X)-(Y). If its the latter, we'd need a 3 wave rally for wave (Y) rather than the 5 waves that would be needed for a wave (C). 

So, on the main count shown in chart 1 above, if we take out the high at 1065.21 before a 5 wave move down, preferably to new lows below the wave [3] low, that will be invalidated.  I would then be looking to the levels  identified in previous end of day updates:

1) if we're in wave iv up, it can't end above the low at 1069.49 if it does, then that would rule out the possibility shown in chart 2 above that we were rallying in wave iv;

2) the next count to look at would then be the  i-ii-[1] which is the main count on chart 3 above That count remains valid unless we  take out the high at 1100.14;

3) if we take out that 1100.14 high, then we may be in the expanded flat for wave ii shown as an alternate on chart 1, or the count that has us having only completed wave i down from 1129.24 (the alternate shown on chart 3),  or one of the more bullish counts shown in the update posted earlier (see here).

4) if we take out 1129.14, that will eliminate those two remaining bearish counts for the move down from that high, but the first bullish count shown in in the update on the bullish counts is bearish once wave [c] of 2 completes. If that count is in play, we would need to see impulsive downside action once wave [c] and 2 end, otherwise, focus will have to switch to the bullish counts under Option 4.

19:09 BST - SPX Update: Bullish Counts Updated

Referring back to the bullish counts on Charts 1 to 3 in yesterday's end of day update, the first one just managed to survive today and the second two may have ended in slight truncations for their final [C] or (c) waves. Here's how they look at the moment:

Chart 1 - 60 min - single zig zag from 1010.91 still in progress:



And here's a close up of this count, picking up the above chart from the low at 1039.83 on 25 August:

SPX 1 min - from 1039.83 low: 




Even if we invalidate this count by taking out the 1039.70 low, the count shown in the charts below can be applied to this chart:

Chart 2: 60 min first bullish count under Option 4 - impulse up from 1010.91:





Chart 3: 60 min - second bullish count under Option 4 - leading diagonal up from 1010.91:



On these counts, the [C] or (c) wave would be the ending diagonal I labelled in my earlier post, giving a slight truncation, but it would be a valid count. If the diagonal was a leading diagonal and we go on to take out today's low and the 1039.70 low, that would be fine too, but we have to stay above 1010.91 in order not to invalidate the count.

17:11 BST - SPX Update: 1 min: bearish count - wave (2) of [5] high perhaps?

If we're in wave (2) of [5] (the 1st possibility listed in my last post), its retraced just about 61.8% of the decline from 1065.21 to today's low:

SPX 1 min from the 1081.58 high:


Its also at resistance (referring to the main labelling on the chart above) from the wave 3 of (1) low and the wave b of 5 high (not labelled). With the risk that what I've labelled as wave Y of (2) has more to go to the upside, you'd want to be out above today's high. Taking out 1049.22 would help this count, but today's high would still be a good place to get out if it moves back up there, given the more bullish possibilities that remain. Of course, for this count, 1065.21 is the invalidation point.

16:14 BST - SPX Update: 1 min: bearish counts

We had the makings of a nice impulse wave finally developing to the downside, but its no longer easy to count a simple impulse from the 1065.21 high to today's low.  I think its now looking like an expanding diagonal as shown on this chart:

SPX 1 min - from the 1081.58 high:


If I try to count an impulse down from 1065.21, the move  up from today's low would have to be a 4th wave within that impulse. However, it doesn't really look like a 4th wave. It looks more like a 2nd wave, which is why this expanding diagonal comes to mind. Here are some of the options on this overall bearish count:

1) if its a diagonal, then it could be a leading diagonal wave (1) (it would be wave (1) of [5] on the main count labelled on this chart). This is invalidated above 1065.21; or

2) it could be an ending diagonal representing all of wave [5] (truncating, therefore) and therefore also wave iii. We'd now be in a wave iv rally. This would be invalidated if we take out 1069.49;

3) if the 1039.70 low was the end of wave iii and 1065.21 was wave [A] of iv, today's low could be double zig zag for [B] of iv. We would now be going up in [C] of iv. If we take out the low at 1039.70 before taking out 1065.21, this count would be invalidated since I'm counting wave [A] of iv as 5 waves, so its forming a zig zag and wave [B] in a zig zag can't move below the start of wave [A]. Also, wave [C] of iv has to stay below 1069.49 or the count is invalidated.

If any of these three counts is playing out, there could be more upside, but it is limited by the invalidation points referred to above. If they are taken out, then attention has to switch to the other counts which imply varying degrees of more upside (see yesterday's end of day update).

Here's a chart showing this count from 1129.24 for a bit more context:

SPX 1 min - from the 1129.24 high:





This chart shows the other possibility that we're still in wave ii up, and now in wave [C] of ii which should take us above the 1100.14 high. I'm not sure I like this count since wave ii is looking abit long in the tooth now, but it remains valid.

For the moment, for these bearish counts listed above, I'm watching the 1065.21 high and the 1069.49 low.

14:07 BST - SPX Update: 60 min chart

On Saturday when I looked at the 60 min chart of SPX, I highlighted the behaviour in the technical indicators that  suggested that however bullish the price action appeared to be on Friday, the technicals did not seem to be painting the same picture.

I noted on the chart in that post the sort of things the bear case needed to see and all of them have pretty much occurred with yesterday's action.

You can see this in the updated 60 min chart:

SPX 60 min:


The notes on the chart are self-explantory and identify the further action we would need to see from these indicators to confirm the weakness in the market seen yesterday.

I've also noted on the chart a couple of concerns that may undermine the bear case, at least temporarily:

There is a little bit of a worry that we didn't see any negative divergences between the indicators and price when comparing the high of 26 August and the higher high on 27 August. That raises the risk of another high above 1065.21 being necessary in order to achieve such divergence before the bear case can continue. 

As I've said before, divergences aren't compulsory, but they are often seen at tops and bottoms and help to identify them as such.  A higher high would fit with the count shown in Chart 6 of yesterday's end of day update, as well as the bullish count on Chart 1 of course. So, if this is what we see, it may increase the odds that one of these counts is playing out. If we fail to take out the 1039.70 low (preferably early on in the session), that may be the first sign that more upside above 1065.21 may be on its way.

Even if we don't rally up to take out the high of 27 August before making a new low, the indicators again look like they are set up to diverge positively against any new low in price. As noted on the chart, this would be consistent with the main count on Chart 4 and the alternative shown on Chart 5 of yesterday's end of day update which call for a 5th wave down now, as well as the bullish counts on Charts 2 and 3. which require a [C] or (c) leg down to complete their corrections. 

So, on any new low below 1039.70, I'll be watching for positive divergence between price and the indicators since it  may be a warning of an imminent turn back up in price as happened on Friday (after Thursday's session, the same positive divergence potential had set up and a substantial rally followed - see this post).

So, the lack of follow through to Friday's bullishness was a plus sign for the bear case. However, the bullish counts calling for varying degrees of further upside remain intact, so, as I said in yesterday's end of day update,  it remains a matter of monitoring the levels that elliott wave logic tells us will rule out various counts as price action develops and seeing what we are left with (I identified the levels I'm watching on the counts I'm following in that update)

Monday, 30 August 2010

21:23 BST - SPX End of Day Update

I don't think that today's action has yet clarified whether we saw a bottom on 25 August or on 27 August (the latter would involve counting the last leg down as an expanding ending diagonal as shown in my post on Saturday) or what that bottom might be.

So, both bullish and bearish counts continue to be in contention as shown on the following charts (if you want a wider context for these charts, please look at the 60 min counts page). 

Bullish Counts: 

Chart 1: SPX 60 min - single zig zag from 1010.91 still in progress:



On this count, which applies to all of the bearish Options shown on the 60 min counts page, I'm showing a bottom on 27 August. This puts us at the start of the next leg up. On this count, that would be wave [c] of the zig zag.

This count for the move down from 1129.24, putting the low at 27 August can also be applied to the other two bullish counts below, and would make the rally off the 27 August low the next wave up in their respective counts. 

However, for current purposes, I'll retain the low on the those charts at the low on 25 August, which means one more new low is required to complete their corrections before they start their next legs up. Of course, this count could equally apply to Chart 1 above, with the same implications.

Chart 2: SPX 60 min - first bullish alternative under Option 4: impulse up from 1010.91:



Chart 3: SPX 60 min - second bullish alternate under Option 4: leading diagonal up from 1010.91:



So, even if we make a new low under the low of 27 August at 1039.70, while that would invalidate the count shown on Chart 1 above, the count shown on Charts 2 and 3 above (which can also apply to Chart 1) would simply mean a delay in the next leg up envisaged by these bullish counts and would not invalidate them. They would only be invalidated if we take out the low ay 1010.91.

Bearish Counts:

Chart 4: SPX 1 min - i-ii-[1]-[2]-[3]-[4] down from 1129.24:



This count retains the low at 25 August and counts Friday's high as wave [4] of iii down. I've labelled wave [4] as over at Friday's high. If it in fact has more upside to go, it has to stay below 1070.66 otherwise this labelling will be invalidated.

If we actually bottomed at the low on 27 August, using the expanding ending diagonal shown in Saturday's update, then that low was probably wave iii , which would make the rally from there wave iv not wave [4]. If that's right, any further upside in wave iv must stay below 1069.49, otherwise that alternative would be invalidated. This wouldn't be the best looking count since wave iii wouldn't be that much longer than wave i and really, it ought to have broken down out of the channel shown, unless we're going to see that sort of acceleration down in wave v.

For the moment I'll stick with the main labelling on the chart. If we can take out the wave [3] low without first making a new high above 1065.21, that would certainly provide more confidence in this count. However, as I said in Friday's end of day update, it does mean that wave [2] and [4] are both expanded flats so it may not be the best count.

Still, its valid. Here's a close up showing the decline from 1081.58:

Chart 5: SPX 1 min close up:




The leading diagonal possibilty I showed in the last post on this count was invalidated because what would have been the 5th wave became longer than the 3rd. That leaves the nested ones and twos - that certainly looks better with the late sell-off, but of course, we need more follow through. And, if the labels are correct, the next rally would be wave iv of 3 of (3) so can't end above the wave i of 3 of (3) low at 1053.57.

If we take out either or the levels mentioned above, 1070.66 or 1069.49, before making a new low, attention for the bearish counts would have to switch to the alternatives I've been showing. One is labelled on Chart 4 above - an [A]-[B]-[C] expanded flat for wave ii which could take us above the high at 1100.14.

The other two near term bullish counts within the bearish counts are shown in the chart below:

Chart 6: SPX 1 min - from 1129.24, i-ii-[1] or i down:



Both of these counts have scope for further upside. On the main count, its more limited since we're retracing the decline from 1100.14 and can't take out that level on this assumed wave [2]. On the alternative count, we're retracing the decline from 1129.24, so a good deal more upside is perfectly possible.

I've relabelled the main count as a (W)-(X)-(Y) for wave [2], which would mean one more up leg to come for C of (Y) of [2]. However, its perfectly possible that it topped at 1065.21 with an ending diagonal (C) wave as shown  in Friday's end of day update. However, the decline from Friday's high can be counted as a double zig zag in progress (as well as the ones and twos shown on Chart 5 above), so the risk of further upside remains in my view, unless we take out the 1039.70 low (even then, I'd have to consider the possibility of a flat or expanded flat in progress with more upside to come).

You'll see I've also noted on this chart the possibility that the low for either the main or the alternative count was on 27 August, not 25 August, using the count shown in Saturday's update with an expanding ending diagonal into the low at 1039.70.  In that case, we would be at a much earlier stage in the upward corrections and would more than likely see further upside before the declines resume.

So, we remain in a position where there are many possibilities as to what is playing out. In that situation, all that can be done is to identify the levels that would invalidate the various counts and let price action tell us. The elliott wave logic I've set out in previous updates cotinues to apply as follows:

1) if we take out the low at 1069.49 before making a new low below 1039.70, then that would rule out the possibility that we ended wave iii at that 1039.70 low and were rallying in wave iv (see comments under Chart 4 above - the possibility of a wave iii low at 1039.70 is shown on Chart 5);

2) if we take out the low at 1070.66 before making a new low below 1039.83, that rules out the main count shown on Chart 4 above;

3) the next count to look at would be the  i-ii-[1] which is the main count on chart 6 above That count remains valid unless we  take out the high at 1100.14;

4) if we take out that 1100.14 high, then we may be in the expanded flat for wave ii shown as an alternate on chart 4, or the count that has us having only completed wave i down from 1129.24 (the alternate shown on chart 6),  or one of the more bullish counts shown in charts 1 to 3.

3) if we take out 1129.14, that will eliminate those two remaining bearish counts for the move down from that high, but the first bullish count shown in Chart 1 is bearish once wave [c] of 2 completes. If that count is in play, we would need to see impulsive downside action once wave [c] and 2 end, otherwise, focus will have to switch to the bullish counts under Option 4 which which are shown in Charts 2 and 3 above.

20:17 BST - SPX Update - 1 min - immediately bearish count

Well, the market's got a sense of humour today. In my last post on the immediately bearish count I disposed of a count of three nested ones and twos and a leading diagonal from Friday's high. Subsequent action is forcing them back on me!

SPX 1 min - i-ii-[1]-[2][3]-[4] down from 1129.24:


If its nested ones and two, the first invalidation point is the wave 2 high at 1059.87. If its a leading diagonal, a rally that reaches the dotted blue line before we make a new low below 1053.57 would invalidate that.

18:29 BST - SPX Update: 1 min: moderately bullish counts

This is how the slightly more bullish count shown in the earlier update is looking - it probably looks better at this stage than the immediately bearish count, but we have to see how the price action develops:

SPX 1 min - 1-ii-[1] or i down from 1129.24:

18:23 BST - SPX Update: 1 min chart - most bearish count

On the most bearish count, the potential leading diagonal I mentioned in the last post didn't work out because the bounce off the low at 1056.22 has meant there's no longer converging lines. The ones and twos count from Friday's high is a possibility, but it would now be three sets of ones and twos, if I keep the labels as they were in the last post, which may be unlikely. This leaves the following:

SPX 1 min - i-ii-[1]-[2]-[3]-[4] from 1129.24:



Its not the greatest of counts because within wave (1), there would be a very large wave 2 and a very small wave 4. However, it is there and for this immediately bearish case, may be the best available count.

We'll have to see if the market will now follow through as it should on this count. It will be invalidated of we take out the high at 1062.31 in this assumed wave 2 of (3).

16:27 BST - SPX Update: 1 min charts of the bearish counts

This is the count shown in chart 4 from Friday's end of day update, looking at it from the 1081.58 high:

SPX 1 min - i-ii-[1]-[2]-[3]-[4] from 1129.24:



The count is still valid, but note that wave [4] could be at the 1061.45 high as discussed in my update on Saturday, so we'd now be in wave iv, not [4].

Taking out today's low would increase the odds of the (1)-(2)-1-2 shown from Friday's high, or we could be seeing a leading diagonal forming from that high, with what I've labelled as wave 2 being the 2nd wave of the diagonal. The wave 2 and (2) highs would be invalidation points for the ones and twos count. Moving above the wave 2 high without a lower low would likely invalidate the diagonal count.

The slightly more bullish counts shown on chart 6 in Friday's end of day update, but with a wave [1] or i bottom on Friday (based on the count shown on Saturday) also remain in play, however:

SPX 1 min - i-ii-[1]-[2] or 1 down from 1129.24:



This assumes that the decline from Friday's high is only part of the upward move from Friday's low. I've labelled it as wave (B) to today's low, but it could just be wave W within (B) as noted, so more downside here doesn't make this count any less likely than the immediately bearish one above. That might change of we take out Friday's low.

Saturday, 28 August 2010

16:11 BST - SPX Update: Weekly, daily and 60 min charts

Looking at the weekly chart (the last post of this is here), not a great deal changed with last week's action. I think it still looks more encouraging for the bear case than for the bullish case:

SPX weekly:


I won't go into any detail here since its all set out in the notes on the chart. The only thing to add is that the moving averages are getting into almost complete bearish alignment - at the moment, the 20ma is still just above the 50ma (and I do mean "just") and they're all pointing down. In addition, the 13ma halted the rallies we saw this week (price having spiked above it last week but closed below). That seems like bearish action.

However, despite this bearish alignment of the moving averages being almost complete and the indicators behaving in a manner which is consistent with a bearish outlook, we still haven't seen real confirmation in price action. That's what I'm waiting for to gain more confidence in the bearish case because, until we see price action confirm, there's always the risk of price moving suddenly in the opposite direction suggested and turning these moving averages and indicators around.

The daily chart hasn't changed a great deal either, but the indicators are positioned to move up from current levels, suggesting that there is scope for more follow through to the rally we saw on Friday:

SPX Daily:





The notes on the chart should be self explanatory. 

Again, the moving averages are configured bearishly and should provide resistance, along with gap resistance (see the 60 min chart below) and fork resistance, suggesting that we ought to see any further rally fairly well contained. 

However, with the indicators poised to move up, we're just going to have to see how they behave on any further upward move in price.  Just because they are positioned to move up or have already started doing so doesn't mean that the bear case is over. I've noted on the chart what I would like to see if any further rally we get is only countertrend and not the start of a major move up. It would be good for the bear case to repeat  what we saw from the indicators in May after the 25 May low, although for the bear case, I don't think we'd necessarily want to see a rally of that magnitude!

SPX 60 min:





Before the open yesterday I showed the 60 and 15 min charts which looked poised to put in bullish divergences against any new price low, which would likely lead to a rally whether on the bullish or bearish case. That's indeed what we saw.

The rally on Friday certainly caused some bullish looking action in the indicators - and yet, its not quite completey bullish.

For example, it was a near 30 point rally in SPX, but the RSI is still not at the bullish level of 66.67. The CCI is still well below zero. The MACD is below zero and on the directional movement indicator, the +DI line is still below the -DI line.

Price is now at resistance represented by the 50ma, a prior gap,  and the upper line of a pink fork that I've added to the chart since I last posted it.

In theory, we should see some reaction to this in the form of a pullback, but its not out of the question that we just gap up above all of this on Monday. 

Whatever price does, I'll be keeping an eye on these indicators to see what they might tell us about the character of the move. Again, I've noted on the chart what I think we need to see in order to favour the bear case.


13:50 BST - SPX Update - Did we see an expanding ending diagonal from 1061.45 to 1039.70?

With trading elliott waves, it always pays to know what the alternatives might be so that you can work out where a particular count that you're trading at a given time might be wrong and when an alternative count might become more likely and take you in a different direction. 

So, I've been looking at the possibility that, on the bullish counts I'm following (see charts 1 to 3 in the end of day update from yesterday) the corrections down from the high at 1129.24 did end at 1039.70 (in that update I have labelled those corrections as needing one more leg down). If the corrections are over, it would mean that we have now started on the substantial rallies that those counts imply.

It all depends, in my view, on being able to count the move down from 1061.45 as the last wave in the correction. As I said yesterday, it has the look of 3 waves, not 5. However, I think it is possible to count an expanding ending diagonal for that move, which would be a 5 wave move and a valid 5th wave to end those corrections.

Here is is close up - its based on the labelling shown in chart 1 of yesterday's end of day update:

SPX 1 min  close up: expanding ending diagonal from 1061.45 to 1039.70:


It seems to fulfill the rules of an expanding diagonal - all waves can be counted as zig zags, wave [3] is longer than wave [1] and wave [5] is longer than wave [3], the lines connecting waves [2] and [4] and [1] and [3] diverge and wave [5] ended beyond the end of wave [3].

In addtion, its said that a diagonal implies a swift and deep thrust in the opposite direction. I think yesterday's move from the low qualifies on that count.

The thing that stands against an ending diagonal here is that its said that they occur where the preceding move has gone too far too fast - personally, I don't think we can say that of the down move from 1129.24. For me, its been quite laboured bearing in mind that the bearish counts put us at a point in the wave structure where we should be seeing severe and impulsive declines (I've mentioned this as a concern for the bearish counts in various intra day posts and on the 60 min counts page over the past few weeks).

However, the count is there and, I think needs to be kept under consideration given the implications it has (a strong upside move to follow).

This way of counting the move down from 1129.24 can also be applied to the bearish counts shown on charts 4 and 6 in yesterday's end of day update.

For the main count on chart 4 it would mean that wave iii of [3] ended at 1039.70 and we would now be in wave iv up. Wave iv would have to stay below 1069.49 in order not to invalidate that count, unless the wave i low should properly be placed at 1076.69, in which case, that's the level at which this labelling would be invalidated.  

On the alternate count shown on  chart 4, it would mean wave [B] of ii ended at 1039.70 and that we'd be on our way up in wave [C].

For the main count shown on chart 6, it would mean wave [1] of iii ended at 1039.70 and we would now be at an earlier stage in a wave [2] correction than the count shown currently suggests, retracing the decline from 1100.14. The diagonal shown from the low would be a leading diagonal wave (A) rather then an ending diagonal wave (C). So, we would likely see more upside once a wave (B) pullback is complete.

For the alternate count on chart 6, it would mean that wave i ended at 1039.70 and that we'd be at an earlier stage in a wave ii correction than the current labelling suggests, correcting the whole of the move down from 1129.24. 

Returning to the bullish count shown above, here's the count on a slighter wider view:

SPX 1 min - complete (a)-(b)-(c) from 1129.24:




You can see that the move up from the low yesterday has broken above the correction channel linking the top of (b) to the start of (a). If price does not fall back within this channel pretty quickly, its going to look like  this ending diagonal down to 1039.70 is valid. It won't mean that these bullish counts must be playing out because, as shown in yesterday's end of day update and as explained above, the bearish counts do also accommodate more upside of varying degrees.

Finally, here's a 60 min chart of this count for greater context:

SPX 60 min - end of correction from 1129.24 on the bullish counts:





So, the next  pullback is going to be important. If the move up from yesterday's low is a diagonal as suggested in yesterday's end of day update, it would be a 1st wave leading diagonal on these bullish counts. That means that the next pullback cannot drop below 1039.70. If it does, this labelling is invalidated. 

However, the labelling shown on charts 1 to 3 in yesterday's end of day update requires another low, so these bullish counts would not be off the table if we do take out that low, unless we also take out 1010.91. 

Assuming we do drop below 1039.70 but do not take out 1010.91, we'd then have to start monitoring how the subsequent move up behaves to try to get an early clue as to whether these bullish counts have ended their corrections or whether the bearish counts are actually coming to fruition.

 

10:13 BST - SPX : 60 min counts page updated

I've updated the 60 min counts page. Please use the tab in the menu above or click here.

Friday, 27 August 2010

21:16 BST - SPX End of Day Update

Well, we got the lower low below 1039.83, but it doesn't appear to have been a 5 wave move from the prior peak at 1061.45, which should mean that it wasn't the end of an impulse wave (whether a wave i, iii, (c) or [c]) down.

That would mean it should be counted as a (X) or (B) wave in an expanded correction.

The following charts show this in the context of the bullish and bearish counts (for the context of these charts, please see the 60 min counts page).

Bullish counts:

Chart 1:  SPX 60 min - single zig zag from 1010.91 still in progress:



This count applies to all the Options on the 60 min counts page.

You'll see on this chart why I don't think we've started the [c] wave up that should occur once the wave [b] correction shown ends. Essentially, we needed 5 waves down from 1061.45 for wave v of (c), but it appears that we only got 3 waves. 

So, this count suggests that we need one more low to complete wave [b] before we launch up in wave [c].

Chart 2: SPX 60 min - first bullish alternate under Option 4: impulse up from 1010.91:



You can see that the the point made in respect chart 1 above also applies here. So, it seems that we ought to see another wave down before we launch into a significant rally.

Chart 3: SPX 60 min - second bullish alternate under Option 4: leading diagonal from 1010.91:



The same comments apply - it looks like we need another leg down before we rally.

Bearish counts:

Chart 4: SPX 1 min - from 1129.24,  i-ii-[1]-[2]-[3]-[4] down from 1129.24:



For the reason explained in relation to the bullish counts, today's low should not be the end of wave iii down even though it went lower than 1039.83, because the move down from the prior high at 1061.45 apppears to only have been 3 waves and 5 waves were needed for wave [5] of iii.

So, it appears to be best counted on the basis of this labelling of the decline from 1129.24 as part of wave [4] of iii.

As shown on chart 4, this count is invalidated at 1070.66, (I've moved the wave [1] label to that low since the earlier posts). With wave ii where it is, that level of 1070.66 may  look better as wave [1], but it does mean that both waves [2] and [4] are expanded flats - not a rule breaker, but it is contrary to the guideline of alternation.

So, although this count remains valid until we take out 1070.66,  because of the issue with the [2] and [4] being the same type, of correction it probably means one of the  other alternatives for the bearish case is more likely to be playing out.  However, for the moment, I'll let the market decide by invalidating it (or not). 

Here's a close up of the count shown in chart 4 count:

Chart 5: SPX 1 min close up:



I've shown a complete ending diagonal for wave (C) of [4], but it could go higher. Wave 5 must, however, stay below 1068.74 to remain shorter than wave 3, assuming I have my labels in the correct place.

If we've completed wave [4] with an ending diagonal (C) wave, we need to drop hard now. A failure to do so raises questions about this count and would raise the odds that one of the alternates for the bearish case (or one of the bullish counts) is playing out.

One of those alternate bearish counts  is shown on  chart 4 above. It has us still in wave ii in the form of an expanded flat. 

Here's a chart with the other two alternate counts for the bearish case:

Chart 6: SPX 1 min - from 1129.24, i-ii-[1] or i:




Both of these counts still look good. 

On the main labelling, we're retracing the decline from 1100.14 so can't take out that high in this wave [2]. So far we've retraced about 38.2% of that decline. It could be enough for a 2nd wave at this stage of the overall bearish count which has us in a 3rd wave down at multiple degrees. However, the diagonal I've drawn in from today's low could be a leading rather than ending diagonal, so would only be the 1st wave of (C).

If we see a 5 wave decline and a 3 wave rally that stays below the high, there's a good chance that we may have topped. Another 5 waves down would have to follow this sequence, whether its an impulse down or a correction before another rally to take out today's high, so once we see another 5 down, we'd than have to stand back and see what happens on the next retracement back up. 

The alternative labelling on this chart implies alot more upside potential since it would be retracing the decline from 1129.24,  so another reason for caution if looking for short entries.

The logic set out in previous days still applies if we invalidate the main bearish count shown on chart 4 above by taking out the low at  1070.66:

1) the next count to look at would be the  i-ii-[1] which is the main count on chart 6 above That count remains valid unless we  take out the high at 1100.14;

2) if we take out that level, then we may be in the expanded flat for wave ii shown as an alternate on chart 4, or the count that has us having only completed wave i down from 1129.24 (the alternate shown on chart 6),  or one of the more bullish counts shown in charts 1 to 3.

3) if we take out 1129.14, that will eliminate those two remaining bearish counts for the move down from that high, but the first bullish count shown in chart 1 is, you'll recall, bearish once wave [c] of 2 completes. If that count is in play, we would need to see impulsive downside action once wave [c] and 2 end, otherwise, focus will have to switch to the bullish counts under Option 4 which which are shown in charts 2 and 3 above.

Have a great weekend!

19:49 BST - SPX Update: 1 min close up: ending diagonal from today's low?

The move up from today's low is starting to look like an ending diagonal:

SPX 1 min close up:


1055.80 remains the level to break to the downside in my view.

18:49 BST - SPX Update: 1 min close up

The wave (2) of [5] of iii count has now been invalidated with the move above 1061.45, so on the main bearish count, I'm looking at today's move as wave [4] of iii. As shown in the last post, this needs to stay below either 1063.91 or 1070.66, depending on where you place wave [1]. Here's the close up:

SPX 1 min close up:


Taking out the low at 1055.80 would suggest that wave (Y) is probably complete. Until then, the wave I've labelled C of (Y) could go higher.

17:31 BST - SPX Update: Nearing a top on the main bearish count?

This would be a good place for a top whether its wave (2) of [5] or, as shown below, wave [4] on the main bearish count - you can make out 5 waves up for (C), but of course, there could be more left in that 5th wave. If its wave (2) it doesn't have much room left before invalidating that count (at 1061.45):

SPX 1 min  - wave [4] expanded flat:


16:43 BST - SPX Update: One of the slighlty more bullish counts under the overall bearish one may be playing out here

I've posted a couple of possible counts for today's move based on the main bearish count  - for details of the main bearish count see the 1st and 2nd charts in yesterday's end of day update. But it may be that we see rather more possible upside if one of the alternates is playing out - see the 3rd chart in yesterday's end of day update. Here's the chart of the alternates showing an expanded flat for wave [2] and retracement levels (but it could be wave ii which could go higher as explained in that update):

SPX 1 min - Alternate counts for decline from 1129.24:


I can't say for certain of course, but it seems less likely that the bullish counts (see here) are playing out at this stage since the move down from 1061.45 to below 1039.83 needed to be 5 waves even for those counts , in order to complete wave (c) or [c] in their corrections down.  I think its very difficult to see 5 waves down from that high without wave 1 - 4 overlap. So, I think the balance of the evidence seems to be that the move down from 1061.45 is part of a correction, not the end of an impulse (whether a wave iii  or [1] or i on the bearish counts or a (c) or [c] wave on the bullish counts). Well, that's my view.

15:34 BST - SPX Update: 1 min close up

Or maybe wave (2) of [5] is forming an expanded flat. This is invalid above 1061.45:

SPX 1 min close up:



15:27 BST - SPX Update: 1 min: expanded flat for [4]?

There's a risk here that we're forming an expanded flat for wave [4] with the way we came up from the low. Something to be aware of:

SPX 1 min - wave [4] forming an expanded flat?

14:42 BST - SPX Update: 1 min close up

Could that have been the finishing touches to wave (2) of [5] of iii down? Its a tight stop if you use today's high. The count labelled would be invalidated if we take out the wave [4] high. We need to see it drop fast like a 3rd wave should if this is right, however:

SPX 1 min close up:



11:12 BST - SPX: links to the charts in the previous post below

If you're getting server errors when trying to view the 60 or 15 min charts in the post below, you can view them on my screencast page:



10:26 BST - SPX Update: The technical picture on the 60 and 15 min charts - setting up to diverge again on a new price low?

The 60 and 15 min charts are suggesting more downside to come, but also that we may see bullish divergences between price and the technical indicators on any new price low. This would be consistent with the main bearish elliott wave count which has us likely in wave [5] of iii down from the 1129.24 high (see yesterday's end of day update). So, any new low below 1039.83 today would be wave [5] of iii of and once that's complete we 'd expect to see a bounce in wave iv:

SPX 60 min:


The notes on this chart tell the story that the indicators and price seem to be conveying to us (you can see the last post on this chart here).

I really like the way that the RSI was unable to get above 50, and the CCI was unable to get above -100, despite the size of the rally from the 1039.83 low. I also like the way that the MACD came back up to test the broken green trend line from below and appears to be failing there - all occuring below the zero line. All of this seems to confirm that the rallies have been countertrend (even though they may not seem like it).

However, you can see from the notes on the chart that we could be setting up for bullish divergences in these indicators against any new low in price. That would be consistent with the main bearish count where I'm expecting a wave [5] of iii low and then a rally in wave iv. That would be in line with my reading of the behaviour of the -DI line making lower peaks, and the ADX line now moving more sideways than up while the -DI is above the +DI. That's consistent with a weakening in the downtrend.

SPX 15 min:





The 15 min chart  (you can see the last post on this here) paints a similar picture - its always good when different timeframes line up.

Again, the warning signs of a potential low of some sort are building - the directional movement indicator is probably doing this most prominently at this stage, with the lower peaks in the -DI and the ADX.

The blue pitchfork that I drew in off yesterday's high may have gained some validity with that late rally testing its upper line and failing there, but we need to see more confirmation that this may be an important fork to watch by seeing price drop to its median line (taking it out of the green fork).

Although I've said above that these charts are consistent with what is expected on the main bearish count, its important to be aware that its also all consistent with a potentially more significant low being formed on the bullish counts. You can see details of these counts on the first three charts in the end of day update from 25 August.

On those counts, any new low below 1039.83 would mark the end of the corrective moves down from the 1129.24 high so the next move up would be the start of a significant rally if any of those counts is actually playing out.

We should get a clue as to whether or not we're seeing something other than a countertrend rally following any new low today, by watching the behaviour of the technical indicators as price rallies. On countertrend rallies, the indicators should behave in the way I've described in the charts above and in the previous postings of them. Its not conclusive and different timeframes can give conflicting views, but if the indicators start to behave more bullishly, especially if we see this across timeframes, then its a warning that the bearish counts may be under threat.

Of course, if we don't get the divergences that appear to be setting up, and the indicators instead just confirm any new price lows, then things may be rather more bearish than the main count suggests.