Friday, 20 August 2010

21:09 BST - SPX End of Day Update

I'm still for the moment concentrating on the move down from the high at 1129.24. I'm looking at a 5 wave decline from that high. 

On the bearish counts, shown on the charts of Options 1 - 5, this would be  a 1st wave down in a larger impulse (either a 3rd wave or a [c] wave, depending on  which Option you're looking at - you can see them all to get some context on the charts below on the 60 min counts page.) ending at either 1076.69 or 1069.49 ( see this post for an explanation of this). On the bearish counts, I've then labelled a 2nd wave retracement either complete at 1099.77, or with a [C] wave back up to that area (and possibly higher) to come.

On the bullish counts, the move down from 1129.24 to 1063.91  would be a wave (ii), B or [b] correction (depending on the Option) before what could be a significant rally higher. 

As you'll see from the charts below, both bullish and bearish possibilities remain very much alive. Here's the bearish count for the move since 1129.24:

SPX 1 min from the high at 1129.24:

This chart uses the labels and degrees relating to Option 2, but relates to the bearish counts for all the Options referred to on the 60 min counts page.

So, from the 1129.24 high, I'm counting a i down and ii up, followed by wave [1] of iii down which can be counted as complete at the low of 1063.91. The alternate labels show the moderately bullish count that still has us in wave ii, which would now be forming an expanded or running flat, with the [C] wave up still to come. 

For the immediately bearish case, we're looking for a 3 wave rally that ends somewhere in the region of a 50% retracement. Assuming wave [1] of iii bottomed at 1063.91, the 50% retracement level would be at about 1082. Of course, it could go higher. The 61.8% retracement level is at about 1086. Much higher than that at this stage of the bearish count and we'd have to watch carefully for signs that something more bullish is happening. Technically however, elliott wave theory allows a 2nd wave to retrace the whole of the 1st, so this count wouldn't be invalidated unless we take out the 1099.77 high.

Here's the count close up:

SPX 1 min close up:

If this is the correct labelling, we have to stay below the start of wave [1] at 1099.77

If that high is taken out, the alternate labelling would still be in play, which would make the rally from the low at 1063.91 wave [C] of ii. We would then look for an impulsive decline to take out the 1063.91 low to gain some confidence that the alternate bearish count on the above chart was playing out and not something more bullish.

And these are the bullish counts (two are bullish alternates under Option 4 on the 60 min counts page while one relates to all of the bearish counts on the 60 min counts page):

SPX 60 min - first bullish alternate under option 4 - impulse up from 1010.91:

As shown on the chart, this count remains in play as long as we stay above 1056.88 on this alternate. That's the low of wave [ii] of the impulse up from 1010.91. If we take out that level, we could make a case for wave [ii] still being in progress as an expanded flat and that would remain a valid count as long as the low at 1010.91 holds.

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

I've re-labelled this count following today's move below the 1069.49 low. It too remains valid unless we take out the 1010.91 low.

SPX 60 min - Moderately bullish count - zig zag still in progress from 1010.91:

If the labelling on this chart is correct, we shouldn't now move below 1063.91 without a new high above 1129.24.  If that low gets taken out, it may mean that wave [b] is on-going, with some re-labelling, since this count is really only invalidated below 1010.91.

So, for the bearish count, if we're in a wave [2] retracement up from 1063.91, we're looking for a three wave move up into the 1082-1086 area. A lesser retracement would suit the bearishness of the count, but shouldn't be expected. If we take out the 1099.77 high, focus would switch to the alternate count shown  for the bear case and we would look  for a 5 wave rally from 1063.91 to be followed by impulsive declines that take out that low soon after that.

If we take out 1056.88 to the downside before we make new highs, the first bullish alternate under Option 4 will be invalidated. on the labelling shown. However, it could just be that we are still in wave [ii] of the impulse up from the 1010.91 low. That and the second bullish alternate under Option 4 as well as the bullish alternate applicable within the context of the overall bearish Options will remain in play until we take out 1010.91.

Have a great weekend!