Friday, 13 August 2010

21:12 BST - SPX Update

With today's action not really having changed the picture on the 10 min charts a great deal, I won't post those charts tonight. I'll just post the charts showing the move since the 1129.24 high which I've posted during the course of today.

If you want to see the slightly bigger picture, have a look at the 10 min charts in last night's update (and for the even bigger picture, click on the buttons in the menu above. The 60 min counts page describes the Options referred to below).

The count from the 1129.24 high is the same for all of the Options I'm following:

SPX 1 min - from the high at 1129.24:

The main count labelled suggests that we've started wave [5] down (the degrees of the labels on this chart relate to the count shown under Option 2, by the way). For this to remain valid we need to stay below the high of wave [4] at 1086.72.

Wave [4] is still labelled with a question mark at the moment since its not certain that we have ended wave [4]. It could be forming a larger correction which will push us up to the 23.6% or 38.2% retracement levels between about 1108 and 1096. Or, as the dotted green lines suggest, we might be forming a triangle with the low at 1079.10 being the (D) wave.

At the moment, based on the character of the move since the 1176.69 low, I'd rate the possibility that that low was wave [5] and wave i down as not very high. It could change with one big impulsive move up, but as things stand, its the least likely of the alternatives mentioned, in my view.

Here's a closer look at what we've seen today:

SPX 1 min - close up:

I've changed the alternative count from earlier to show it as a possible (W)-(X)-(Y) instead of (A)-(B)-(C). The significance is that the (Y) wave will only be 3 waves rather than the 5 that would be required if it is a (C) wave. Its possible that it will end up as a 5 wave rally from the low currently labelled as wave (1) of [5] down, but looking at the correction so far, a 3 wave move off that low to complete wave [4] looks more in keeping. However, either would be acceptable as long as wave [4] does not end above the low of wave [1] at 1111.58.

So, the invalidation point for the count, if there is more upside to come in wave [4] remains as yesterday, 1111.58. If that gets taken out in what we're currently assuming is a wave [4] correction,  an alternative that I've mentioned before but which is not on the chart, is that the low at 1176.69 was wave (1) of [3]. That possibility would be invalidated if we took out the start of what would be wave (1), at 1127.16.

In that case,  it may well be that the count mentioned on the first chart above is playing out, with waves [5] and i having bottomed at the 1176.69 low.

If that alternate is playing out, we'd need to stay below the high at 1129.24 for it to remain valid. If that high is taken out, then obviously, something more bullish is going on. Possibly, that may be the bullish alternates  under Option 4, which you can see charts for in last night's update - both remain valid at this point. Or, any of the Options can accommodate further upside, even above 1131.23, as you can see from the commentary on each Option on the 60 min counts page.

So, those are the levels to continue to watch for signs of cracks in the bearish count. 

For signs that the bearish count may be playing out, we need to make 5 waves down from the 1129.24 high (I'm assuming that we haven't already done so). Taking out the low at 1056.88 would also be favourable for the bear case, but ultimately, we want to see the low at 1010.91 get taken out. As explained last night, this wouldn't exclude any further upside or even new highs in the forseeable future.  So it wouldn't be proof that the bear case is playing out, but without it, there is no bear case.

Have a great weekend!