Thursday, 5 August 2010

21:14 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.

The move up from the July low seems to be a single or double zig zag. Either we completed the 4th wave of [C] of the zig zag/second zig zag as a triangle yesterday and the high of 1128.75 was the 5th and final wave, or today's low was the end of the 4th wave and we are now in the 5th wave up.

Once we have a completed move,  then for Options 1 and 2 we would be starting a 3rd of a 3rd wave down at various degrees - both very bearish.  For Option 3 we would be starting minor wave 3 down - again, very bearish. For Option 4, we would be starting wave (iii) of [c] of minor Y down - temporarily bearish. For Option 5, we would be starting wave (iii) of [c] of minor Y down - again, temporarily bearish. However, note the bullish alternate count under Option 4 below.

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.

I've shown  the double zig zag count on this chart. It remains valid on this Option provided we stay below 1131.23. If we exceed that level, there is still a bearish count in play (see what I have said under Option 1 on the 60 min counts page), but I don't think it would look very attractive and I think I would abandon this count if that occurs since the alternate shown under Option 2 on the 60  min counts page would look much better if 1131.23 is taken out.

On the chart of this Option, I've shown the count that has the double zig zag complete at 1128.75. 

Here's a chart (the wave degrees and labels relate to the single zig zag shown under Option 3, but the count into the high is essentially the same) showing the completion of the final leg of a corrective move up from the July low:

SPX 1 min - 4th wave triangle, then a top at 1128.75:

This is, of course, invalidated if we move above the 1128.75 high. In that event, we are probably still in the 5th wave of the (C) wave - you can see the detail of this under Option 2 below.

If we did top out at 1128.75 and have since seen the first 2 waves of an impulse down, we first need to take out the low at 1118.81. Then, to eliminate the possibility that we are in a very elongated 4th wave, we'd need to take out the high at 1104.32, which is the 1st wave of (C).

After that, the important levels to watch on the downside remain the low at 1088.01 and then the low at 1056.88.  Until those levels are taken out, more upside remains possible even on the overall bearish counts (for example, on the single zig zag count, we may only have completed the 1st wave of (C) until 1088.01 is taken out).

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 move up from 1010.91 would be wave (ii) of [iii], so, assuming its complete, we would now be in wave (iii) of [iii] down.

On this chart I've also shown the double zig zag count. To remain valid, we need this to stay under 1131.23. However, even if we take out that level therefore voiding the [i]-[ii]-(i)-(ii), we could still be counted as being in a [i]-[ii] down from 1219.80. As explained on the 60 min counts page, that would not look at all bad under this Option (in fact, I probably prefer this now, even though we haven't yet exceeded 1131.23).

However, I'm showing here the count that has us still in wave (5) of [C] of the second zig zag. Here it is in close up:

SPX 1 min - wave (5) of [C] of the second zig zag:

We obviously need to hold above 1118.81 for this count as labelled to remain valid. If we take that out, its possible we may still be in wave (4) until we take out the wave (1) high at 1104.32, but it may be unlikely given that it would make wave (4) very large in time, compared to wave (2). However, its something to bear in mind until we drop below the lower levels mention under Option 1 above.

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. On this chart I've shown the single zig zag count, but the position is really the same as that shown under Options 1 and 2, namely, we may have topped in minor 2 at 1128.75 or we may still be in wave (v) of [c]. Please refer to the 1 min charts posted under those Options.

The levels to watch on the downside are the same as those set out under Option 1, namely, 1118.81, 1104.32, 1088.01 and 1056.88.

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/triple  zig zag up from 1010.91 would be wave (ii) of [c]. With either of those complete, we would now be starting 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. An alternative  [i]-[i]-(i)-(ii)-i count is shown on this chart:

SPX 1 min - Impulse from July low:

For the moment, I've assumed we've completed a single/double zig zag for wave (ii) of [c], but please bear in mind the alternate shown under Option 2, which would entail a further new high. 

The levels to watch out for are the same as referred to 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 Option 1 so the comments made under that Option apply equally here, as does the possibility of further upside, as outlined under Option 2 above.

If we do take out 1131.23, under this option there remains a bearish interpretation - it may just be completing a more complicated X wave before starting wave Y down. I've shown this as a possible alternate on the chart of this Option.