Monday, 2 August 2010

21:21 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. 

On the charts of Options 1, 2, 4 and 5 its possible to label  a double or triple zig zag count from the 1 July low ay 1010.91.

If complete today,  then for Options 1 and 2 we would be about to start a 3rd of a 3rd wave down at various degrees - both 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. 

On the chart of Option 3 I've labelled a single zig zag with today's move being all or part of  minute [c] of  minor 2 up. Note, the double or triple zig zag count could also be applied here since they have retraced a sufficient amount of the decline from 1219.80 to be a minor 2 correction of that drop.  If either of those is now complete and we apply one or the other to the chart of Option 3, it means that wes hould be starting  minor 3 down now.

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.

On the 60 min counts page which I updated at the weekend, I noted some concern that the decline we had seen from 1120.95 did not immediately appear as impulsive, which might be a warning that the complete double zig zag labelled at the 1120.95 high might not be correct. Today we took out that high, proving that it was not correct. 

I've relabelled the double zig zag given that 1120.95 was taken out today. As now labelled, its still a viable count. Provided we stay below 1131.23, this whole count remains valid. 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.

There is not much more room left for this count, therefore. We really need to start dropping now if its to survive.

On the downside, the main level to watch remains the low at 1088.01 and then the low at 1056.88.  Until those levels are taken out, the bullish counts shown under Options 3 and the bullish alternate under option 4, still have the ability to take the market higher.

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 shown the possible triple 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.

As explained under Option 1 above, if we have completed a triple (or double) zig zag, we need to take out the 1088.01 low. From there, we need to follow through with impulsive declines that have the character of a 3rd of a 3rd wave and take out 1056.88. Until then, the trend remains up and care is needed on the short side.

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. I've labelled minor 2 as having completed today, but its feasible that we've only seen wave (i) of [c] of minor 2 and not the whole of wave [c]. Taking out the wave [b] low at 1088.01 will eliminate that as a possibility.

Here's a close up of the action from the 1120.95 high (wave [a]) which shows wave [b] as complete:

SPX 1 min - wave [c] of minor 2:

If we've completed minor 2, we should see an implusive decline from here that quickly takes out the wave [b] low at 1088.01. Anything less leaves open the possibility that we have only seen wave (i) of [c] and that there is more upside to come.

As mentioned above, its possible to apply the double or triple zig zag counts shown under Options 1 and 2 to this Option given how far that has retraced. If we do that and they are complete, then minor 2 should be over and we should now have started minor 3 down. However, even then, we need to see the same action as mentioned above in order to get some confirmation that the correction from the July low is over.

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 completed a double/triple zig zag for wave (ii) of [c] at 1127.30. Please refer to the comments made under under Options 1 and 2 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 please see the comments made under that Option and under Option 2.

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.