Wednesday, 18 August 2010

23:43 BST - SPX Update: 60 min chart

Here's an update of the 60 min chart. When I posted it earlier today, I said I thought it seemed to be set up for yesterday's high to be taken out since at yesterday's high, we had not seen any of the usual divergences between these indicators and price - see that post here.

SPX 60 min pitchforks:

As mentioned in one of my earlier posts (click here) although on the SPX (and the Dow), we didn't see higher highs made, we did get higher highs on the Transports, the Russell, and the two Nasdaq indices and, if you look at their 60 min charts, the indicators diverged bearishly against those new price highs.

If SPX and/or the Dow continue  to fail to make a high above the high of 17 August, that should be a good sign for the bearish case since such divergences, if they stand, are rarely a good sign for the markets. That would certainly be one thing I like to see at a top of any degree.

Anyway, you can see from the 60 min chart of SPX, that while we didn't get the higher high in price, it was very close and there are marked lower highs in the indicators, as noted on the chart. This isn't bearish divergence as such, but it does illustrate that the push higher today was weaker than the push up we had yesterday. This doesn't mean that we've definitely made a top - its feasible that SPX and Dow play catch up to the other indices and make new highs tomorrow, with more divergences showing up in these indicators on this time frame and only then do we roll over.

There are various counts that would accommodate a further high on the bearish case. One is the double zig zag I showed on the 1 min close up posted during the day, which you can see in the end of day update

Another would be if (5) of [C] on the main count shown on that chart (or on the expanded flat 2nd wave count shown on the first chart in today's end of day update) is still in progress - today's high may only be wave (3) of [C] and the late day sell off would be wave (4). This would be invalidated below 1091.03.

So, signs that we are at or near a top for the rally from 1069.49 are showing up on the 60 min chart. What we need now is impulsive action to the downside to confirm it if the bearish counts are playing out. Watch the 1091.03 level mentioned above and then the 1085.76 level referred to in the end of day update to eliminate some of the near term bullish possibilities (though, as explained in the end of day update, other more bullish possibilities will remain in play even if those levels are taken out).