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Thursday, 30 September 2010

21:17 BST - SPX End of Day Update

On the 3 Options set out on the 60 min counts page, I'm  looking for the end of 5 waves up from the August low  to mark the end of minor 2 (or (i) of [c] of 2) on Option 1, the end of wave X on Option 2 or the end of wave [i] of C (or (i) of [iii] of A) on Option 3.

Please refer to the 60 counts page for context.

It may be that we have a good candidate for a top at today's new high for the rally from the August low at 1157.16. This is based on the ending diagonal I've been showing.

Here it is on the bigger picture for the move up from the August low (labelled as if Option 1 is playing out):

Chart 1: SPX 1 min - 5 waves up from the August low:


Here's a closer look: 

Chart 2: SPX 1 min - 5 waves up from the August low close up:


We had what may reasonably be counted as a 5 wave decline from the high at 1157.16 and the move up from there appears to be 3 waves.

If this is correct, I want to now see an impulsive move down that takes out the low at 1132.09 and the low at 1122.79. As explained in my earlier post, taking out the first level will preclude a further high to come in wave v of the diagonal that I've labelled on the above charts. Taking out the second level will start to make the bullish case look doubtful (though it won't be invalidated).

Its possible that wave [2] still has further upside - so far we've retraced about 50% of the decline from the high. The move down from where I've labelled wave [2] doesn't look impulsive at the moment, so we could still be in the (B) wave.  If so, it may well try to get to the 61.8% level at about 1149 before its done. A 5 wave decline below 1136.08 will mean that wave[2] should be over. 

To the upside, we obviously need to stay below the high at 1157.16.

Turning to the more bullish counts, here's the bigger picture (the labelling on these charts relate to Option 3): 

Chart 3: SPX 1 min - 5 waves up from August still in progress:


This is beginning to look unlikely as far as starting wave (v) up is concerned. However it can't really be ruled out. If we take out 1132.09, that will eliminate the i-ii-[1]-[2] and the possibility that wave (iv) ended at 1132.09, but still leaves the possibility that we're in a i-ii from the 1122.79 low.  If we take out 1122.79, that will eliminate the i-ii count for the start of wave (v) up, but won't rule out the possibility that we're still in wave (iv). I have the high of wave (i) on this count at 1065.21, and that's what will rule out a continuing wave (iv) as far as elliott wave is concerned.

Here's a close up:

Chart 4: SPX 1 min - 5 waves up still in progress, close up:


You can see even more clearly at this scale why I think this count, showing the start of wave (v) up at 1122.79, seems unlikely, with all the ones and twos in there. 

You can also see that if we take out 1136.08,  the blue (1)-(2) will be eliminated. Then, as mentioned above, the next levels to watch are 1132.09 and 1122.79.

The possible diagonal I've sketched in suggests a top has been put in  at 1157.16 even on this count. Still, I want to see the levels mentioned above taken out to gain greater confidence in this.

So, the levels I'm watching for some sort of confirmation of an end to the rally from the August low at 1157.16 are 1136.08, 1132.09, 1122.79. To the upside,we have to stay below the current high at 1157.16.

17:08 BST - SPX update on the ending diagonal

This is the chart from earlier, updated with the subsequent price action:

SPX 1 min - ending diagonal complete at 1157.16?




Taking out 1141.02 has confirmed that a diagonal with the alternate labelling as shown on the chart in the previous post is complete at today's high.

However, if its the diagonal shown above (this was the main labelling on the chart in the previous post) that is playing out, we have to take out the low at 1132.09 to preclude further upside in wave v.

I've tentatively labelled an impulse wave down from today's high, but wave (1) looks more like a double zig zag - I've labelled a running flat wave 2 within wave (1) to make it an impulse, so its not entirely satisfactory.

What I want to see now is the low at 1132.09 get taken out. If we take that out, the diagonal shown in the above chart would, I think, have to be complete since wave v, which could still be in progress otherwise, would no longer be a zig zag type wave if that low is taken out.

Until 1132.09 goes, the above diagonal carries the risk of further upside (to a maximum of 1159.22).

 

16:26 BST - Dollar Update

On the overall bullish count which has us currently in a wave (2) decline in the dollar, we've just about reached the 78.6% retracement of the decline from the June high and the point where wave C is .618 x wave A:

Dollar 80 min from June 2010 high:





Coupled with the above, there's a not unreasonable count for a complete 5 waves down from the high labelled B. Here's a closer look:

Dollar 60 min from B wave high at 83.522:




However, remember, the trend is firmly down. Until we see something clearly impulsive to the upside, the risk of further declines remains - we may have more to go in wave (v) of [v] of C or, perhaps we may only have seen the first wave of wave [v] within C, for example. The latter isn't ruled out until we take out the wave [iv] high at 80.259.

So, the low at 78.414 is critical to this labelling showing wave C of (2) as complete and the labelling has to be tentative until we see some price action that is decidely bullish (don't forget, there are more bearish potential counts - see the dollar page).

 

15:08 BST - SPX Update onthe ending diagonal

So, 1150 wasn't the top of the rally from the August low. However, on the ending diagonal count, one of the alternatives was that we were still in wave v (see yesterday's end of day update). If that's the case, we may have seen it complete today - its invalidation point was 1159.22:

SPX 1 min - ending diagonal close up:


If the alternate is playing out, with wave iv at 1141.02, then the invalidation point is at 1168.23. Needless to say (but I will), until we see a decisively impulsive decline, the risk remains to the upside as always. If we take out 1141.02 without making a new high, I might have more confidence in this labelling.

10:28 BST - SPX - 60 min time and price chart

I've continued to watch this 60 min time and price chart with interest:

SPX 60 min time and price chart:


When I posted it on Tuesday (see here) I noted how price had crawled up the mid line of the channel after the big gap up on Friday, fallen away from it and then tried to get back to it but failed, suggesting some weakness.

You can see that following this, we saw price drop out of the channel, but it then did what I didn't want to see it do if we had seen a top to the rally from the August low - it got back into the channel and we duly made a new high.

However, its interesting that we didn't get near the mid line of the channel with this new high at 1150 and after making that high, we fell back out of the channel and then spent most of yesterday crawling up the lower line of the channel, trying to get back within it. The failure to do so continues to suggest weakness and, as you can see, we continue to see the indicators seemingly confirming this weakness.

Also of interest is the striking similarity between the current move and the move into the early August high - I've highlighted the two areas in yellow. The current move seems to be a smaller version of the August top. Well, this is interesting but probably has no predictive value. Just thought I'd point it out.

Still, the current move, is displaying the same indicator divergences that we saw into the August top, so may be indicative of a topping process going on.

None of this precludes further highs, so we just have to continue to watch price action and look for confirmation in the indicators. I explained in the previous post what I would want to see in price and indicator action to provide a degree of confidence that some sort of top has been put in. Although we closed below the channel yesterday, I don't think it can yet be considered as a significant breach. We need now to see downside follow through if a top has been put in.

However, if price gets back into the channel, then its going to be a warning that we may see further highs before this rally is over. It could be limited if price again fails to make it to the mid line of the channel, so it would be sensible to monitor any move back into the channel to try to gauge the strength of the move. 

As I pointed out prior to Friday's move, price could move up into the next Gann price levels (1156 then 1170) by just crawling up the mid ine (or, indeed, the lower line) of the channel. If that's what it does, again, I'd be looking at that as a sign of weakness.

Of course, if it gets back into the channel and then gets above the mid line, then all short bets should be off.
 

Wednesday, 29 September 2010

21:22 BST - SPX End of Day Update

On the 3 Options set out on the 60 min counts page, I'm still looking for the end of 5 waves up from the August low  to mark the end of minor 2 (or (i) of [c] of 2) on Option 1, the end of wave X on Option 2 or the end of wave [i] of C (or (i) of [iii] of A) on Option 3.

Please refer to the 60 counts page for context.

We stayed below the high at 1150, so the potential ending diagonal that I posted in yesterday's end of day update and updated earlier, remains valid. 

Here it is on the bigger picture for the move up from the August low (labelled as if Option 1 is playing out):

Chart 1: SPX 1 min - 5 waves up from the August low:




For this labelling to remain valid we need to stay below the high that I've labelled (2), which is at 1148.63. A move above that would suggest that we are likely to take out the high at 1150, perhaps in one of the alternatives within this diagonal that I set out in my earlier post or on one of the more bullish counts (see below).

Here's a closer look at the diagonal: 
 
Chart 2: SPX 1 min - 5 waves up from the August low close up:



You can see one of the alternatives for the diagonal labelled on this chart, namely, that 1150 was only the end of wave iii and we're now in wave iv. To preclude this, I want to see 1122.79 taken out and/or the dotted line reached. Once we have a wave iv low for this alternative, the limit for wave v would be 27.21 points from that low since wave v must be shorter than wave iii.

The other possibility I mentioned in the earlier post is that we're still in wave v of the diagonal, so 1150 would have been wave [W] of v and we'd now be in wave [X] of v. This would be invalidated if we drop below 1132.09 since that would prevent wave v being a (double) zig zag, which all waves in an ending diagonal need to be. We'd have to remain below 1159.22 in wave v since it has to be shorter than wave iii. If we take that level out, I'd be looking to one of the more bullish counts.

Turning to the more bullish counts, here's the bigger picture: 

Chart 3: SPX 1 min - 5 waves up from August still in progress:




And here's a close up:

Chart 4: SPX 1 min - 5 waves up still in progress, close up:




Here, I think that taking out 1140.26 would start to cast doubt on this count. If we take out 1132.09, I'd be even more doubtful. Taking out 1122.79 would probably put it to bed, though I don't think we can rule out that we are still in wave (iv), so I'd want to see an impulsive move down and a very significant drop below 1122.79 to start thinking about discarding that possibility.

The possible diagonal I've sketched in would suggest more limited upside than the ones and twos labelled. It may be something to keep an eye on, but below 1132.09 it will be invalidated.

So, the levels I'm watching for some sort of confirmation of an end to the rally from the August low are 1140.26, 1132.09, 1122.79. To the upside, if we take out 1148.63, its likely we'll move above the 1150 high. If we're still in an ending diagonal shown in charts 1 and 2 above, the highest we could go is 1159.22. Above that and the bullish counts in charts 3 and 4 will become the focus.

15:53 BST - SPX Update on the potential ending diagonal to complete 5 waves up from the August low

This is a close up of chart 3 from yesterday's end of day update showing the possible ending diagonal for the final 5th wave up from the August low:

SPX 1 min - ending diagonal 5th wave to complete 5 waves up from August low, close up:


As shown by the main labels, we may have completed the diagonal at 1150. Its also possible however, that we're still completing wave v. In that case, we have to stay above 1132.09 to retain a zig zag count for wave v and we have to stay below 1159.22 for wave v to be shorter than wave iii.

However, you can see that the alternate labelling labels the high at 1150 as wave iii, with wave iv now in progress. If that's correct, wave iv has to stay above that dotted line and/or 1122.79. 

Another possibility would be that wave iii is still in progress.  Again, to retain a zig zag count for wave iii, it would then have to stay above 1132.09. To remain shorter than wave i , wave iii would have to stay below 1152.50.

So, these are the possibilities on this potential ending diagonal count. Bear in mind that the more bullish counts shown in charts 1 and 2 in yesterday's end of day update still stand (except the small ending diagonal in chart 2), albeit with some labelling adjustment. I wouldn't rule them out until we take out 1122.79.

Tuesday, 28 September 2010

21:43 BST - SPX End of Day Update

On the 3 Options set out on the 60 min counts page, I'm still looking for the end of 5 waves up from the August low  to mark the end of minor 2 (or (i) of [c] of 2) on Option 1, the end of wave X on Option 2 or the end of wave [i] of C (or (i) of [iii] of A) on Option 3.

Please refer to the 60 counts page for context.

Taking out the high at 1149.92 means that the count in the chart I posted earlier, or some variation of it, looking for further upside is playing out. The question is how much further upside.

Here's the bigger picture for the move up from the August low (labelled as if Option 3 is playing out):

Chart 1: SPX 1 min - 5 waves up from the August low:




If wave (iv) is correctly placed at the 1122.79 low, then there could be a good deal of potential upside to come, though if the diagonal possibility I mentioned when I posted this chart earlier is playing out, it may be more limited.

You'll see I've got an alternate labelling for wave (iv) at the 1132.09 low. Even on this labelling, however, the upside could be substantial.

For these counts, they really need to stay above the wave [2] low at 1141.22. Taking it out would cast doubt on them. Taking out the low at 1132.09 would seriously call the main labelled count into question and would invalidate the alternate labelled count. Taking out the low at 1122.79 would invalidate the main labelled count altogether.

If 1132.09 is the wave (iv) low its possible that we might be seeing an ending diagonal form from there which may have less upside potential. Here's that possibility on a close up chart from the 1122.79 low (this chart is labelled as if Option 1 is playing out):

Chart 2: SPX 1 min - 5 waves up from the August low close up: 




You can see the potential diagonal shown by the green lines. I've put on tentative labels for the diagonal, but we may only have seen the 1st wave rather than waves i, ii and iii of it. If we did complete wave iii at today's high, then wave iv must stay above the dotted green line, otherwise, the diagonal that I've drawn in is off the table. 

Having said all of that, there is a count that may have a top in at today's high or not too far above, as shown on the following chart: 

Chart 3: SPX 1 min - top of 5 waves from August low in at 1150:

 
 
Taking out 1132.09 would give some credence to this count. 
 
So, the levels I'm watching are now 1141.22, 1132.09 and 1122.79.

19:23 BST - SPX Update: Last chance for the immediately bearish count

Its now an 88.6% retracement, so it had better start dropping now if this labelled count is to survive:

SPX 1 min - (1)-(2) down from 1149.92 - last chance:


Taking out that B wave low at 1142.47 might be the first encouraging sign, though not conclusive, that this count might be playing out, but it has to be done in an impulsive manner. Until then, I'd expect more upside, perhaps in the count shown in my last post.

17:57 BST - SPX Update: Do we still have more upside to come before 5 waves from the August low are complete?

If we don't start showing some impulsive downward action soon, I'm going to start thinking that this count (shown on a close up of Option 3 - see the 60 min counts page) for 5 waves up from the August low may be playing out:

SPX 1 min - 5 waves up from August low still in progress?:


If we take out the high at 1149.92, then it becomes the most likely count. Whether wave (v) will form as an impulse or as a diagonal, we'll have to wait and see, but a diagonal would be a possibility, with the 1st wave ending at 1149.92 instead of where I've placed it. 

So, this is something to keep in mind as we fail to make any downside progress.

16:44 BST - SPX Update: (1)-(2) down from 1149.92? Jury's still out

Its a much deeper retracement than I would have liked for this wave - 78.6%. The way I've labelled it, Y=W. If its wave (2) in a new downtrend, then it needs to start falling now or there's a clear risk that we're going to take out yesterday's high and invalidate the labelled count:

SPX 1 min - (1)-(2) down from 1149.92?:

15:17 BST - SPX Update: 5 waves down from 1149.92?

Its possible that we've now seen 5 waves down from yesterday's high. Here it is on chart 2 from yesterday's end of day update:

SPX 1 min - 5 waves down from 1149.92 complete?:


I can't be sure its the end of 5 waves down, but its right at the top of Friday's gap up, so it could be and we might see support come in here, so its a logical place to be on the look out for a low. If things are really weak, we could just continue to fall and fill the gap.

However, you get the idea and whether its bottomed where I've labelled it or there's more to go to the downside first, once we have completed wave (1), then the bounce is going to be critical - obviously, we have to stay below 1149.92 for the labelling shown on this chart to remain valid. Preferably, the retracement will stay between the 50%-61.8% retracement levels, though we know a 2nd wave can retrace more. The deeper it retraces the more doubt that will create that an end to the rally from the August low ended yesterday.

8:22 BST - SPX Update: 60 min time and price chart - early signs of a top, but price and indicators now need to confirm

When I last posted this time and price chart, SPX had broken down into the lower half of the price channel for the first time since the rally that started at the end of August - see last Thursday's post here. To me, this  was an inital sign of weakness creeping into the rally. 

It actually broke down out of the channel at the end of Thursday, though didn't close outside of it. As you can see from the updated chart, Friday's rally took it back up to the mid line of the channel and it duly spent the rest of the day crawling along the underside of the mid line, which was a possibility I mentioned in that post. An inability to get over the mid line would, as I mentioned, also be a sign of potential weakness, perhaps suggesting that an end to the rally would be close:

SPX 60 min time and price chart:


Yesterday, it fell away from the mid line and the rally into the day's high failed to reach it. This looks bearish, coupled with the divergences that I've marked in the indicators between the high in price made on Friday and yesterday's high (along with the larger divergences between yesterday's high and that of 21 Sept).

Still, the RSI and CCI continue to remain at bullish (to neutral in the case of RSI) levels. If we've seen the end of the rally from the August low then I want to see these indicators turn decisively bearish along with a significant decline in price. For RSI that means falling to the 30 level. For CCI that means falling at least to the zero line, but better still, below it and towards the -100 line.

The MACD histogram has turmed slightly negative which means that the MACD itself has had a bearish cross. However, the latter is still above the zero line. It needs to drop below that line to confirm any bearish move in price.

The stochastic has had a bearish cross, but remains in the overbought zone. We need to see it fall quickly to the 50 line at least, with a good decline in price.

You can see that we're coming into the next time line today, so it would be a good area for price to confirm a top to the rally from the August low, even though it has not quite hit the next price level at 1156. If we have seen a top, then price should fall decisively below the channel and not be able to recover it and we should start seeing the downward price levels (in red) get hit. Moves in the indicators as described above that accompany such a price move would help confirm that perhaps a top to the rally is in.

If we don't see all or any of the above, then it'll be a warning to be prepared for more upside. In particular, I don't want to see price decline but the indicators fail to reach their respective bearish/oversold levels, or price go sideways, but the indicators reach their respective bearish/oversold levels. Those combinations of price/indicator behaviour would be potentially bullish in my view. And, of course, if the channel gets broken to the downside, I don't want to see price recover back inside it.

Monday, 27 September 2010

21:16 BST - SPX End of Day Update

On the 3 Options set out on the 60 min counts page, I'm still looking for 5 waves up from the August low to mark the end of minor 2 (or (i) of [c] of 2) on Option 1, the end of wave X on Option 2 or the end of wave [i] of C (or (i) of [iii] of A) on Option 3.

Please refer to the 60 counts page for context (the following charts are based on the bearish count shown in Option 1on that page).

Here's the bigger picture for the move up from the August low (labelled as if Option 1 is playing out):

Chart 1: SPX 1 min - 5 waves up from the August low:




Here's a closer look at the action from the wave iv of (v) low:

Chart 2: SPX 1 min - 5 waves up from the August low close up:




I've kept the count in the last intra day post showing 5 waves into today's high at 1149.92.  As I said on Friday, its always going to be difficult to label a wave that shoots straight up and then chops sideways. As I've been saying in the intra day updates, until we see something that is decidely impulsive to the downside, the trend remains up. So, we can attempt to place labels on the move with a view to identifying a potential top, but ultimately, the first indication will be wave behaviour consistent with a top. 

As you can see, I've labelled what may be the start of an impulse move down from today's high. Its certainly more promising than anything else we've seen over the past couple of days and I like the fact that its taken out the low I had labelled as wave [4] of v and moved into the price void created by Friday's move up.

Still, we need to see more - once 5 waves down is complete, for wave (1) on my labelling (as you can see, I've labelled a complete wave (1) as  a possibility),  the retracement in wave (2) will have to stay below the high at 1149.92, obviously. 
 
If it can do that, we need to then see another 5 wave impulse down for wave (3) that is clearly stronger than wave (1) and moves decisively below wave (1) and deeper into the price void created by that straight line move up on Friday. It would be nice if this wave (3) could take out the low at 1122.79, but it may be asking too much. However, what will be critical is that once wave (3) ends, the assumed wave (4) retracement stays below the low of wave (1).

So, there's a wide range to watch - 1149.92 to the upside and 1122.79 to the downside - Friday's move means there aren't really any reference points before that low. However, as this wave down develops, (assuming it does and its not just part of a corrective move prior to further upside) other reference points will be created that can be used to assess whether or not this move down is likely to continue.

19:54 BST - SPX Update: Still waiting for impulsive action to the downside to confirm the end of 5 waves up from August

With the lack of real impulsive downside movement, the trend remains up and the risk that 1148.90 wasn't the end of 5 waves up from the August low played out. Here's a count showing 5 waves into today's high:

SPX 1 min - 5 waves up from August lows complete?:
 

However, until something impulsive happens to the downside, this can just continue grinding up. A 5 wave move that takes out the low I've labelled as wave [4] of v at 1143.73 would be a start.

17:24 BST - SPX Update: (1)-(2)-1-2 down from 1148.90?

Referring to my earlier post, we managed to stay below 1148.90 and appear to have made another 5 waves down:

SPX 1 min - top of 5 waves from August lows?:


However, there's a high risk that 1148.90 was only [3] of v and that what we've seen since is [4] of v, as mentioned in the last post. Until we see something convincingly impulsive to the downside, I think this risk remains.

15:31 BST - SPX Update: Possible end to 5 waves up from August - 1148.90 must hold

This is chart 2 from Friday's end of day update brought up to date with today's action so far. Its possible that 5 waves up from August ended with the ending diagonal shown on Friday:
SPX 1 min - 5 waves up complete?:




Here's a closer look from the wave iv of [5] low of 1122.79:
SPX 1 min - top of 5 waves from August at 1148.90?:




You can see its possible to count 5 waves down from Friday's high. However, its tentative. We now need to see any retracement stay below 1148.90 and form in only 3 waves. Otherwise, this labelling will be invalidated and what we probably saw will only have been the end of wave [3] of v as an ending diagonal.

Saturday, 25 September 2010

10:00 BST - SPX: 60 min counts page updated

I've updated the 60 min counts page to show the remaining 3 out of the original 5 Options I was following for the move from the April 2010 high at 1219.80. That page should be read in conjunction with the Long Term Counts page and the Counts from March 2009 page for context.

Friday, 24 September 2010

21:16 BST - SPX End of Day Update

On the 3 bullish to bearish Options set out in Friday's end of day update, I'm looking for 5 waves up from the August low (the diagonal count I'd been following is no longer feasible as I had it labelled). Today's action confirmed that those 5 waves did not complete at the high of 1148.59 since we took that out and hit a new high at 1148.90 today.

The question now is whether that is the end of the rally from the August low which will mark the end of minor 2 (or (i) of [c] of 2) on Option 1, the end of wave X on Option 2 or the end of wave [i] of C (or (i) of [iii] of A) on Option 3.

Please refer to the 60 min charts in Friday's end of day update for context (the following charts are based on the bearish count shown in Option 1 in that update).

In last night's end of day update I identified the levels to watch for the bearish count that had us topping at 1148.59. Both of those levels (1136.77 and 1144.38) were exceeded today, so the bullish count which expected a high above 1148.59 became the main count and, as mentioned above, we duly took out the 1148.59 high.

So, here's the bigger picture for the move up from the August low (labelled as if Option 1 is playing out):

Chart 1: SPX 1 min - 5 waves up from the August low:




Here's a closer look at the action from the wave [1] of iii high:

Chart 2: SPX 1 min - 5 waves up from the August low close up: 




Obviously, labelling a wave that shoots straight up and then chops sideways has its difficulties. There are various ways to label it, as I've shown in the previous two intra day posts.

With all the sideways chop since the initial run up, this is another count I think works OK - an ending diagonal for wave [5]. It may be complete at today's high or that high may only be the 3rd wave of the diagonal - its difficult to tell, but a move below 1146.50 would suggest its complete, if it is a diagonal (if it s not complete, the 5th wave has to stay below 1149.46 on my reckoning since I would have the 5th wave starting at 1146.50 and the 3rd wave is 2.96 points). However, what I would really like to see is the low labelled as wave [4] get taken out in an impulsive 5 wave move.

So, after today's action, the main levels I'm watching are 1146.50, 1144.58 and 1122.79. Taking out the first one would suggest that the diagonal labelled is complete. Taking out the second one would preclude wave [5] subdividing, assuming that the wave [4] label is in the right place. Taking out the third would mean that wave v of (v) is complete assuming that the labelling shown on chart 1 is correct.

Have a great weekend!

20:08 BST - SPX Update: 5 waves up from August low complete?

If we take out the low at 1145.85 now, I'd be inclined to go with the labelling in this chart because taking out that low would invalidate the (1)-(2) of wave [5] that I mentioned in the last post, so we'd have wave [5] ending at 1148.81:

SPX 1 min - 5 waves up from August low complete?:




However, if we take out 1145.85, I then want to see a swift move to below the low at wave (W) which was labelled as wave [4] in the previous post and I want to see all of this happen in a 5 wave impulsive move.

However, if we can't take out 1145.85, I think we have to continue to expect further upside.

19:19 BST - SPX Update: 5 waves from August low complete?

We've taken out 1146.38, now I want to see the wave [4] low at 1144.58 taken out, otherwise, with a 5-3-5 looking wave down from the high, we could just be in wave (2) of [5] if today's high was wave (1) of [5]:

SPX 1 min - 5 waves from August low complete?:

 

18:59 BST - SPX Update - minor 2 top in?

Its possible that 1148.77 was the end of 5 waves up from where I now have wave [4] labelled and I can see a very small 5 waves down from there. (though you can't see it on the chart below). However, I think we need to take out 1146.38 which I have as wave (1) of [5] - until then, its possible that we're still only in wave (4) of [5]:

SPX 1 min - minor 2 top?:




If it is the top of 5 waves up from yesterday's low, we'll now have to wait and see if it was all of v of (v) or just the first wave.

17:32 BST - SPX Update - minor 2 complete with a slight truncation in wave v?

On this bullish count which yesterday was calling for another high above 1148.59, if we have completed 5 waves up from yesterday's low, the question now is whether its the whole of v of (v) or whether its just the first wave of v. If its all of it then SPX will have a slight truncation. The Dow took out its equivalent high, so this might be the kind of divergence that we often see at turning points:

SPX 1 min - minor 2 now complete with a slight truncation at 1147.62?:





Since the Dow exceeded its 21 September high, even if we don't take out 1148.59 to invalidate the [1]-[2] count, this count has to be the favoured one.

So far, we haven't seen any real sign of the market starting to decline here, so although I've labelled 5 waves up from yesterday's low as complete, there is clearly a risk that its not. We need a 5 wave decline as the first sign that a top may be in. Until then, we have to expect more upside. 

16:42 BST SPX Update: ending diagonal to complete the rally from yesterday's low?

On the bearish count that is really it - we have to drop now:

SPX 1 min - top in at 1148.59:




If we don't, that high at 1148.59 is likely to go and that will invalidate this count, and the bullish count could take us to the 1156 level (though it might not get there since the move up from yesterday's low could well be near completion, assuming its the whole of v of (v) of [c] and not just the first wave).

15:15 BST - SPX Update on the bullish and bearish counts

The bearish ones and twos down from the 1148.59 high has been invalidated. I have however got a [1]-[2] count that remains valid unless we take out 1148.59 - I've been trying to find a way to overcome the (1)-(4) overlap in wave [1] and think that the triangle shown in the chart below achieves that since the crucial point in determining overlap is where wave (4) ends - with the triangle for wave (4), it ends below the low of wave (1):

SPX 1 min - top in at 1148.59:


So, 1148.59 is the level to watch on this count.

However, the bullish count requiring one more high above 1148.59 (or 5 waves from the wave iv low) does seem  more likely, but you never know. Here's the bullish count:

SPX 1 min - one more high to come:


Thursday, 23 September 2010

21:16 BST - SPX End of Day Update

On the 3 bullish to bearish Options set out in Friday's end of day update, I'm still awaiting confirmation whether or not we've seen the completion of 5 waves or a diagonal up from the August low at yesterday's high of 1148.59  (the diagonal would be an ending or leading diagonal, depending on which of the Options you're looking at). 

Please refer to the 60 min charts in Friday's end of day update for context (the following charts are based on the bearish count shown in Option 1 in that update).

I said in last night's end of day update that one of the levels I was watching was 1131.47. Well, we did take out that high so excluded the possibility that from the high at 1148.59 we were in wave (4) of [5] up - see chart 2 in yesterday's end of day update. However, we didn't take out the next level I was watching at 1119.77 and instead rallied quite steeply. This suggested a different count might be in play which had us in wave [4] of v, with wave [5] up still to come, as shown in my update at 15:32 BST (see here).

So, we remain pretty much where we were yesterday, despite today' late decline, with the choice being either that a top for the rally from 1039.70 is in at 1148.59, or we have one more high to come.

Chart 1: SPX 1 min - top is in at 1148.59 - impulse (on Options 1 and 2)/correction (on Option 3) down has started:




The labelling relates to the bearish count shown in Option 1 in last Friday's end of day update. Although I've labelled it as if we've only completed wave (i) of [c], given how far we've come, I'm more inclined to think that the rally since August is the whole of [c], so the end of minor wave 2.

This count assumes that the rally from the August low has topped and that we are now going to see at least a reasonable decline. You can see a wider view of this count on the third chart in the end of day update from 21 September - click here.

On the bearish counts (Options 1 and 2 in last Friday's end of day update) this move down would be the early stages of wave [1] down. We should eventually be headed down below the August low (on Option 1 I'm assuming that the high at 1148.59 is the end of wave [c], not just part of it, as mentioned above).

On the bullish count (Option 3 in that update) this move down would be wave (a) or (w) of [ii] down and we're only going to retrace a portion of the rally. Wave (a) may take the form of 5 waves, or it may just form 3 waves. Wave (w) would be 3 waves. 

Since we have 3 waves down from 1148.59 to 1131.58, its possible that that low marks the end of wave (w) of [ii] as a zig zag. What followed would be wave (x) as an expanded flat correction. So we'd now be in wave (y) which could form as another zig zag, but it could take any other corrective form, so we'll just have to wait and see (you can see what I mean for this (w)-(x)-(y) wave on chart 2 below). Alternatively, we may still be in the early stages of a 5 wave move for wave (a) of [ii] which would be labelled as shown on the above chart (except that the degrees would be different of course).

For the bearish count, or if we're forming 5 waves for (a) of [ii] on the bullish count, I'll stick with the labelling on chart 1 for the moment. 

Bearing in mind my comments in relation to the bullish count below, I think that the level to watch now on this count is 1110.27 - if that level is taken out then the bullish count is invalidated. 

This (1)-(2)-1-2 will be invalidated if we take out 1144.38, but I think that taking out 1136.77 at this stage would create concern that this count isn't playing out.

Chart 2: SPX 1 min - final leg of the rally still to come: 




You can see the wider view of this count on the chart posted at 15:32 BST (click here). Although the intraday labelling that had us starting wave [5] up has been invalidated, the possibility that we're in wave [4] with wave [5] up to come remains until we take out the high of wave [1] at 1110.27.

Although I've labelled it as if we're still in wave (Y) of [4], it may well be complete at the late afternoon low, in which case, we'd expect a rally starting tomorrow.

As long as we stay above 1110.27, this count suggests a new high above 1148.59. 

So, after today's action, the main levels I'm watching are 1110.27, 1136.77 and 1144.38. Taking out the first one will invalidate the bullish count. Takking out the second one will make the bearish count less likely. Taking out the third will render the bearish count invalid.

19:59 BST - SPX Update on the bullish and bearish counts

On the bullish count I'm inclined to think that we completed wave (1) of [5] at today's high since the move down from there has become rather out of proportion to be wave 4 of (1). If we decline below 1127.66 (see the previous posts) now, that would exclude the wave 4 of (1) count anyway, but even if we don't, I think I prefer this count for the time being:

SPX 1 min - one more high to come:


Taking out today's low will invalidate this one.

On the bearish count, I'm going with this for the moment:
SPX 1 min - top in at 1148.59:




We have to take out today's low for this to be a possibility. If we're still actually in wave 2, we may well end up taking out today's high - that's fine. It will invalidate this labelling but as long as we don't get above 1144.38, the (1)-(2)-1-2 possibility will still remain.

17:35 BST - SPX Update: 60 min time and price chart

Just looking at the 60 min time and price chart, it doesn't seem to be over for the immediately bearish case - well, not just yet. Although the rally from today's low has appeared pretty strong, we're still in the lower half of the channel drawn through the time and price lines and below the last Gann price level that price broke down from yesterday (its at about 1138):

SPX 60 min time and price chart:


Now, on the bullish count, it doesn't mean that we won't just continue to crawl up the underside of the midline of the channel to make wave [5], but if it does that, it would probably be a clue that such a rally is likely terminal.

So far, the indicators don't seem overly impressed with the move from the low. The RSI and CCI look like they're just retesting the 50 and +100 lines from which they broke down. The MACD may be turning up, but if so, its doing it very slowly. The histogram is making higher lows within the current trough but is yet to turn positive. The stochastic has moved up from oversold, but hasn't, so far, been able to reach the 50 line.

Of course, all of this can change and the indicators can start behaving more bullishly if we just continue to rally. So, we can only watch the price levels that the move so far suggests should be important to the bullish or bearish counts and wait for price action to confirm which of the two is playing out. On my counts (see the last post) I'm watching 1127.66 and, of course, taking out the high at 1144.38 will void my bearish count.

17:09 BST - SPX update on the bullish an bearish counts

On this bullish count, it looks like we need another leg up to complete wave (1) of [5]. If the labelling is correct, and we're in 4 of (1), we have to stay above the high of 1 of (1) at 1127.66 in an assumed wave 4 correction:

SPX 1 min - one more high to come:


The same count for the move up from today's low could be applied to the bearish count, so one more high needed to complete wave c of 2 (see the second chart in the last post). However, its possible that wave 2 is a w-x-y not an a-b-c and that y of 2 is complete with the move up from today's low being a complete zig zag:

SPX 1 min - top in at 1148.59:


If we take out the high at 1127.66 mentioned above under the bullish count, before making a hig habove 1136.77, then this count will become the most likely.

15:56 BST - SPX Update: Close ups of the bullish and bearish counts

Here's a close up of the chart shown in the previous post:

SPX 1 min - one more high to come close up:


But this is how I'd count it for the more bearish case which assumes a high was put in at 1148.59:

SPX 1 min - (1)-(2)-1-2 down with 2 as an expanded flat:



On this count, if c of 2 fails to take out the a of 2 high, it would be a running flat rather than an expanded flat. 

I can see 5 waves up from today's low, but it may be a (1)-(2)-1-2-3. If we drop below 1131.04 before making another high, the latter will be eliminated so we'll be left with 5 waves up. We'd then need to see today's low taken out if this bearish count is in play. Until then, the buliish count would seem more likely.

15:32 BST - SPX Update - one more high to come in the absence of impulsive downward action?

We've taken out one of the downside levels I was watching yesterday, 1131.47, but not the next level at 1119.77 and with price action not behaving overly impulsive to the downside at present, here's the count I think we need to watch for further upside:

SPX 1 min - 5 waves from 1039.70 still in progress:



On this count, if we're in wave [4] of v, all we have to do is stay above 1110.27 and make a new high and put in 5 waves up from the wave [4] low to complete 5 waves up from 1039.70.

13:48 BST FTSE and Dax breakdown from time and price channels

The FTSE and Dax have broken down out of their 60 min time and price channels:

FTSE 60 min time and price chart:



Dax 60 min time and price chart:





Hopefully we're not just going to get an immediate recovery back into the channels. Assuming its a genuine breakdown, let's see if the SPX can follow suit today.

12:06 BST - SPX Update: Equity Put/Call Ratio, Percent of Stocks above the 50ma and the 60 min time and price chart - lining up for sell signals

The CBOE Equity Put/Call ratio is once again, on the verge of giving a sell signal by the 5ma moving above the 10ma. There hasn't yet been a cross of the 5ma above the 10ma - they closed yesterday at the same level - exactly as they did on 10 September (see my post of 12 September). Then, no signal came as the 5ma dropped below the 10ma and they both stayed below the blue dotted line. Here's the updated chart:

CBOE Equity Put/Call ratio:



As I've mentioned before and reiterated in the 12 September post, we may get the cross of the 5ma above the 10ma and that can be taken as a sell signal, but while these moving averges are below the blue dotted line, there is always a higher risk of false signals, so trade management must take that into account.

There are however, features that might provide some support for a sell signal here. 

First, while the market has risen, the moving averages have stayed within the pink channel, which is presently a smaller downward channel (bullish for the market) within a larger upward channel (bearish for the market). The pink channel looks like a bull flag which should break to the upside (which is bearish for the market). The black channel was broken, but that may just need to be re-drawn. Importantly, so far, the red channel remains intact.

Second, the 5ma has formed a double bottom - you'll see that the 5ma made a triple bottom in early August (see the last vertical red dotted line marking the 9 August market high) and we then saw quite a substantial decline in the market.

Third, there is good divergence in the McLellan Oscillator which made a lower high while the market moved to a higher high. We didn't have this on 10 September (you'll see that we did have such divergence coupled with a cross of the 5ma above the 10ma at the 9 August market high).

If the market has topped, we should see the 5ma cross above 10ma and both should move emphatically above the pink channel and the blue dotted line and, preferably above the mid-line of the red channel. If one or other of these does not happen, it should be considered as a warning that any down move may not be sustainable.

The S&P 500 percent of stocks above their 50ma was in an area where it could have signalled a market top when I last posted it on 12 September, but, as mentioned in that post, there was no sell signal at that time and the risk remained to the upside. 

Since then, it moved up further along with the 13ma (and the market). Its now close to giving a sell signal, but hasn't yet done so. Its reached the overbought area where market tops have occurred previously and has truned down, but hasn't yet crossed down through the 13ma:

S&P 500 Percent of Stocks above the 50ma:




Whereas on 12 September this was telling me to be on the lookout for a potential market top, I think it may now be saying to be on high alert. 

Of course, there's nothing wrong taking trades in anticipation of a sell signal being given here, based on other analysis (eg elliott wave counts or other technical indicators), as long as risk is managed appropriately - its feasible that this indicator could move up again and make a lower high, while the market moves up to a higher high - that has certainly happened at previous market tops. 

If you were only trading off this indicator however, you'd wait for the cross and,  in general, once it falls below the 13ma in this area, its been a fairly reliable sell signal. So, something to keep a close eye on.

The 60 min time and price chart that I last posted on 21 September is aligning well with the potential sell signals referred to above:

SPX 60 min time and price chart:




You can see we're right at one of the time cycle lines so, while not guaranteed, there should be a good chance of a turn around the area of this line. Certainly, the longer term time cycle posted on 15 September would be consistent with a turn here and what we're seeing in the internals and indicators suggests that the turn should be down. 

However, none of these cycles can be precise turning points on every occasion, so more upside remains feasible and a turn down right now shouldn't be considered as guaranteed. Price action needs to be watched closely because sometimes, all you get is a brief pause in the prior trend and the market then continues in its original direction  (currently up) into the next cycle line.

So, looking at price action, it does seem to be behaving like it may now be struggling to make further upside to the next price level at about 1156. Once it fell below the current price level yesterday, it wasn't able to get back above it. 

It also fell below the midline of the channel (the construction of which is explained in the earlier post). Its the first time its done that since the big rally that got it into the upper part of the channel on 1 September. Obviously, this may be a false breakdown, so a quick recovery back into the upper half of the channel would potentially be bullish and we'd have to be thinking that the next price level up may be on the cards. 

However, if it fails to recover the upper half of the channel, that's going to look bearish and will suggest that the lower line of the channel may be reached and that will then open up the possibility of a breakdown out of the channel altogether.

You'll see that I've added some red dotted horizontal lines to the chart. These are Gann based price levels assuming a top at 1148.59. The first one has already been reached (it coincided with prior peaks in the market so was bound to provide support).  The lower ones may be the initial targets to watch for if we have topped and areas where price may pause. If we're only correcting an overall uptrend these levels may mark potential turning points for such a correction. If we're now entering a larger downtrend, these levels should only provide temporary support.

As for the technical indicators, while the bearish divergences did manifest themselves in lower prices yesterday, I really want to see more bearish moves in these indicators to have confidence that we will be seeing at least a reasonable pullback in the market.

The RSI needs to break the 50 level and get to oversold with price declining. The CCI needs to get to below zero and towards the -100 level with price declining. The MACD needs to fall below zero with price declining. The stochastic has reached oversold, but without too much of a sell-off in the market. If we see a market decline today, I'd like to see this indicator fall further into oversold without recovering above the oversold line.

So, the way things are lining up suggests that a top for the rally from the August low may be very near, if not already in at 1148.56. This is consistent with the wave counts, even on the overall bullish case (see yesterday's end of day update). Now we just need price to confirm with follow through to the last two day's bearish candles with a significant deline that takes out some meaningful price levels  to the downside (the ones I'm watching for the moment are set out in that end of day update).