Monday, 13 September 2010

18:38 BST - SPX update: Daily time and price chart and 60 min divergences

Well, we're certainly getting a reaction at the point where the time and price chart suggested a potential turn might occur. Here's the daily:

SPX daily time and price chart:

Obviously, we'll have to wait for the close of the daily bar to see whether or not it holds for today. All we can say at the moment is that it looks good for a reversal of some sort as we've hit a time and price target and the upper line of the channel on the time and price grid that price has moved within since the August lows (its obviously not a traditional technical analysis channel, but you can see that these grid channels have, in the past, been influential on price movement within the grid, both up and down - see the red, purple and black channels made up from the grid lines).

It may be of note that the level we've reached, 1123.87, is also within the range of a gann price level measured off the 1010.91 low. That level is about 1125. So, a confluence of these square root based price levels.

Here's the 60 min chart to show the divergences that have continued from when I posted the 60 min time and price chart showing them on Thursday:

SPX 60 min:

You'll see from the notes on the chart that despite the divergences, we need to see more in order to have more confidence in the bear case. 

Ultimately, price action must confirm a bearish interpretation of the wave count and that too hasn't yet done quite enough to confirm a bearish view. Its made a good start, but at the moment, at first glance, the decline from today's high looks like a (1)-(2)-1-2-3-4 (ignore the degrees, its just for illustration), so not quite 5 clear waves down.

Even if we see 5 waves down, it could still be part of a correction before a further push up (see the counts shown in the other charts posted today). So, with 5 waves down, we really also need to take out some meaningful price levels. 

For example, taking out 1110.27 would provide good reason to conclude that we're not seeing 5 waves up from 1101.53 (see the close up of the zig zag count posted earlier). That would be fine since I can label wave iv as a small triangle ending at the 1108.56 low, followed by a large ending diagonal up from there.

Taking out 1101.53 would suggest that the ending diagonal shown in the updates on the [i]-[ii]-i-ii count posted earlier is invalid, leaving the complete [W]-[X]-[Y] wave ii complete at today's high.

So, while the daily time and price chart may suggest a turn is likely in this area, we haven't yet seen price confirm a turn down or that any such turn down means that a significant top is in. More clearly impulsive downward movement and the breaking of significant price levels as described above would provide more confidence in a bearish view.