Thursday, 9 September 2010

20:54 BST - SPX - Update on the bullish counts

If we've completed 5 waves up from the August lows, on the bullish counts, we'd now be looking for at least a 4th wave pullback or a potentially deeper 2nd wave decline, depending on where you start the count for those 5 waves. The two possibilities are shown on the 60 min charts below which set out the labelling for the three bullish counts I'm following:

Chart 1: SPX 60 min - zig zag up from July low:

This chart shows wave iii of (i) complete at today's high and now puts us in wave iv of (i). Even on this chart, with wave i of (i) starting at the low at 1039.70, its possible that wave (i) completed at today's high and so we'd now be in a wave (ii) retracement. (see the 1 min chart below).  The difference is that the latter would likely retrace more of the prior up move than the former. 

For the moment, I've assumed on this chart that we're in wave iv down with a possible target at about 1083, the 38.2% retracement. So, I'd be on the look out for a 3 wave move ending in that area. 

If we are in wave iv on this count, its possible that the degree labels are one degree too low and that I should be labelling the move up from the August low as waves (i)-(ii)-(iii) and (iv) of [c] so that once we get wave (v), wave [c] would be completed and it would also be the end of minor 2 up. Certainly, if we take out 1129.24 in the 5th wave that I'm looking for on this count following the 4th wave correction, it'll be something to consider - but it would have to be confirmed by wave action, ie movement consistent with a minor wave 3 down.

Chart 2: SPX 60 min - first bullish alternate under Option 4 on the 60 min counts page: impulse up from 1010.91:

On this and the following chart, I've labelled 5 waves up from the low at 1040.88, which is where wave i and (i) on these charts started. So, on this and the following chart, I'd be looking for a 3 wave decline ending around the 50% to 61.8% retracement levels between 1075 and 1067.

For this and the following count, we have to stay above 1040.88 otherwise the labelling shown is invalid and would mean that we did not start the next waves up on these counts. However, they aren't technically invalidated completely until we take out 1010.91. Until then, we could simply still be completing their corrective waves down before starting the next leg up. 

Chart 3: SPX 60 min - second bullish alternate under Option 4 on the 60 min counts page: leading diagonal up from 1010.91:

Here's a closer look at the count on chart 1 above from the August low:

SPX 1 min - wave [c] of a zig zag from 1010.91 underway:

So, the main count on this chart is that we're in wave iv down, probably to around the 1083 area. I've labelled today's decline as wave [A] of iv, but this may need adjustment as the wave develops. 

As mentioned above and as shown by the alternate labels, it may be that we topped in wave v and (i) today (this would be in line with the labelling I showed on this chart in yesterday's end of day update), in which case, the retracement could be deeper, but I'll just wait and see what sort of move down we get - 3 waves into 1083 with a clear reversal back up would start to favour this count.

If we're in wave iv, we have to stay above the wave i high at 1065.21. If it goes below that then I'll switch to the alternate labelling.

On this count, we have to stay above 1039.70 in order not to invalidate the labelling that has us moving up in wave [c] of minor 2. Taking out that low wouldn't invalidate the overall count - that would only happen if we take out 1010.91. However, it would weaken it considerably in my view.