Thursday, 9 September 2010

21:10 BST - SPX End of Day Update

For both bullish and bearish counts, I was looking for 5 waves up from the 31 August low at 1040.88. 

If you look at the update I posted earlier  on the bullish counts (you can read it by clicking here), you'll see that for the count shown in chart 1 in that update, it would be wave iii of (i) of [c] in a zig zag. For the count shown in chart 2, it would be wave (i) of [iii] up and for the count shown in chart 3, it would be wave [i] of C up.

On the bearish counts, 5 waves up from 1040.88 would complete a 2nd wave correction in an overall downtrend.

For the bigger picture on those bullish counts and the bearish counts set out below, please refer to the 60 min counts page.

You'll see from the update on the bullish counts that I posted earlier that its possible that we have now seen 5 waves up from the 1040.88 low. and I explained in that update what that means in the context of those bullish counts. 

In this update I'll only show that move in the context of the bearish counts.

Chart 1: SPX 1 min - [i]-[ii]- i-ii down from the 1129.24 high:

I've labelled 5 waves up from 1040.88 as complete at 1110.27, which would be the end of the wave ii correction.

However, on the labelling shown, I'd feel a bit more confident about this if we were to take out the low of the wave (4) triangle at 1097.23. Assuming wave (4) is correctly labelled as a triangle, that would preclude the possibility that wave (5) is subdividing.

Here's a closer look, zooming in on the move from the 1105.10 high:

Chart 2: SPX 1 min - from the 1105.10 high: 

You can see the count for 5 waves down from the 1110.27 high (I explained the truncated 5th wave in wave (5) of [C] in my earlier update). So I now have us in wave (2) up. Obviously, wave (2) can't take out the start of wave (1) at 1109.92, otherwise, this count is invalidated. 
If this labelling is correct, once wave (2) is complete, we should see a clear impulsive move to the downside in wave (3). If we don't see that sort of wave behaviour, it would raise questions as to whether or not this count is playing out.

So, putting together the bullish and bearish counts, the levels I'm watching are as follows:

1) for the bearish counts, we need to stay below the high at 1109.92. If that goes, it will mean that wave ii is extending higher. We'd then have to stay below the high at 1129.24 otherwise the [i]-[ii]-i-ii count will be invalidated (it could still be a [i]-[ii], however, as explained on the 60 min counts page);

2) if we take out 1129.24, that will focus attention on the bullish counts. The first bullish count shown in the update posted earlier  is bearish once wave [c] of 2 completes. If that count is in play, we would need to see impulsive downside action once wave [c] and 2 end, otherwise, focus will have to switch to the bullish counts under Option 4;

3) taking out 1097.23 before we make a new high will improve the chances of the bearish count.  However, it wouldn't be conclusive that the bearish counts are playing out since the bullish counts can easily accommodate a fall below that level in the corrective waves that they would now be in;

4) taking out 1065.21 will reduce the odds that the bullish count shown on chart 1 in the update I posted earlier is playing out;

5) taking out 1039.70  will eliminate the bullish counts as labelled. Until we take out 1010.91, however, there would still be a possibility that they are in continuing downward corrections, so didn't start their respective bullish moves at the 1040.88/1039.70 lows, but it might then be considered low probability and my focus would switch to the bearish counts.