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!