Wednesday, 1 September 2010

21:17 BST - SPX End of Day Update

The action today has eliminated two of the bearish counts that I've been following, as explained in the intra day updates today. I'll deal with the remaining bearish counts below. The bullish counts were updated in my earlier post which you can read by clicking here.

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

So, here is the position on the remaining bearish counts: 

Chart 1 - SPX 1 min: from 1129.24, i-ii-[1] or wave i down:

The main count on this chart shows a subdividing wave iii down and puts us currently in wave [2] of iii.  I've placed the wave [1] of iii low at 1039.70 and labelled an (A)-(B)-(C) correction for wave [2] (I've dropped the (W)-(X)-(Y) option shown in the last update today given the new high above 1080). If that's correct, wave [2] could be almost done at today's high. We've retraced just over 61.8% of wave [1], and that's a good level for a wave [2] retracement.

If I put the wave 4 of (C) low at 1076.22, I can count 5 waves up to the high at 1081.30. However, if the wave 4 of (C) low is at 1076.20, it looks like another wave up is needed to make 5 waves. However, if we take out the high at 1078.59 (which I would count as the 1st wave within wave 5 of (C)) before making a new high, that could be good reason to think that wave 5 of (C) is complete (but be warned, that high at 1081.30 could then just be part of a continuing wave 4). I also wouldn't rule out the possibility that the current wave is only the 1st wave of 5 of (C). This could be ruled out if we take out 1076.22, assuming that's the wave 4 of (C) low.

This main count is invalidated if we take out the wave ii high at 1100.14.

The alternate count shown on chart 1 has us only having completed wave i down, so puts us now in wave ii up. We'd be retracing the entire decline from 1129.24, so the upside on this count could be a bit more than on the main count. A 50% retracement would be about 1084, 61.8% would be about 1095 and 78.6% would be about 1110.

This alternate count would be invalidated if we take out the high at 1129.24.

Here's the close up showing the decline from the wave ii high at 1100.14:

Chart 2: SPX 1 min - from the 1100.14 high:

As mentioned above, I've labelled the move up from the 27 August low as  an (A)-(B)-(C) correction. If wave (C) is not yet complete, the next fibonacci retracement level to look at is the 70.7 level at about 1082.50 and then the 78.6% retracement level which is at about 1087.

Here's a closer look at today's action with an update of the chart I posted earlier, showing the move off the 1039.70 low I have as wave [1] of iii or wave i:

Chart 3: SPX 1 min close up:

The third bearish count has wave i down from 1129.24 complete at the low of 1069.49 and places us currently in wave ii which is taking the form of an expanded flat. Here's the chart:

Chart 4: SPX 1 min - wave i at 1069.49, wave ii expanded flat:

I don't particularly like this count, but its valid and if its correctly labelled, we need to see 5 waves up from the low marked [B] at 1039.70. As you can see from the chart, there seem to be a few more waves necessary to achieve that. Its quite possible on this count that it could reach the 61.8% retracement level at about 1107. But equally, it could fall short - if it failed to get above the wave [A] high at 1100.14, it would be a running flat rather than an expanded flat.

This count would be invalidated if we exceed the high at 1129.24.

So, thankfully, the market has eliminated two of the bearish counts that I was following. That still leaves these three for the bear case,  plus the bullish counts which I updated earlier (click here to see that update). Still, as before, the elliott wave logic arising from each count can be used to identify when a count can be eliminated from consideration. Currently, the levels to watch are as follows:

1) for the main count shown on chart 1, the  i-ii-[1]-[2] down from 1129.24, we have to stay below the wave ii high at 1100.14, otherwise, that count is invalidated;

2) if we take out that 1100.14 high, then, for the bear case,  we may be in  the alternate count shown on chart 1, which counts the completion of wave i down from the 1129.24 high, or in the expanded flat for wave ii shown on chart 4, or one of the more bullish counts shown in the update posted earlier (see here).

3) if we take out 1129.14, that will eliminate those two remaining bearish counts for the move down from that high and will focus attention on the bullish counts. The first bullish count shown in the update posted earlier on  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.