Thursday, 2 September 2010

21:25 BST - SPX End of Day Update

For both bullish and bearish counts, I'm looking for 5 waves up from the low at 1040.88 which occurred on 31 August. 

If you look at my last update on the bullish counts (you can read 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 charts 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 be all or part of a 2nd wave correction in an overall downtrend.

The counts I show below on the charts of the bearish counts for a 5 wave move up from 1040.88 apply also to the bullish counts.

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 bearish counts following today's action: 

Chart 1: SPX 1 min - i-ii-[1]-[2] or wave i down from 1129.24:

The main count on this chart shows a subdividing wave iii down and puts us close to the end of wave [2] of iii.  As mentioned in the intraday updates, we've retraced about 78.6% of wave [1]. Wave 5 of (C) is about equal to  wave 1 of (C). Its not a bad point for wave [2] to end.

However, as mentioned in the intraday updates, if I put the wave 4 of (C) low at 1076.22, we may well only have completed wave i of 5 of (C) up today, and started wave iii of 5 of (C).

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. We've already exceeded the 50% retracement which was at 1084. If this count is playing out, the next levels to look at would probably be the, 61.8% at about 1095 and 78.6% at about 1110.

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

Here's a closer look at today's action showing the move off the 1039.70 low I have as wave [1] of iii (or wave i on the alternate count shown on chart 1 above):

Chart 2: SPX 1 min close up:

I've shown a possible count that completes wave 5 of (C), but I'm not convinced its correct. I'd have to see an immediate impulsive drop tomorrow that at least takes out 1082.72 in order to start thinking that a top might be in.

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

As I said in yesterday's end of day update, 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,  if we have seen the completion of 5 waves up from the 1040.88 low to complete wave (3), we still need a dip in wave (4) and a further high in wave (5) to complete wave [C] on this count. 

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, no counts were invalidated today, either bullish or bearish and therefore,  the levels to watch remain as set out yesterday: 

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 3, or one of the more bullish counts shown in the update posted yesterday (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 yesterday  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.