Friday, 3 September 2010

21:41 BST - SPX End of Day Update

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

If you look at the update I posted today 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 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 complete 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.

Today's action eliminated one more bearish count, leaving the following ones intact: 

Chart 1: SPX 1 min -  i-ii down from 1129.24:

On this count, we're retracing the decline from 1129.24. So far, we've retraced just over 70.7% of that decline. If there is further to go, the 78.6% at about 1110 may be a target.

This 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 i:

Chart 2: SPX 1 min from the 1039.70 low:

It looks like we are about to complete those 5 waves up from 1040.88.

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

Chart 3: SPX 1 min - from the 1105.10 high:

On this chart, the count for a high above 1105.10 is shown as the alternative on the chart I was using in earlier posts to show a possible top at 1105.10, but that seems unlikely with the move up we saw in the last few minutes of trading.

Assuming that we're in the last leg up to complete wave [C] of ii, you'll see from the note that wave v of 5 of (5) of [C] may be in the process of extending. 

The other possibility is that it may be forming an ending diagonal. If so, and assuming we started the 3rd wave of the diagonal at 1102.40, that 3rd wave must stay below 1106.24 otherwise the 3rd wave will be longer than the 1st, in breach of the rules for contracting diagonals. It would then become more likely that wave v of 5 is extending.

Once we complete wave ii, we would expect to see strong implusive moves to the downside - behaviour consistent with a 3rd wave decline. Anything less would have to be taken as a warning that this bearish count is not playing out and that the decline is simply part of a corrective move within one of the bullish counts.

The other bearish count that has survived this week 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:

As I've said in previous end of day updates, 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,  we may be on the verge of completing this too.

The 61.8% retracement level for this count is at about 1106. The count shown in chart 3 above for the move up from 1094.99 would also apply here and if the final leg is taking the form of an ending diagonal, the 1106 level may well be met. If the last leg up is extending, it feasible that the 78.6% level at about 1116 could be reached.

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

So,with another bearish count  invalidated today, the levels to watch are now as follows:

1) for both remaining bearish counts, we have to stay below the high at 1129.24;

2) 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 today  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.

Have a great weekend!