Tuesday, 21 September 2010

22:29 BST - SPX: 60 min time and price chart

This chart shows Gann based price levels from the 1040 low with a 4 day cycle and a channel with a lower line drawn through the first cross of the time and price lines after the start point of the channel at the 1039.70 low:

SPX 60 min time and price:

Its interesting how price has found resistance and support at these price levels and how, at the 1121 level it consolidated for so long right between two of the time cycle lines before this latest rally (see the yellow highlighted areas). 

The close today was right on one of those price levels. I've marked the next level up, which is at 1156 (the one after that is about 1173, but won't fit on the chart).

Its obviously well within the realms of possibility that the market could get to the next price level. I showed in the end of day update a possible count that has us still in wave (4) of [5] of an impulse up from the August low (see the fourth chart). Today's high would have been wave B of wave (4) which is forming an expanded flat on this alternate count. So, wave (5) of [5] would follow once wave C of (4) is complete.

As mentioned in the update, if that count is playing out, we'd have to stay above the wave (1) of [5] high at 1131.47 in wave (4). As long as we do that, the risk of a further high, possibly to the next price level shown on the above chart (or the next one at 1173), remains.

You can see from the chart how well price has moved within the upper half of the channel. So, a break down into the lower half may be an indication that the rally is over. A break down out of the channel altogether would probably confirm a top of some sort is in.

The next time line on the chart is tomorrow. This coincides with two cycles I showed last week which start from the March 2000 high - see that post here.

The RSI, MACD and MACD histogram show nice divergences. The MACD and its histogram show quite a large one going back to early September. The histogram and the RSI show nice divergences between yesterday's and today's highs. 

Its perfectly possible in light of this and the main wave counts shown, that the rally ended at today's high. However, if a top is in, we need to see the indicators move to bearish levels with a decline in price. Anything less than that (for example, the indicators fall away but price is only moving sideways) should be considered as a warning that further upside may be coming.