Wednesday, 27 October 2010

11:47 BST - SPX Update - revised bullish count

I've been saying for the last few days that I don't really like the bullish count that I've been showing where the 5th wave of the rally from the August low is subdividing. So, I've come up with a new bullish count which I prefer and which I'll be following instead.

Here it is on a 60 min chart which zooms in on the rally from the August low:

SPX 60 min - new bullish count:

As you can see, it puts us in an extending wave (iii), which incorporates an extended wave iii and which is forming in a nice channel. 

At the moment, the count places us possible at the start of wave v of (iii), though as noted on the chart, wave iv may still be in progress if its forming a triangle instead of what looks like a completed running correction.

The triangle possibility for wave iv would be off the table if we take out the low at 1171.17 which I would consider to be the [A] wave if a triangle is in progress.

There is a slightly less bullish way to count this, which would make the high at 1189.43 wave (iii) and the low at 1177.72 wave (iv), so leaving only wave (v) up to come. I've labelled it on the close up chart:

SPX 1 min - new bullish count close up from the 1184.38 high:

With this count, the obvious invalidation points are well below where we are currently: if we're in wave iv of (iii) then it can't drop below 1105.10 (the wave i of (iii) high) and if we're in wave (iv) of [i] then it can't drop below 1065.21 (the wave (i) of [i] high). Therefore, for earlier clues, I'd be relying on wave behaviour to suggest that this count may not be playing out. By that I mean, of course, a significant 5 wave decline that has undoubtedly impulsive characteristics - something that we simply haven't seen since this rally started at the end of August, so hopefully, it should be easy to recognise when it does happen.

Until we see that, then I'd assume that further upside remains.