Thursday, 14 October 2010

21:07 BST - SPX End of Day Update

The counts shown in yesterday's end of day update anticipated a continuation of the decline from 1184.38 that had started in the latter part of yesterday's session, whether on the bullish or bearish count. On the bullish count it was wave [4] of v and on the bearish count it was part of an impulse wave down.

Today's action fulfilled that expectation and, in the process, the main bullish count was invalidated with the move below 1168.68. However, the alternative bullish count that I had mentioned remains.

The following charts are close ups of the action from the 1131.87 low. You can see the larger context of the following charts on the 60 min counts page.

Here's the surviving bullish count which I've labelled as if Option 3 on the 60 min counts page is playing out:

Chart 1: SPX 1 min - bullish count:

On this labelling, taking out 1155.71 would invalidate the count, since wave (2) of [3] can't drop below that low. If we were to take out that low,  the bearish count would become the focus, making 1184.38 the end of the rally from the August low. 

Of course, what that means depends on which Option shown on the 60 min counts page is playing out, because it could just be a temporary top prior to more significant upside.

Here's the bearish count which is labelled as if Option 1 on the 60 min counts page is playing out:

Chart 2 : SPX 1 min - ending diagonal from the August low complete at 1184.38:

I've switched back to the impulse wave off the high at 1184.38 since we didn't see a retracement deep enough to be considered as wave [2] following the diagonal I had labelled earlier.

As you can see, I've shown a complete wave [1] down, meaning we'd now be in wave [2] up. A likely retracement level might be the 61.8% area at about 1178, but watch also the 78.6% level at about 1180 and the 50% level at about 1175.

The critical level for this count is the high at 1184.38. If we take that out then I'd have to assume that the bullish count is playing out.

So, I'm watching two levels after today's action: 1184.38 and 1155.71. Taking out the former eliminates the bearish count while taking out the latter eliminates the bullish count.