Tuesday, 12 October 2010

21:11 BST - SPX End of day Update

With the further new high for the rally from the August low, the main bearish count is now the diagonal from that low that I showed in my last post. Here it is updated to today's close:

Chart 1: SPX 60 min - diagonal from August low:

This would be an ending or leading diagonal, depending on which of the bigger picture options is in play (as to which, see the 60 min counts page - the chart above assumes its Option 3).

Here's a close up of Chart 1 from the wave (ii) low (its labelled as if Option 1 is playing out):

SPX 1 min - close up of diagonal from August low:

As mentioned in the earlier post, the limit for wave (v) is 1192.52 because wave (v) must be shorter than wave (iii).

On this labelling, taking out 1155.71 would suggest that the diagonal is complete, but an earlier indication might be taking out the b of wave (v) low at 1162.55. Its possible that wave (v) should be labelled as a w-x-y complete at today's high (or with one more high to come) and taking out the low I've labelled as wave b would probably confirm that.

Here's the more bullish count which has us in a subdividing wave v of (v):

SPX 1 min - impulse up from the August low:

Taking out 1155.71 at this stage would make this count unlikely unless wave [2] can still be considered to be in progress. Really, on this count, the low at 1151.41 needs to be taken out to eliminate it. 

I've noted that wave v may be forming a diagonal - if today's high was wave [3], it was just shorter than wave [1], so this remains a valid possibility. I've drawn in the lines for the diagonal. If we're in wave [4], we need to stay above the dotted blue line if a diagonal is playing out.

However, remember the much more bullish possibility I have been mentioning over the last several days, that the high at 1163.87 was wave i of (v) and the low at 1151.41 is wave ii, which puts us now in wave iii of (v). We'd really have to take out 1131.87 to eliminate this, but taking out 1151.41 at this stage would probably render this count less likely.

So, the levels I'm watching are 1162.55, 1155.71 and 1151.41.