Friday, 8 October 2010

21:13 BST - SPX End of day Update

On the 3 Options set out on the 60 min counts page, I'm still waiting for the end of 5 waves up from the August low  to mark the end of minor 2 (or, now less likely, (i) of [c] of 2) on Option 1, the end of wave X on Option 2 or the end of wave [i] of C (or (i) of [iii] of A) on Option 3.

We made another new high for the rally from the August low, but the question remains whether that new high is the end of the rally from that low or whether there is still more upside to come.

You can see the bigger picture into which the following charts fit by going to the 60 min counts page where you'll find the 3 Options I'm following for the move down from the April 2010 high.

These charts are labelled as if Option 3 is playing out:

Chart 1: SPX 1 min - 5 waves up from the August low with a possible ending diagonal for wave (v): 

This is the chart I posted intra day showing a possible ending diagonal for wave (v). It could be complete at today's high, or that high may only have been wave iii. If we decline to the black dotted line, then I'd count the diagonal as complete. 

The question then will be whether or not it was a diagonal or whether we're seeing the development of ones and twos in a more bullish move up. Taking out the low at 1151.41 would make me start to think that it was a diagonal, but it wouldn't be conclusive - we'd have to take out the low at 1131.87 to get confirmation.

The other possibility is that we're just seeing a straight impulse wave up from the wave (iv) low at 1131.87, with the low at 1151.41 being wave iv of (v).This is shown in the close up chart I've been posting. For this possibility, there are a number of ways to count the move up from the wave iv of (v) low at 1151.41 as you can see from the chart below:

Chart 2: SPX 1 min - 5 waves up from August low with wave v of (v) starting at 1151.41:

The main labelling assumes we're on the verge of completing wave v of (v) if we haven't already done so. The alternate count labelled is more bullish and assumes we're still in wave [3] of v of (v). If we were to take out 1161.60 at this stage, the main labelling would become the more likely, although I'd then like to see 1155.58 get taken out very quickly after that in order to avoid the possibility that wave (2) has formed a very complex expanded flat type of correction (this seems unlikely at this stage, in my view).

If we can take out those two levels, I would then want to see a swift move to below 1151.41 and then, of course, 1131.87 would be the real focus.

Don't forget the other possible way to count this which I mentioned in an intra day update yesterday -  the high at 1163.87 may have been wave i of (v) and the decline we saw from there to 1151.41 was wave ii. This would mean a potentially substantial rally coming in wave iii. I'm still thinking this count would be low probability since wave ii  would only be a 38.2% retracement of the rally from 1131.87, which is perhaps rather shallow for a 2nd wave, but also because it might make wave (v) somewhat out of proportion to wave (i) in the rally from the August low. However, we'll have to see how price action develops. Only taking out the 1131.87 low would eliminate this.

So, the levels on my radar after today'a action are 1161.60, 1155.58, 1151.41. If we can take those out, the odds increase that a top for the rally from the August low is in. However, this won't be confirmed until we take out 1131.87 on the counts as I have them labelled.

Have a great weekend!