Monday, 11 October 2010

21:16 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.

The first chart is labelled as if Option 1 is playing out:

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

This diagonal could be complete at today's high.

Its also possible that today's high was only the end of wave iii of the diagonal, and we're now in wave iv. If we drop to the black dotted line in an assumed wave iv, this possibility is excluded.

The alternative to a diagonal from the 1131.87 low is that we're just seeing a straight impulse wave up from that low at 1131.87, with the low at 1151.41 being wave iv of (v). 

For this possibility, there are a number of ways to count the move up from the wave iv of (v) low at 1151.41. I've amended these from earlier to take into account today's action (this chart assumes that Option 3 is playing out):

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

The main labelling assumes that  this impulse topped at 1168.88 with wave v forming an ending diagonal.

The alternate count labelled is more bullish and assumes we're still in wave v of (v) which is subdividing. The diagonal that I've labelled from the 1151.41 low would be wave [1] of v. with wave [2] now in progress. I don't really like this alternative since its likely to mean a very large wave v compared to wave i. However, until we take out 1151.41, it remains on the table.

Finally the other possible way to count this which I mentioned in an intra day update last Thursday (but not shown on the charts) is that 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. If we've had a diagonal from 1151.41, that could be a leading diagonal for the first wave of wave iii. I still consider this count  to 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, many possibilities remain. I tend to favour the count in Chart 1 above, so there, I'm watching for the decline from the high at 1168.88 to drop to the black dotted line to exclude the possibility that 1168.88 was only wave iii in the diagonal.

After that, the key level I'm watching is 1151.41 to exclude the extending wave v shown by the alternate labels on Chart 2. Then I'll be watching 1131.87 to exclude the i-ii count from the 1131.87 low..