Wednesday, 6 October 2010

21:18 BST - SPX End of Day Update

On the 3 Options set out on the 60 min counts page, I've been  looking for the end of 5 waves up from the August low  to mark the end of minor 2 (or (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 stayed below the high of 1162.76, so that high remains a potential top for the rally from the August low.

However, we haven't yet seen a clear 5 wave impulsive decline from that high, taking out any significant levels so the risk of further upside continues.

You can see the bigger picture into which the following chart fits 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 following chart is labelled as if Option 1 is playing out and zooms in on the action from the wave (iii) of [c] high at 1157.16. Its updated from the earlier posts to take account of subsequent price action:

SPX 1 min - 5 waves up from the August low, close up:

I've labelled it as if we've compled 5 waves up from the August low. Its tentative at the moment because, as explained in the intra day updates, we haven't seen anything yet to enable us to have any great confidence that a top is in. 

The 3 waves down from the high that we've seen so far could be wave [4]  or iv (on this or some variation of this count). The diagonal I've sketched in from today's low for wave a of 2 could be the start of wave [5] or v up. We need to take out the low at 1154.85 to preclude that. The (1)-(2)-1-2 that I've labelled will be invalidated if we move above the high at 1161.75 in an assumed wave 2. If that happens, the likelihood of a new high will be signifcantly increased.

As I said yesterday, to really start thinking that we've seen a top of some sort (what it represent will depend on which Option is playing out), we need to see an impulsive 5 wave decline that takes out a pivot that would enable us to eliminate the bullish possibilities. On the count I've labelled, the two levels I'm continuing to watch are 1152.50 and 1149.21.

I'm watching these levels because on the labelling I have,  its possible that the high I've labelled as wave iii at 1152.50 is only wave [1] of iii (and the high at 1162.76 would be wave [3] of iii). If we take out that high in an assumed wave [4] of iii, that possibility will be ruled out. I'd then want to see the low at 1149.21 which I've labelled as wave iv get taken out to preclude the possibility that wave v might extend.

Of course, taking out those levels doesn't preclude further upside, because on the bigger picture, there are levels lower down that need to be taken out if we have seen the end of 5 waves up from the August low. The first of those will be the low labelled as wave (iv) at 1131.87 (to preclude the possibility that wave (v) is extending).

So, the levels I'm watching for now are 1161.75, 1152.50 and 1149.21.  Taking out 1161.75 reduces the likelihood that we've seen a top and we'll probably go on to take out the high at 1162.76. Taking out 1152.50 and then 1149.21 will greatly increase confidence that a top is in at 1162.76.