Monday, 14 June 2010

23:59 BST - SPX Update - Option 2

Here's an update on one of the more bullish counts. This is Option 2 which shows a complete wave [i] down fron 1219.80 to 1040.78 and a correction in wave [ii] now going on. I would place us in wave (c) of [ii]:

60 min chart - Option :

As we're in a (c) wave, we need to see 5 waves up from 1042.17. On the count shown above, we have completed i of (c) at today's high and are now in ii of (c) which may be forming a zig zag or double zig zag. Here it is on a 3 min chart from the wave (b) low:

4 min chart - Option 2:

Its a bit ugly, but no uglier than any other impulse count off the 1042.17 low that I can dream up and less ugly also than several sets of ones and twos! 

But I like the channel that it forms and, if we are in ii of (c) now, I like how wave [B] of ii retested the broken channel and dropped away.

*NOTE* This count of 5 waves up from the 1042.17 low may also apply to the more bullish count, Option 5, which has us in minor A up from an (X) wave low. I also like it for the more bearish counts if I label them as a-b-c instead of w-x-y (eg the count in Option 1. Today's high would then be the end of c of (ii), quite possibly completing that correction).

20:33 SPX Update - Option 3

Here's the count that puts us still in wave [iv] of a leading diagonal down from 1219.80 (Option 3).

60 min chart:

And here's a close up from the wave [iii] low on a 3 min chart:

Again, it can count complete as a double zig zag, or wave (y) may still be in progress - we'd be in wave b of (y) at the moment, so a new high would be next.

All this has to do to remain valid is that wave [iv] has to be a zig zag type correction and the lines of the diagonal have to converge (the 60 min chart shows where they would be parallel). Currently, these requirements are met.

19:02 BST SPX Update

Here's a possible count for the remaining Option 1 bearish count which has us in wave (ii) of [iii]:

60 min chart showing the base channel for the [i],[ii] move which is currently contaiing the rally:

 And here's a close up on a 4 min chart from the wave x low:

 Its possible to count a complete complex correction from the 1040.78 low. Having said that, we have the unclosed gap between 1107 and 1115 just above, so there is always a risk that the count shown will put in another high before it is done. That would mean we're currently still in wave (4) of [C] at the moment. Really, I'd be looking at taking out the wave [B] of y low as possible confirmation of a wave (ii) top. Until them, there remains the draw of the gap above.  Having said that, you can see on the 60 min chart that the MACD histogram has been making lower lows on each higher high in price since the x wave low at 1042.17, suggesting that the rally is tiring.

16:32 BST SPX Update

Finally, one of the counts, Option 1 a has been eliminated with the move above 1105.67. That means that Option 1 b now comes into play, putting us still in (ii) of [iii]. The invalidation point for this count is 1173.57.


15:46 BST SPX Update

Well, SPX did have another high for us. It now looks like a better 5 up from the (B) wave low on the chart in the last post. We could still be in wave 4 of (C) and even if we have a complete 5 waves up, until we take out the wave (B) low, we could just have completed only a first wave up either on this or one of the more bullish counts.

15:10 BST SPX Update

If this correction (on the bearish Option 1 count) is over as marked on the chart below, we should see prices move swiftly back within the red correction channel (though there may be an extra leg up still to come to complete 5 up from the (B) of [Y] low):

Remember, as long as it stays below 1105.67, I'm looking at Option 1a. Above that, its Option 1 b.

11:38 BST - ES Update

Here's a possible count showing a potential top in wave ii of (iii) for the ES futures. It reflects the bearish count for SPX shown in Option 1 posted on 12 June.

ES 5 min chart:

Its not certain that there is a complete five up from the (B) of [Y] low - it could still be in iv of 5, so a further new high remains possible.

Of note, perhaps is the fact that the overnight action has taken ES right up to the upper correction channel line (with a brief break above it). 

11:21 BST - Andrew's Pitchfork

This chart may be worth watching. It shows the rally from March 2009 in SPX with the Andrew's Pitchfork overlayed.

SPX Arithmetic Scale Pitchfork:

I only have a basic understanding of this tool, but essentially, its usefulness seems to be in relation to a market that appears to be moving in a channel.

The basic lines are the median line and the x1 line - all in blue on the chart. I've added additional lines based on fib numbers, as identified on the chart.

I believe the theory is that in a trend, price should move to the median line of the fork and should gravitate around there while the trend is intact. Once price breaks the median line and fails to get back to it, that may signal the end of the trend. 

You can see on the chart how price 

1) reached the median line during April 2009;
2) broke above it at the start of May and found support there during May;
3) broke down through it in June but then broke back above it in July;
4) subsequently stayed above the median line until 22 January 2010;
5) again, recovered and traded back up through the median line until 27 April 2010;
6) rallied towards, but failed to quite reach, the median line on 29 April;
7) rallied following the 6 May crash, but failed to get anywhere near the median line;
8) declined below the lower x1 line of the fork following the rally into 12 May;
8) climbed back into the fork with the post 25 May rally; and
9) broke down through it again with the decline into 8 June.  

According to my rudimentary understanding, the early sign of the end of the trend came with the failure of the rally into 29 April to reach the median line. The next sign was the failure of the rally into 12 May to do so also. 

Having broken the lower line of the fork, price is now trying to get back into it again. I assume that a failure to recover it would be very bearish. Of course, there's nothing to stop it from starting a new up trend with the rally off the 8 June low and, therefore, creating a new fork within which it will channel. 

Well, as I said, I'm no expert on this tool and the above is just my interpretation of the picture shown on the chart. My primary focus will remain the Elliott Wave count - but I'll just keep an eye on this for future reference!