Friday, 18 June 2010

22:13 BST - SPX Update

Well, that was a whole lot of nothing after the initial rally and decline back down.

It still leaves alot of options on the table. Looking at the action since the 1118.74 high here are some ways to label it in relation to the 5 counts that I have on the larger time frames:

1) Today's high at 1121.01 was the end of a 5th wave. 

This has different implications for the 5 counts, but on counts 1, 3 and 4 it would be very bearish (well, only near term bearish on count 4). 

On count 1 it would be the end of a wave (ii) of [iii] correction, meaning we would now be starting wave [iii] down.

On count 3, it would be the end of wave [iv] in a leading diagonal and we would now be starting wave [v] down.

On count 4, it would be the end of a [b] wave in a zig zag wave Y so we would now be starting wave [c] down (this one might not be as bearish as the other two, but it has the potential to be).

On count 2, it might be the end of the first wave within wave (c) of [ii], so near term, we'd expect a wave ii correction down before further rallies. However, its possible it could be the whole of wave (c) of [ii] and, therefore, very bearish. Its only retraced just over 38.2% of wave [i], but its at resistance and if we really are back in a big bear market, wave [ii] may only be capable of a 38.2% retrace.

On count 5 it would be the end of wave [5] of iii within (i) of [iii] up.

Here are a couple of ways to count the action as the end of a 5th wave at today's high:

5th wave up complete, wave [1] down complete, wave [2] still in progress:

SPX 2 min chart:

(Its possible that today's high on this count was just [1] of v up. That would be ruled out if we take out the low marked iv at 1105.87).

5th wave up complete, waves [1], [2] and (1) complete, currently in wave (2) of [3]:

SPX 1 min chart:

This would be invaildated above 1118.53. In that case, wave [2] may still be in progress.

(Its possible on this count that today's high was only wave [1] of v up. That would be invalidated with a drop below 1106.85)

2) Today's high was simply part of a 5th wave. 

This would not be appropriate for count 3 since it would likely mean that wave [iv] of the assumed leading diagonal would be too large and create parallel instead of converging lines, therefore invalidating the pattern.

For counts 1 and 4, its feasible, though in both cases the 1173.57 high would be the limit for any further rally.

For count 2, it would be fine, especially if we are in a sub-minuette rally for (c) rather than a micro degree rally.

For count 5, it would be perfectly reasonable and in keeping with the very bullish nature of that count.

Here are a couple of ways to count the action on this basis:

A [1],[2],(1),(2) up:

SPX 1 min chart:

This would be invalidated below 1113.93.

A leading diagonal wave [1] up to today's high, possibly still in a wave [2] correction:

SPX 1 min chart:

On this count, we might see a deeper wave [2] correction, in keeping with what is supposed to happen after a diagonal completes. 

So, as with the longer time frames, even on these smaller time frames, there remain various option. we just have to watch the important levels. for each of the possibilities.  If we completed 5 waves up at today's high, then 1121.01 shouldn't be taken out if we are in counts 1,3 or 4 or, on count 2, if it represents the end of wave (c) of [ii]. If we're in a [1],[2],(1),(2) up, we can't drop below 1113.93. If we completed a leading diagonal at today's high for wave [1] of v up, we can't take out 1106.85 (other levels are mentioned above).

Have a good weekend!

19:56 BST - SPX Update

In addition to the two ways to count the action since the high at 1118.74 that I showed earlier, here's another possibility, a leading diagonal to complete wave [1] of v. 

The wave [2] may still be in progress so may not necessarily be where I have the label. The action since that point hasn't been very impulsive looking, suggesting its still in a correction, but these things have a way of morphing into impulses.

Its also possible that the move up from iv is the whole of v and, therefore, an ending diagonal. We'd have to take out the wave iv low to prove this though.

SPX 1 min chart:

18:18 BST SPX Update

Something to keep an eye on here perhaps - a possible head and shoulders (height is about 7 points):

SPX 1 min chart:

16:11 BST - SPX Update

With the new highs above 1118.74, focus now switches to the two moderately to very bullish counts shown in last night's update. So, for all of the Options 1 to 5, the 1118.74 high was a 3rd wave. Yesterday was a 4th wave.

Here is how the two counts from last night look currently (showing the picture from the high at 1118.74):

The more bearish count:

2 min chart:

It might look odd, but the wave I have as [3] is about 1.618 x wave [1]. To think this is working out, I'd like to see the low marked iv taken out - that's 1105.87.  

Of course, this count could actually be very bullish also, putting us in what could be  an extending 3rd wave. Taking out today's low at 1113.93 would invalidate that possibility but the risk of an extending 3rd wave wouldn't really be excluded altogether until we take out the low marked [2].

The more bullish count:

1 min chart:

Probably a lot more upside left on this count and it fits well with the two most bullish Options, 2 and 5.

11:05 BST - ES Update

All five counts that I'm following for SPX remain on the table and will probably do so for some time. 

Last night I zoomed in on the action from the high in SPX of 1118.74, showing some ways to count it. One would be almost immediately bearish and applicable to Options 1,3 and 4 in particular.  The other two would require at least one more higher high above 1118.74 even on those three options (which are the most bearish of the five, though option 4 is only near term bearish). 

Looking at the futures this morning, I have them labelled in accordance with Option 1, showing a wave x low on 8 June and therefore, requiring an [A]-[B]-[C] advance for wave y, to complete wave (ii) of [iii].

As with SPX,  it seems possible to count them as either completing  wave y at yesterday's overnight high (so far, SPX made its high the previous day) or as requiring one more leg up to complete (5) of [C] of y.

Here's a 5 min chart showing the immediately bearish count and the alternative:

ES 5 min chart:

And here's a close up look to show how the drop from the high might count as 5 waves down for wave [1] for the start of minute wave [iii] down:

ES 2 min chart:

Obviously, the labelleing of wave [2] is entirely speculative at the moment and it may have to be moved if this count survives. In order to survive, it must stay below the high marked [5] (see the red line). If that is taken out then the focus must switch to the alternative count. So, the line in the sand for the immediately bearish case is not very far overhead. It could easily be negated prior to the cash open - futures have been very volatile this morning, albeit within a small range, and its quadruple witching.