Monday, 21 June 2010

22:07 BST - SPX Update

Quite the reversal today, but there's still no certainty that we have seen an important top yet.

From today's high, we have three waves down. It could be a 1-2-3 or it could be an A-B-C.

Referring back to the various counts I am watching (see the 60 min charts here), the most bearish ones are Options 1, 3 and 4. Here are the short term charts for each: 

Option 1 has us completing wave (ii) of [iii] down. We've retraced over 61.8% of wave (i), so its feasible that today's high was the end of wave (ii) and the decline is the start of wave (iii) of [iii] down:

Option 1 - 6 min chart:

Option  3,  has us completing wave [iv] of a leading diagonal. Here, there is a reasonable count of a double zig zag from the 8 June low. It could go higher, but not too much since the lines of the diagonal have to be converging:

Option 3 - 5 min chart:

Option 4,  has us completing wave [b] of a second zig zag minor Y wave. This too, could go higher, but its limit will be 1173.57. As it is, it counts nicely as a zig zag up from 8 June to complete (y) of [b]:

Option 4 - 15 min chart:

Option 2 has us in wave (c) of [ii] up. It could be immediately bearish like the three counts above, or, its possible that the rally from 8 June has only been wave i of (c) (not the whole of (c)). If its only i of (c), then today's three wave decline from the high may only be all or part of a wave ii correction before we rally higher. Even if we make 5 waves down tomorrow, until we take out the 8 June low, this is the upside risk on this count:

 Option 2 - 5 min chart:

Option 5 is the most bullish count. On this count, today's high would be the end of wave iii of (i) of [iii] up within minor A. The decline from today's high could well be all (or part) of wave iv - its retraced back down to the lower line of the elliott channel and its between a 23.6% and 38.2% retracement of wave iii:

Option 5 - 8 min chart:

So, despite today's bearish looking reversal, there remain bullish counts on the table. The low at 1042.17 is the key level for those bullish counts, so until we take out that level, they remain valid. Even on the bearish counts (Options 1, 3 and 4), we could still be in a subdividing 5th wave up, as I showed in this chart posted earlier today, and that possibility stands until we take out 1105.87.

20:15 BST - SPX Update

Well, two bullish counts have become invalid. I still have this one until 1105.87 is taken out:

SPX 1 min chart:

19:09 BST - SPX Update

Here's a bullish count for SPX. It needs to stay above 1115.15 or, if this decline is wave [4], it needs to stay above 1117.77:

SPX 1 min chart:

18:47 BST - SPX Update

Here's an update on the SPX chart I posted before the open suggesting a possible count that could mean an important top on a new high today:

SPX 2 min chart:

I don't know if this count is correct, but the action today does now look on the bearish side. The levels I mentioned in the earlier post are still intact so far, so at this time, the bearish count is not definite.

18:29 BST - Dollar Update

Here's the 60 min chart of the dollar index, which I've overlaid with esignal's effort at ichimoku (unfortunately, the cloud doesn't extend into the future as its supposed to, but the other components are fine):

Dollar 60 min chart with ichimoku overlay:

You can see that we may have the first sign of a trend change. Referring back to my weekend post on ichimoku charts, you can see that the lagging line (green), which lags by 26 periods, can  has moved above price and price is above the turning (blue) and standard (red) lines. We now need to see the lagging line stay above price on any pullback in price (I've marked on the chart an example of this happening).

Ideally, I also want to see both the lagging line and price get above the cloud and find support there on any pullback - the cloud is seen as resistance when price is below it.  Failure on this front would start to suggest that we are in for more of a downward correction and the count putting us in wave [v] of minor 3 may not be correct.

13:39 BST - Dollar Index Update

I can count s complete zig zag on the dollar, as shown in this 60 min chart:

Whether its the entirety of the correction or just the first of a double zig zag or a zig zag within a double three, remains to be seen. My favoured count (see the various counts here) is that we are completing wave [iv] of minor 3 (we've retraced 38.2% of wave [iii]). If that's right, we should rally now in a wave [v]. However, I'll be on the alert for the risk of a deeper correction. Here's the daily chart:

13:14 BST ES Update

This count on ES is the alternative count shown on Friday for this contract. It fits in with the possible count for SPX which I showed earlier, placing us in a 5th wave, which, on counts 1, (possibly) 2, 3 and 4, could put us at an important top (as opposed to the more bullish counts which place us at the start of a 5th wave which has the potential to go much higher):

ES 5 min chart:

Its possible that where I have 3 of (5) is actually the end of (5), but giving the benefit of the doubt to the upside, the action since that high may only be wave 4 of (5), so another high to come.

If this count is correct, we could end up with a gap and crap on the cash markets, but we'll have to wait and see.

10:18 BST - SPX Update

In my post after the close on Friday, I gave a couple of counts showing where we might be if Friday's high at 1121.01 was the end of a 5th wave. With the futures up as much as they are currently, it seems unlikely that those counts will hold. Assuming they do not, it may still be possible to count a completed 5th wave applicable to all of the alternate counts I am following, on any new high today.

Here is the potential count on a 2 min chart:

SPX 2 min chart - potential 5th wave high today?

Obviously, we can't ignore the more bullish counts I showed in Friday's after the close post, which put us in the early stages of a 5th wave. I think I'll be looking initially at the (E) wave low of the triangle wave [4] being taken out as a sign that this count may be the operative count. However,  bear in mind that the levels I gave for invalidation if the two bullish counts, 1113.93 and 1106.85 may prove to be a better indication of the more bearish count being in play.