Tuesday, 22 June 2010

21:22 BST - SPX Update

Well, the bears certainly took control today, but there still remain bullish counts on the table.

Here's a review of the 5 counts I'm following, looking at the moves from the high of 1131.23 yesterday (for persepctive, see the 60 min charts):
Option 1 - wave (ii) topped at 1131.23:

SPX 6 min chart:

I've shown here the [1],[2],(1),(2) count from yesterday. This would mean probably a reasonable amount of more downside before we bounce in a 2nd wave since once wave [3] is complete (and the count puts us only in (3) of [3]), we will need waves [4] and [5] before a 2nd wave retracement.

Within wave [3], once wave (3) bottoms (and it may have done so today), we will get a wave (4) - that must not end above the wave (1) of [3] low at 1108.24. If it does, it would suggest that the count showing a triangle 4th wave was likely the correct count for this bearish option (see chart for Option 3 below).

Option 2 - wave i of (c) of [ii] complete at 1131.23:

SPX 5 min chart:

This count makes the current decline wave ii of (c) - the triangle would be wave [X] within a double zig zag. You can see the retracement levels for wave ii on the chart. As last night, it may be that (c) actually completed at 1131.23 and we have now started wave [iii] down. We can't be sure of this until 1042.17 is taken out.

Option 3 - wave [iv] of a leading diagonal completed at 1131.23:

SPX 5 min chart:

I've shown the triangle count on this chart, but the [1],[2],(1),(2) would go equally as well. Taking out the (x) wave low is probably the confirmation that wave [iv] did end at 1131.23.

Option 4 - wave [b] of minor Y within a wave [X] completed at 1131.23:

SPX 15 min chart:

Taking out the (x) wave low at 1052.25 probably confirms that we're in wave [c] of Y. 

Option 5 - we completed wave iii of (i) of [iii] at 1131.23:

SPX - 8 min chart:

This makes the current decline wave iv. The retracement levels are shown on the chart. The wave iv count is invalidated if  the end of wave iv is below 1077.74 (the wave i high).

20:34 BST - SPX UPdate

Here's an alternative to the triangle count - 

SPX 2 min chart:

It should mean less of a retracement once this current decline bottoms, since it will only be wave [3], not a complete 5 waves down as it would be under the triangle count.

18:52 BST - SPX Update

We seem to have the D leg of the triangle now, if that's what is forming. If it is a triangle, we need the E leg to stay below 1116.67:

SPX 1 min chart:

If it doesn't, then something else is going on.

17:46 BST - SPX Update

On the count I posted prior to the open, we could be forming a triangle for the 4th wave. If we're currently in the D wave, we shouldn't go below the C wave low at 1109.15.

If we drop below 1108.24 without an E wave, then the 4th wave will probably be counted as complete where I have put the label. Or it may be that we're in the [1],[2],(1),(2) count I posted shortly after the open.

SPX 1 min chart:


15:29 BST - ES Update

Its not exactly in the same position as the last chart I posted for SPX, but ES may also be starting a 3rd wave down from yesterday's high:

ES 5 min chart:

Again, if its in a third wave down, it needs to behave like it is, otheriwse, its a warning sign that something else may be happening. Watch out also if it can't take out the wave [1] low pretty soon. Yesterday's high is the invalidation point for this count.

14:56 BST - SPX Update

Well, that's a tad strong for a 4th wave. Still could be a 4th, but here's a possibility to consider for the bearish case - something even more bearish!

SPX 6 min chart:

Its invalid above 1123.70 and, if its right, we'd be in a 3rd of a 3rd, so it would need to behave like it is.

13:49 BST SPX Update

In addition to the bearish count I showed in last night's update, with waves [1], [2] and, possibly [3] down complete, here's a count that puts us still in wave [1] down, so, once complete, we will see a deeper wave [2] retracement:

SPX 1  min chart:

We may still be in wave 4 of (3). Once we have waves (4) and (5) complete for wave [1], I'd expect a 50%-61.8% retracement in wave [2]. Obviously, the bullish counts shouldn't yet be disregarded, so any retracement up needs to be watched carefully - the 1131.23 high clearly can't be taken out for this count to stand.

11:03 BST - DAX - A look at what its recent strength may mean for SPX

Will we see a new rally high in the Dax - if so, does it mean SPX will also make a new rally high?

The recent strength in the Dax of late has been undeniable. Yesterday it came close to invalidating the count that has it topping on 26 April 2010 along with the other major indices, as you can see from this daily chart:

DAX Daily chart:

It backed off the 26 April high and closed below the 6300 level yesterday. 

If it were to take out the 26 April high, that would put it out of snych with the bearish counts on the other major indices. In that case, the more bullish alternative marked on the chart might come into play, meaning we are in another zig zag up from the 2009 low. That would also open up the possibility that that is where we are also on SPX - I have a count for that possibility (see Option 5 on the 60 min counts page).

However, as strong as the DAX has been, it wouldn't surprise me if it does not exceed the April high, so we can still count a [i], [ii] down. As you can see from this weekly chart showing the 2007 top in the DAX,  it can have very deep 2nd wave retraces - pretty much reaching the start of the 1st wave:

DAX Weekly chart, 2007 top:

Of course, if it does get above the April high, it might just mean that the Dax is only now completing the expanding diagonal shown on the daily chart, which would be followed by significant declines, perhaps seeing it catch up with the other major indices -after all, back in 2007, it topped out in July. SPX on the other hand topped out in October, but they came back into synch after that right down to the March 2009 low. Here is a weekly chart showing these indices at the 2007 high. I've labelled the drop on each down to intermediate wave (1). You can see that by minor 2 of wave (1) down, they had got back in synch, despite the different topping dates.

SPX/DAX Comparative Chart of 2007 Top:

So, I'm not sure that a new high on the Dax, if it were to occur, would necessarily mean that we would have to start thinking that more bullish counts are also in play on SPX. Also, despite the depth of the retracement of the decline since the April high, a new high in the DAX for the rally since March 2009 is by no means certain.

9:30 BST - 60 min Counts page Updated

See here