Wednesday, 23 June 2010

21:50 BST - SPX Update

It was pretty much sideways today really - suggesting a corrective wave of some sort. Whether it was a 4th wave, a 2nd wave or a (B) wave remains to be seen.

Here are the 5 counts - all still in play (see the 60 min counts for context):

Option 1 - wave (ii) topped at 1131.23

SPX 6 min chart:

Still showing the [1],[2],(1),(2) count for this one. Today's action is counted as wave (4) of [3], with wave (5) of [3] starting. If we take out today's high at 1099.64, then either wave (4) of [3] is continuing or a more bullish count is in play.

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)  which appears to be forming a double zig zag. You can see the retracement levels for wave ii on the chart. As I showed in the 1 min chart posted earlier, its possible that we completed a single zig zag at today's low, in which case, we should have started wave iii up. Unless we saw a series of 1,2s off today's low, it may be more likely that we need a (C) wave to complete the double zig zag.

Also remember that its possible that 1131.23 was the end of wave (c) of [ii], in which case, the counts in Option 1, 3 or 4 may be applicable and we'd be in wave [iii] down.

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

SPX 5 min chart:

I've shown 5 waves down complete on this chart, but counts shown for Options 1 or 4 would go equally as well. It calls for more upside in a wave ii correction. The retracement levels for wave ii are shown on the chart. If we take out today's low without a deeper retracement, its still possible that we had a wave ii, but probably unlikely and I'd focus more on the count shown for Options 1 or 4.

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

SPX 15 min chart:

This is a slight variation on the themes in Options 1 and 3 above. On this count, the next leg lower would complete wave [1] down. 

We still need to take out the (x) wave low at 1052.25 before its confirmed 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). It got quite close today. The depth of the retracement may suggest its not a 4th wave correction, but I think I'll leave it on the table until its ruled out by breaching the level mentioned above.

If it takes out the low at 1042.17 (the end of wave [ii]) then this particular count will go but it may just mean we ended  a minor X wave at 1131.23 and that the drop from 1219.80 is forming a double zig zag rather than the single zig zag that completed at 1040.78. It would mean more downside near term, but longer term, would be bullish.

19:52 BST - SPX Update

Its possible that we've seen a 4th or (B) wave correction complete. Here are the two charts posted earlier, brought up to date with the post-Fed action:

SPX 2 min chart:

SPX 1 min chart:

It still doesn't look impulsive from the lows, so I don't think the alternative count in the second chart is playing out, but I'm still going to keep an eye on it. Obviously, we need to take out today's low to invalidate it.

And let's hope this correction doesn't just extend by becoming more complex!

17:42 BST - SPX Update

Here's a count (plus an alternative) for the bullish side (for example, this from last night), showing a double zig zag forming. We'd currently be in wave (B) of the second zig zag. But note the more bullish interpretation, of a complete single zig zag from 1131.23. There's not been anything too impulsive looking from the low yet, but that can change pretty quickly, so its something to watch for.

SPX 1 min chart:

17:03 BST - SPX Update

Here's one possible way to count today's action in SPX:

SPX 2 min chart:

If we take out today's low, it might still be a correction, in the form of an expanded flat, which might give it the opportunity to retrace up a bit more, to, say, the 38.2% level (assuming we are in a 4th wave correction).

Of course, we may have started the 5th wave down on this count, from the 1091.76 high. It doesn't immediately strike me as impulsive, though it could be forming a diagonal - just something to watch.

16:27 BST - Dollar Update

Speaking of the dollar, here's the updated 60 min chart. The lagging line and price have behaved as I would want them to (see here) in order to confirm that the trend has turned up:

Dollar 60 min chart:

As long as price now gets support from the cloud and/or the turning and standard lines and the lagging line stays above price on any decline, the uptrend should hold. If any of these fail to occur, it may be an early warning of more downside to come.

16:15 BST - VIX Update

The 60 min chart of the vix is in a similar position to the dollar chart I showed on Monday, giving signs of a potential change in the 60 min trend:

Vix 60 min chart:

As explained on the chart, we need to see price get above the cloud and the lagging line to follow. On any pullback in price, the lagging line should stay above prices from 26 periods ago, otherwise, the risk is that this little rally was nothing more than a retracement in a continuing downtrend - see the area I have circled on the chart.

13:44 BST - ES Update

The position in the futures is essentially the same as for the cash - uncertainty as to whether there is further upside above the high made on 21 June, or whether we have started a significant decline. 

Here is a chart showing the bearish count, but with the bullish alternative as well.

ES 5 min chart:

On the bearish side, the invalidation point has to be the high marked (ii) on the chart. On the bullish side, the invaildation point is much lower down, at the low on 25 May (although then, it may be that the rally to the June high will have completed an X wave, if the decline into 25 May was a zig zag on the bullish case).

11:05 BST SPX Ichimoku Update

I'm not sure if anyone is really interested since not many people leave a reaction to the posts, but I like these charts, so I'll show them anyway!

Its really updating the position since I posted these charts at the weekend.
At that time, the 60 min chart was still showing an uptrend (see the chart here), but we're now starting to see the possibility of that changing:

60 min ichimoku chart:

At the moment, its still possible that support will be found within the cloud and that we will see a further rally from around current levels. However, on my interpretation, any rally in price that does not cause the lagging line to get above the close of 26 periods ago should indicate that the rally is likely to fail. It could go either way at the moment, so I'll be keeping a close eye on this.

Turning to the daily chart I posted at the weekend (see here), I listed the things I wanted to see happen in order to keep the downtrend that had started to develop intact - see points 1)-3) in the box on the far right of the chart.

Here is the updated daily chart:

Daily ichimoku chart:

You can see that two of the three things on my list have happened - so far. The third, that the turning line stay below the standard line, hasn't happened, but the turning line is only above the standard line by .28 of a point. If it crosses back down from here, it would look like a bearish hook you see in, for example, the MACD and would be bearish for the market.

The position on the daily chart doesn't preclude the uptrend on the 60 min chart continuing, but if the daily downtrend is to be maintained, any further rally on the 60 min chart would need to be limited. In a downtrend, that is the job of the cloud and currently, on the daily chart, the resistance is between 1130 - 1144 which represent, approximately, the lower and upper boundaries of the cloud. However, spikes above the cloud resistance that do not change the trend are not uncommon - I'll be watching the lagging line if such a spike occurs, to see whether or not it is able to follow price and get above the close of 26 periods ago.