Thursday, 24 June 2010

23:37 BST - SPX Update

I don't know if anyone is following the ichimoku charts, but there have been some further developments on those charts since I posted them yesterday.

Here is the updated daily chart:

SPX Daily ichimoku:

You can see that both price and the lagging line have moved further away from the cloud. In my view, the inability of the lagging line to rally above prices of 26 days ago, despite the early June rally remains a bearish sign. 

Although the turning line is above the standard line, the latter is falling, as is price, and I suspect that the turning line will start dropping soon also if things are as bearish as they appear to be from this chart.

Turning to the 60 min chart:

SPX 60 min ichimoku:

Yesterday I said that I wanted to see price continue to drop through the cloud and the lagging line following it as well as staying below the price from 26 periods ago. That seems to be what is occuring, so far. Price has even come back up to the cloud and the turning line to retest them from below and failed. They have provided resistance, as they should in a downtrend. Of course, that doesn't mean it won't try again, but with the daily positioned as it is, it seems unlikely at the moment that any further retest will succeed.  Today was actually the third time price found resistance at the turning line - that paints a pretty bearish picture.

The lagging line hasn't yet dropped through the cloud, but at the moment, that's not a great concern, as long as it remains below prices of 26 periods ago.

22:12 BST - SPX Update

After yesterday's sideways action, we got some nice moves today. It was bearish, but not enough to rule out all potential bullish possibilities. Its also added a couple of counts for the bearish side because we didn't get a decisive enough retracement up that could be called a 2nd or 4th wave.

Here are the 5 counts (see the 60 min counts for context). Remember that the counts shown in Options 1, 3 and 4 are interchangeable. Its just that there are so many ways to count the decline from 1131.23, so I've just used each of those options to illustrate different bearish counts:

Option 1 - wave (ii) topped at 1131.23

SPX 6 min chart:

I showed yesterday what was possibly the start of wave (5) of [3] down and today we did, indeed go on to complete a 5 wave move down that would be wave [3] on this count. The rally that followed was a 23.6% retracement of wave [3] - enough for a wave [4], but I might have expected it to get to the 38.2% retracement level to be certain. 

The fact that it didn't raises the possibility that the rally was only wave 4 of (5), so we still have 5 of (5) to come (well, it seems to be well underway!). This means we would expect a wave [4] maybe sometime tomorrow. 

Another alternative is that wave [4] is playing out as an expanded flat so after today's decline into the close, we would expect a rally, perhaps up to the 38.2% level at about 1093.

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). I've amended the count given today's action, to show a single zig zag with a possible ending diagonal wave [C]. Obviously, it depends on wave (i) of [C] being a three - I think the waves are ambiguous enough to cater for that!

Also remember that its possible that 1131.23 was the end of wave (c) of [ii], in which case, the counts in Options 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'm still showing 5 waves down complete to 1085.31. This expanded flat count, which is updated from earlier, isn't out of the question, so I'll keep it on as a possibility (but obviously, the counts shown for Options 1 or 4 would go equally as well).

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

SPX 15 min chart:

I've got two counts on this chart.

The first has wave [1] bottoming at 1074.63 and we are now forming an expanded flat for wave [2]. 

The alternative is what I showed earlier, that we are in a series of ones and twos down. I showed two sets this morning, and this had developed  into three sets this afternoon. This count would be invalidated by a move above 1099.64, although it could then be we were still in a [1],[2],(1),(2), but with (2) being an expanded correction (as shown in Option 3). That would only be invaildated by a move above 1116.67.

We still need to take out the (x) wave low at 1052.25 before its confirmed that we're in wave [c] of Y. 

For Options 1, 3 and 4, bear in mind the additional count I showed this afternoon, with wave [5] extending. Here it is updated to the close:

Taking out 1185.95 would begin to cast doubt on it. Taking out 1099.64 would invalidate it.

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

SPX - 8 min chart:

The count I showed for this yesterday, putting us in wave iv of (i) up was invalidated with the move below 1077.74. However, until we drop below the wave [ii] low at 1042.17 this bullish option remains and I've changed the count to show wave (i) of [iii] complete and the drop from 1131.23 as wave (ii) of [iii].

As before, 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.

19:30 BST - SPX Update

As well as the possible [1],[2],(1),(2) shown earlier, here's a possible count that might also account for what has, so far, been a moderate reaction to what looks like 5 waves complete at today's low (on the bearish counts):

SPX 1 min chart:

It shows a possible extending wave [5], so the bounce from today's low would be wave (2) of [5]. It will be invalidated above 1099.64. Although I show it as complete, it hasn't quite retraced 50% and could clearly run up further, provided it stays below 1099.64.

15:33 BST - SPX Update

We still appear to need another leg down to complete 5 down for wave (5) on this count.

SPX 3 min chart:

Obviously, if we get above the wave 1 of (5) low before making a new low, something is likely wrong with the count.

15:25 BST - SPX Update

Just two things to watch out for, one bullish near term, one bearish:

A possible expanded flat following a complete 5 waves down yesterday:

SPX 5 min chart:

If we get 5 waves down from where I have [W] then this count, as labelled, wouldn't work (but it may still do with some reconfiguration).

A possible 3rd of a 3rd count happening now:

SPX 15 min chart (see the alternative count):

I prefer the main count shown on the chart above, but the alternate is something to bear in mind. The alternate is invalid above where I have the "or (2)" label.

14:13 BST - ES Update

This bearish count just lines up ES with the count for SPX I showed on the chart for Option 4 last night:

SPX 5 min chart:

I've shown the alternative bullish count too (which is on the chart of Options 2 and 5 for SPX).

Its possible that we had a slightly truncated 5th wave within wave [5] on ES, making a complete wave i down now, in which case, this would align ES with the count I showed on the chart of Option 3 for SPX which would now put us in a wave ii rally. Even if we still have more to go to complete wave [5] or (C) of [Y], there does seem to be a probability that we will get a  rally at some point today. 

But bear in mind the count I showed for Option 1 on SPX, which would make a 5th wave low now only the end of wave [3] down, so a rally today would only be wave [4].

So I think we may need to be on the look out for a rally at some point today - perhaps the choppier and more sideways it is, the more likely it is to be  only a 4th wave and not a 2nd wave rally.

11:00 BST - DAX Update

Its possible that the Dax may have completed its wave [ii] high on 21 June, getting very close to the start of wave [i]. As I pointed out in my post of 22 June, the Dax made a similar deep retracement of the first wave off its July 2007 high.

Here is the daily chart for perspective on the longer term count:

Dax Daily chart:

And here is the possible count into the wave [ii] high on the 60 min chart:

Dax 60 min chart:

Taking out the low at wave a of the triangle, at 5634.64 would invalidate the alternative bullish count on the daily chart as labelled, but it would not necessarily put an end to the possibility of an [X] wave forming as a flat (given the three wave drop from the high) or a double three, in which case, the June high would be a wave X and we would now see a flat, zig zag or triangle develop for the second three. 

So, we could see near term downside which might be substantial (especially if the next leg down is a 5 for  a C wave or a zig zag ), yet we would still be in a bullish count longer term.  I think we'd need to take out the low of the first [X] wave to avoid a third zig zag.

For the bearish count, we now need a clear 5 wave decline probably at minuette degree, that takes us below the 5634.64 low. As mentioned above, that wouldn't rule out the bullish possibilities, but it would still be a start for the bearish case.

8:29 BST - Dollar Update

Since yesterday afternoon's post on the dollar, its pulled right back to the bottom of the cloud and the lagging line has fallen below prices of 26 periods ago on the 60 min chart:

Dollar 60 min chart:

If this is a wave (ii) (within wave [v] of minor 3) as I've marked it, then we should see the support from the cloud, for both price and the lagging line, hold and the dollar now push back up above the cloud, with the lagging line rising back above prices of 26 periods ago.

Looking at the elliott wave picture, there is a three wave decline from where I've marked wave (i) and its about a 61.8% retracement, so a perfect place for a wave (ii) to end.

A warning sign that we may continue down instead of pushing up in a wave (iii) will be if price finds resistance within or around the top of the cloud, and/or the lagging line fails to move above prices of 26 periods ago with any push up in the current price.

I'm watching thos one closely!