Friday, 25 June 2010

21:56 BST - SPX Update

We had a bit of a rally today. Whether or not its over remains to be seen. There still remain a number of possible counts, both bullish and bearish.

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. There remain 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:

For this count, I'm looking at an expanded flat type of correction for wave [4] of i down. It may well have completed at today's high with a zig zag for (W), a zig zag for (X) and an expanded flat for (Y) ((Y) may have had a truncated 5th wave).  However, the 38.2% retracement level at about 1093 might still be a target. 

I've shown the alternative I posted earlier, with wave [4] topping at 1085.95 and the subsequent decline and rally being waves (1) and (2) of wave [5]. This would be invalidated if we move above 1085.95.

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

SPX 5 min chart:

This count shows a completed wave ii correction and the start of wave iii up within wave (c) of [ii]. Wave ii retraced 70.7% of wave i. Although it can be counted as complete at today's low, as labelled, it could still be an on going wave ii correction even if it takes out today's low. That would mean a re-labelling of the decline to a double zig zag as shown on the chart - today would have completed (or nearly completed) wave (B) of the second zig zag. Obviously, any further decline can't take out the start of wave i at 1042.17.

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've changed this count to the nested ones and twos that I previously showed on the chart for Option 4. Wave 2 may have completed at today's high with a zig zag for waves w and x and an expanded flat for wave y. If we take out the wave (2) high at 1099.64, then this count is invalidated. It might be that we then look to just a [1],[2],(1),(2), with (2) being an expanded flat type of correction.


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

SPX 15 min chart:

This shows a completed wave [1] at 1074.63, with an expanded flat wave [2] in progress. Today's rally would have to be counted as 1 of (C) and the decline into the end of the day as all or part of wave 2 of (C). The target for the end of wave (C) would be between 1095 and 1109.

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, there is also the extending 5th wave count which would have today's high as wave 2 of a (1),(2),1,2 within wave [5]:

Taking out 1085.95 would mean it would have to be a (1),(2) of [5]. Taking out 1099.64 would invalidate that.

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

SPX - 8 min chart:

The picture here is the same as shown on the chart for Option 2.

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.

Have a great weekend!

20:07 BST - SPX Update

Here's a quick update on those bearish counts I posted earlier:

Wave [5] extending:

Still on, but invalidated above 1085.95 (though then it might just be we are completing wave (2) instead of 2).

Expanded flat wave [4]:

That looks back on with the nice push up we've been having. The possibility that we are in wave (2) of [5] is invalidated above 1085.95 and the expanded flat wave [4] becomes the only count on this chart.

Expanded flat wave [2]:

Still on also, but we probably need more of a rally to be able to think this is the right count.

Nested ones and twos:

Still on. The invalidation point for the third set is above 1099.64

17:49 BST - SPX Update

Its possible that on the count I showed earlier for a possible expanding flat wave [4], we've already completed wave [4] and have started wave [5] down:

SPX 1 min, wave [4] complete, now completing wave (2) of [5]:

This would be very similar to the extending wave wave [5] count shown at the above link, except that could be more bearish since it has nested ones and twos within wave [5].

15:46 BST - SPX Update

Still no significant rally so far. The bearish options updated from yesterday would count like this at the moment:

1 min chart, extending wave [5]:

1 min chart, in an expanded flat for wave [4]:

1 min chart, in an expanded flat for wave [2]:

Finally, there's the nested ones and twos shown in last nights Option 4 chart.

14:00 BST - ES Update

Here are two possible counts on ES, one bearish overall and one bullish overall.

The bearish count is essentially the one shown in the Option 4 chart for SPX. The bullish one relates to the counts in the charts of Options 2 and 5 on SPX, but adjusted for ES to take account of the overnight action.

ES 5 min chart: 

On the bearish count, the expanded flat for wave ii may well be in the works, with the [C] wave up due (I have it as (C) on the SPX Option 4 chart). On the bullish count, a rally today would be wave (B) of [Y]. It has to stay below the [X] wave for a double zig zag. If it doesn't, its possible the [Y] wave ended where I have B of the expanded flat, at the overnight low.

If we fail to rally high enough for a wave ii, I'd be looking closely at the nested ones and twos count shown as an alternative on that Option 4 chart for SPX, though of course, it may be that its a 4th wave as expected on the Option 1 count, or the extending 5th wave shown in the extra chart from last night.

11:50 BST - CPCE - Options Equity Put/Call Ratio

Just looking at my CPCE chart, we may have the beginnings of a new uptrend in the 5 and 10 day moving averages (I think these are a fairly standard means of smoothing out the movements in the CPCE itself, so no magic there), which would be overall bearish for the markets - see the red dotted lines at the right end of the chart below:

CPCE Daily chart:

Obviously its very tentative at this stage, but every trend has to start somewhere!

What I found of interest is that the recent high on 21 June occured at a level in the CPCE which marked a number of high points during the 2007-2009 downtrend in the markets (and the early stages of the new uptrend) - see the blue dotted horizontal line and the highs I've highlighted with magenta circles.

Clearly, the moving averages are going to move up and down within any new trend and we do have to be aware that they are currently at levels where previous lows have occured. It doesn't mean that the markets can't go lower (there is certainly scope for these moving averages to push further up as you can see from the chart), it just means we need to be alert for signs of a low. I find that the 10 day moving average often turns down ahead of a low - it doesn't always work out, but its worth keeping an eye on.

10:30 BST - Dollar Update

After looking like wave (ii) may have ended yesterday, the dollar displayed some weakness later, with price slipping through the bottom of the cloud. The warning sign I mentioned in the post shown in the link above did occur - as price rallied (from point a on the chart below), the lagging line failed to move above the price line - see how it stopped just under where I have the iv label - not a good sign for a rally.

However, whilst the lagging line (I've changed the colour to turquoise) did drop through the cloud, it was only briefly - it stayed largely within it, even while price remained below. This suggested that a more sustained drop was probably not on the cards.

Now, price has rallied today and this time, the lagging line has moved above the price line.

Here's a close up of the action on the 60 min chart:

Dollar 60 min in close up:

The rally today has moved price back into and slightly above the cloud and the lagging line is confirming this as potentially bullish by moving above prices of 26 periods ago.

You can see the elliot wave count - it looks better as a wave (ii) correction now, with that drop yesterday.

In ichimoku terms, we need to see price and the lagging line get above the cloud. We have a bullish cross of the turning line (blue) above the standard line (red) - its a weak buy signal since it occurred when price was below the cloud, but price can confirm it by getting above the cloud and taking the laging line with it. As before, once above the cloud, price needs to find support on the cloud and any pullback in price should not result in the lagging line falling below prices of 26 periods ago (if it did, that would again be warning that all is not well with the potential rally).

Here's the zoomed out view on the 60 min chart for the bigger picture of the wave count:

Dollar 60 min zoomed out: