Monday, 28 June 2010

22:23 BST - Dollar Update

The dollar is suggesting, for the moment at least, that it may hold the support area highlighted at the weekend.

Here is an updated daily chart. Note the slight bullish signs showing in the RSI, MACD histogram and Slow STO. However, it still has a lot of work to do if it really is starting a rally that will take it above the 7 June high of 88.708.

Here's the 60 min ichimoku chart:

Its managed to break above the cloud (just) and is above the turning and standard lines (blue and red, respectively). Also, the turning line is above the standard line. The lagging line is stuck below the cloud at the moment. Really, it needs to get above the cloud (as do the turning and standard lines) for me to have any confidence in a more sustainable rally.

I also need to see the first leading line (the blue outline of the cloud) get above the second leading line (the red outline) to get the cloud sloping upwards. At the moment, the rally that we saw today isn't entirely convincing and that's reflected in the position of the components of this chart.

Here's a 60 min elliott wave chart with a highly tentative count suggesting we've seen the low of the correction from the 7 June high:

As I've said above, its not completely convincing at present, so that low at 85.215 needs to be watched closely. A fall below it would probably mean there is more downside to go, as suggested by the alternative counts mentioned on the chart.

21:45 BST - SPX Update

Another rather sideways day today meaning there are still a myriad of counts on the table, 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, we either had a brief wave [4] rally which ended at 1085.95, followed by a (1), (2) representing part of wave [5] down, with (2) likely topping at today's high of 1082.60 and we're now starting wave (3) of [5] down, or wave [4] has formed a triangle which topped at 1082.60 and we are now in the early stages of wave [5] down. On either of those counts, the 1082.60 high is the invalidation point and may mean that wave [4] is still in progress.

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. The invalidation point for this count, as labelled, is the wave ii low at 1067.89.

The alternative is that we are forming a double zig zag from 1131.23 and we had a triangle (B) wave that completed at 1082.60. 

If the triangle completed at 1082.60, then we may have seen a small 1,2 down (wave 1 being a leading diagonal, perhaps). It has to stay below 1082.60 for this count to remain valid, otherwise, either wave (B) is still on going or the more bullish count, that we have started wave iii, is in play.

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 retained the nested ones and twos on this chart. I've changed the count slightly to show wave 2 completing at today's high with a truncated  C wave within y and we've possibly started wave 3 down. If we take out the wave 2 high at 1082.60, then this count as labelled is invalidated, but it would still be possible that wave 2 is in progress, as long as it stays below the wave (2) high at 1099.64.

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. I've changed the count slightly to show wave (B) of [2] as a triangle - the triangle may still be in progress, or may have completed at today's close (I've labelled it complete there). If that's right, we'll need to rally pretty much from the start tomorrow in order to avoid invalidating the triangle. If we're in wave E of the triangle, it can't go below the wave C low at 1071.45.

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. I've moved the wave 2 high to 1082.60, but even if that gets taken out, it could still be forming  wave 2 provided it stays below the wave (2) high at 1085.95. If it takes that out, it may be we are still in wave (2), subject to the high of 1099.64  remaining intact:

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, but I've only shown the bullish count which puts us at the start of wave (iii) up. If we take out the wave (ii) low, then it'll probably mean that the double zig zag count shown on the chart for Option 2 is playing out.

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.

19:23 BST - SPX Update

The count I have that shows a wave [1] bottom at 1074.63 and putting us now in wave [2] up to around 1095 - 1109 (see the Option 4 chart), also may have a triangle in the position of the (B) wave of [2]:

SPX 1 min chart:

If the E wave is correctly placed, we need to stay above that and make a new high for the (C) wave of [2]. If we're still in the E wave, it can't drop below the low of wave C at 1071.45 - that would invalidate the triangle.

17:59 BST - SPX Update

The possible triangle I pointed out in my last post, which would be a 4th wave applicable to the counts shown in Options 1, 3 and 4, is also relevant to the more bullish counts, Options 2 (if wave [ii] hasn't already topped at 1131.23) and 5, where it would be a (B) or [B] wave in a second zig zag. Here it is on the Option 2 chart:

SPX 1 min chart:

The invalidation point for the triangle is, again, 1083.56.

16:21 BST - SPX Update

On the count shown on the chart of Option 1, where I'm looking for a wave [4] (if it hasn't already completed at 1085.95), we may be forming a triangle:

SPX 1 min chart:

We would be in wave (E), so couldn't take out the wave (C) high at 1083.56. That would invalidate the contracting triangle.

13:54 BST - Dollar Update

The dollar is also not giving very much away at the moment.

Its holding here, possibly for the reasons set out in my weekend post, but it hasn't really launched into a 3rd wave. This means, the risk of further downside remains for the time being.

Heres the 60 min chart:

I've marked on it some levels to watch. If we take out 85.215, the risk that we are in a double zig zag down or a larger single zig zag (see the alternate counts) will increase, though only taking out the low at 85.025 would rule out the main (i), (ii) count.

Taking out the high at 86.119 might be an early indication that wave (iii) up has started and that will strengthen if we take out the 86.415 high and the upper red channel line. Its no guarantee since we could still be in a (x) or (b) wave, but it would be a start and we could use a higher low as a warning that its not really wave (iii).

Here's the 60 min ihchimoku chart:

We've got a bullish cross of the turning line (blue) above the standard line (red) and price is above both and the lagging line has moved above the price line. However, its all still below the cloud, so its only a weak bullish signal at this stage. There's alot of work to do to establish a new uptrend.

13:28 BST - ES Update

Here's a 60 min ichimoku chart of ES showing a bullish cross of the turning line (blue) above the standard line (red), with price moving above both and the lagging line (green) above the price line. These bullish crosses occurred below the cloud, so were weak buy signals and price has failed to follow through so far, in particular, failing to get above the cloud. 

ES 60 min ichimoku:

It paints a fairly neutral picture at the moment, but looking into the future (26 periods out), the cloud is showing signs of turning negative if the red outline goes below the blue outline.

So, the initial bullish signs from earlier are in danger of failing. I'm watching the lagging line in particular since if it can't get above the cloud, (its struggling to overcome resistance at the standard line currently) it'll be a warning that something may be wrong with any rally that takes place. If it falls below the price line, that's bearish.

13:14 BST - ES Update

There's nothing decisive either way in ES at the moment, so all counts shown for SPX on Friday would seem to be still in play.

Here's a 5 min chart of ES:

Its pretty much the same count as I posted on Friday before the open, except I've changed the labelling of the siedways move from the wave i low to W-X rather than A-B, but it could be either.. This count lines up with Option 4 on SPX posted on Friday and suggests some more upside before we head down in a 3rd wave. However, beware of the counts I've shown on SPX on Friday that have more immediate downside potential, because we are either in a 5th wave down (see the alternative on the Option 1 chart and the extra 1 min chart) or (even more bearish) in nested ones and twos to the downside (see the Option 3 chart)

The alternative double zig zag count relates to SPX Options 2 and 5 (see Friday's charts here) and requires a bit more upside before we move down in wave (C) of [Y], but as suggested on the main counts for those Options, a single zig zag may have completed already, in which case, I wouldn't expect any further downside. So, Friday's low is, for the moment, the level to watch here.


11:55 BST SPX 60 min Counts page update

Updated the 60 min counts page to the close on 25 June.