Wednesday, 30 June 2010

21:49 BST - SPX Update

An exciting end to an otherwise quiet day. Here's how things look on the counts I'm following (see the 60 min counts for context)

Option 1 - Wave (ii) of [iii] topped at 1131.23

6 min chart:

Its looking very much like the alternate count which has wave [4] topping at 1085.95 is the correct count, making today's sideways action wave (4) of [5]. This means the new low today is all or part of  (5) of [5]. Once it ends, it will complete wave i of (iii) down. 

Wave (5) is currently 1.382 x wave (1). The level of  about 1025 is a 1.618 extension (and it may well get there since it does not look like 5 waves down from today's high is complete).

Option 2 - Wave [ii] topped at 1131.23

6 min chart:

On this count, we probably saw wave (4) of [3] of v at today's high.

If wave (4) ended at today's high (a 23.6% retracement), we are now into wave (5) of [3] down. This could bottom anywhere below 1035.18 - just keep an eye out for 5 waves down - it doesn't look lke a complete 5 from today's high, so there may be more to go to the downside. At 1025 approximately, wave (5) would be 1.618 x wave (1).

Option 3 - Wave [iv] of an ending diagonal completed at 1131.23

6 min chart:

On this count, I can't decide if we've seen  wave [4] or wave iv today.

The main count is that it was wave [4] that topped today and we are now in wave [5] of iii. Its currently a 2.618 extension of wave [1], but it doesn't look like 5 waves down have completed, so could still have more to go. The lower line of the elliott channel may be a target. Wave iii would be a 2.618 extension of wave i at about 1016.

If we saw wave iv of (v) top today. then the next 5 wave decline is likely to be the end of wave (v) and, therefore, wave [v] of the leading diagonal. 

Remember, it has to end above 999.83 to remain shorter than wave [iii].

Option 4 - Wave [b] of minor Y within intermediate [X] topped at 1131.23

15 min chart:

On this count, its seems unlikely that we had wave ii of (iii) today. I think it would probably have to be counted as part of wave (4) of i, taking the form of a running flat. That would put us now in wave [5] of i down. Wave [5] would be 2.618 x wave [1] at about 1027.

Option 5 - Minor wave X within intermediate wave [X] topped at 1131.23. Now in minor Y down

8 min chart:

On this count, it seems most likely that we are still in wave iii of (iii). 

Today's action was likely wave (4). The next 5 wave decline would be wave [5] of iii, leading to a rally in wave iv.  Wave [5] of iii would be equal to wave [1] at about 1022 which is just about where it would hit the lower line of the elliott channel. The larger extensions are shown on the chart.

In respect of all the above counts, as noted, the decline from today's high does not yet look like 5 waves. If we rally above today's highs without making 5 waves down, we may have an expanded flat 4th wave on our hands - something to watch for.

20:03 BST - SPX Ichimoku Update

This 5 min ichimoku chart illustrates the struggle that SPX has faced today, to overcome resistance and push higher (the flattening of out of the cloud from early on in the session was a sign that the market was likely going to move sideways):

SPX 5 min ichimoku chart:

Although it got through the cloud in the morning, it couldn't take the lagging line (green) with it. So, when price pulled back, the lagging line was unable to stay above the price line, even though it and price were above the cloud.

Now they have both dropped through the cloud and although they are trying to recapture it, the turning line (blue) is now below the standard line (red) and this, as well as the cloud, will act as resistance to price. It doesn't mean it can't get above them, but the odds have turned against it for the time being.

18:24 BST - Dollar Update

The dollar had better start pedaling hard if its to maintain the uptrend that its been trying to establish for the last couple of days. Since my earlier post, its continued to find support from the cloud, but it just hasn't been able to move up and away from it:

Dollar 60 min ichimoku chart:

Its looking a little more hopeful right at this moment, with price moving back above the turning (blue) and standard (red) lines, but the turning line needs to get above the standard line too. Also, that lagging line (turquoise) needs to get back above price. Its encouraging that its found support from the standard line , but so far, its had resistance from the turning line, so is stuck between them and below the price line.

I've tentatively labelled waves (1) and (2) of [3] up on the elliott wave front, but price now needs to prove this is the correct count. The 85.215 level remains the level to watch for the moment for this count.

17:21 BST - SPX Update

You'll see from the charts I posted earlier that I have us either in a 4th wave retracing the drop from 1082.60 to 1035.18, a 2nd wave retracing that same drop, or a 2nd or [b] wave retracing the drop from 1131.23 to 1035.18 or something much more bullish which will take out the 1131.23 highs.

At the moment, the market isn't giving any real clues as to which of these options is playing out. Currently, the move off yesterday's low is weak enough to be nothing more than one of the 4th wave options. Its just managed to retrace about 23.6% of the decline from 1082.60 to 1035.18. If we make new lows now, those will become the likely counts.

Still, from little acorns, as they say, so bears can't get complacent. The market is quite capable of turning what is looking like a shallow retracement into something much larger.

Even if we are only in a 4th wave retracement of the decline from 1082.60, there could still be more upside to come. Here's a 1 min chart showing the decline from 1082.60 and the move off the 1035.18 low, based on the main count on the chart of Option 5:

SPX 1 min chart:

This looks like a double zig zag forming, with the C leg of (Y) to come.  However, I've marked the alternative, which is a single zig zag which could count as complete at today's high (the (B) wave would be a double three).

Hopefully we'll know by the end of today which of the counts is the most likely to be in play.

14:19 BST ES Update - 60 min Ichimoku Chart

This 60 min ichimoku chart of ES paints a very bearish picture:

Notice how even with the overnight rally, price was unable to get anywhere near the cloud and the lagging line (green) showed no sign of getting above price. All this despite the Slow Stochastic getting to overbought.

Price has now fallen back below the turning line (blue), which, by the way, never got above the standard line (red) and the overall picture suggests more downside to come.

Things can change quite quickly, so I'll be keeping a close eye on this.

14:06 BST - Dollar Update

I've adjusted the elliott wave count on the dollar - today's pullback was too deep for the 4th wave I was expecting. It represents a 61.8% retracement of the rally from 85.215, so chances are its a 2nd wave. That's how I've labelled it. Its still got room to drop, but if it takes out the 85.215 low, then it invalidates the count and puts the focus on one of the more bearish alternatives mentioned on the chart, though until 85.025 is taken out, the bullish possibility remains:

Dollar 60 min Elliott Wave chart:

And here's the 60 min ichimikou chart:

The wave [2] pullback (if that's what it is), brought price back to the cloud and below the turning (blue) and standard (red) lines. It also brought the lagging line (turquoise) below the price line. This wouldn't be unexpected in a 2nd wave retracement, so nothing to worry about too much, provided that price can now recover above the turning and standard lines and the turning line can get above the standard line. Also, the lagging line needs to get back above the price line.

These things should happen if we are now starting wave [3] up. If they don't, its a big warning that there is more downside. If we break 85.215, this bullish count will be off the table for the moment. Breaking 85.025 takes it off completely.

13:33 BST - ES Update

The zig zag down from the 21 June high is gone now. That leaves the nested ones and twos count that I have on the SPX Option 5 chart (though the degrees are different). Here's the 5 min chart of ES:

ES 5 min chart:

Wave 4 of (3) may have happened overnight, but its possible its not complete yet and we've just had the a or w wave of 4. If we're still in wave 4, it can't exceed the wave 1 low. If it does, it may mean that wave (3) bottomed yesterday and we are in wave (4). That can't exceed the wave (1) low. If that happens, then we're probably in one of the counts that shows 5 complete waves down at yesterday's low (see, eg the chart for Option 1 on SPX)

11:24 BST - SPX Update: Summary of the counts from 1131.23 and the implications for each Option

I've updated the 60 min counts page and in the process of doing so, thought it would be useful to review and summarise the various counts for the move down from 1131.23.

I'm showing different counts on the chart for each Option,  (I've changed a couple from last night's update) but they are interchangeable and what each count means has to be interpreted in the context of each Option.

Chart of Option 1 showing a completed 5 waves down or nearly complete, with one more up/down:

Chart of Option 2 showing an extending 5th wave down with 3 sets of nested ones and twos:

Chart of Option 3 showing an extending 5th wave with 2 sets of nested ones and twos with the 5th wave either complete at 1035.18 or requiring one more up/down to complete (this count is more suitable to this Option given the limit on the length of wave [v]):

Chart of Option 4 showing a complete 1st and 2nd wave down, with the 3rd wave extending (this is a new count):

Chart of Option 5 showing nested ones and twos (this count was previously shown on the chart of Option 3):

So, the various counts show different stages of a 5 wave move down from 1131.23.  At one extreme, 5 waves down are complete while at the other, there is a long way down to go before 5 waves down complete.

Looking at what 5 waves down from 1131.23 means for each of the Options I'm following (please refer to the 60 min counts for context):

For Option 1, it would be wave i of (iii) of [iii] down. 

On Option 2 it would be wave (i) of [iii]. 

On Option 3 it would be either all of wave [v] (in which case, expect a potentially substantial rally back up) or, if wave [v] is going to be three waves, (a) of [v]. 

On Option 4 it would be all of [c] to complete minor wave Y and, therefore, intermediate wave [X] (in which case we would now launch up in minor A of another zig zag up from March 2009) or it would be (i) of [c] of minor Y. 

On Option 5 it would be all of [a] of minor Y (in which case, expect a rally in minute [b]) or (i) of [a] of minor Y.


10:30 BST - 60 min counts page updated

See here