Tuesday, 20 July 2010

21:35 BST - SPX Update

On the counts that imply the rally from the 1 July low is a corrective one (Options 1, 2, 4 and 5) I've labelled completed double/single zig zags ending with a truncation at 1099.08, followed by 5 waves down to today's low at 1056.88, with today's rally being a double zig zag.

On the count that places us in a 5 wave move off the 1 July low (Option 3), which would be part of a larger correction up,  I've labelled the high at 1099.46 as wave (iii) and today's low as wave (iv)

The Options are the different ways to count the move down from 1219.80. There are 5 that I'm following and they are set out on the 60 min counts page

The question whether the rally from 1 July has completed a corrective move or whether its only all (or maybe, part) of a larger correction up remains to be answered.

Here's how things stand after today:

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

15 min chart:

Five waves down from 1131.23 on this Option represents wave i of (iii) of [iii] of minor 1. The double zig zag I have labelled from the 1010.91 low would be wave ii of (iii), so implies a wave iii of (iii) decline to follow.

I've labelled a complete 5 wave decline from 1099.08 to today's low at 1056.88 to complete wave [1] of iii of (iii) down.

The 1099.08 high remains the invalidation point for the completion of wave ii on the double zig zag as labelled.
Option 2 - Wave [ii] topped at 1131.23

15 min chart:

For this Option, five waves down from 1131.23 represent wave (i) of [iii] of minor 1 down. The double zig zag up from 1010.91 would be wave (ii) of [iii], so, assuming its complete, we would be in wave (iii) of [iii] down.

This is the same labelling as on the chart of Option 1 for the rally from 1 July and subsequent decline (although the wave degress are different), so the invalidation point is  the same.

Option 3 - Ending diagonal complete at 1010.91

15 min chart:

For this Option, 5 waves down from 1131.23 to 1010.91 could be  wave [v] of a leading diagonal down from 1219.80 and, therefore, minor wave 1.  

It places us now in minor wave 2 up.  I've labelled the start of 5 waves up from the 1010.91 low, on the assumption that we will get a zig zag type move up for wave 2, since we  would be retracing the whole decline from 1219.80, not just the drop from 1131.23.

I'm showing us having completed wave (iii) (at 1099.46) of what I'm assuming at the moment will be a 5 wave move for wave [a] of minor 2.  This would mean the pullback to today's low was wave (iv) of [a].

Today's action looks like it completed wave (iv), putting us now in wave (v) up to complete minute [a] of minor 2 - taking out today's low will invalidate that.

The alternate labelling assumes that the 5 waves down from 1131.23 is only wave (a) of [v] and that the retracement back up was wave (b). Assuming its complete, we'd now be in wave (c) down and the count shown on the charts of the other Options would likely be in effect.

Remember, if there is further downside  to come, we must stay above 999.83 for the leading diagonal count to remain valid. 

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

15 min chart:

For this Option, 5 waves down from 1131.23 would be wave (i) of [c] of minor Y and the double zig zag up from 1010.91 would be wave (ii) of [c].

However, as mentioned previously, counting a complete 5 waves down to 1010.91 does bring in the possibility that wave [c] of Y is done so we have also completed intermediate wave (X) - see the 60 min counts page. That would put us now in a minor wave A rally and eventually take us to new highs. If wave (X) did end at 1010.91, then the impulse wave I have labelled on the chart of Option 3 would apply here.

For the moment, I've assumed we are starting wave (iii) of [c] down  from  the 1099.08 high. The 5 waves down to today's low would be wave i of (iii)  of [c] and today's rally would be wave ii. 

The invalidation point is the same as for Options 1 and 2.

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

15 min chart:

On this Option, 5 waves down to 1010.91 would be wave [a] of minor Y down and the retracement would be wave [b]. If its over, we would now be headed down again in wave [c] to complete minor Y.

I've labelled a single zig zag on this chart for wave [b], but its end point is the same as for Options 1, 2 and 4, namely, the high at 1099.08, so that would be the beginning of wave [c]. 

I'm counting the 5 waves down from that high to today's low as wave (i)  and today's rally as wave (ii) of [c]. The same invalidation point stated for  options 1, 2 and 4  apply here.

Here's an update of the chart I posted earlier showing the 5 waves down to today's low and the subsequent rally:

SPX 1 min:

The degree labels used relate to Option 2. If it is a 2nd wave retracement, it should be done about now or very nearly done. The second zig zag is about 1.618 x the first zig zag at today's high and the retracement is 61.8% of the first wave.

Obviously, we can't ignore the fact that it can also be counted as an impulse wave up from today's low, which could mean that the continuing double zig zag previously identified could be playing out and that these 2nd waves up from 1010.91 are retracing higher.

SPX 1 min - double zig zag still in progress:

The other possibility, if 1098.66 is taken out, would be that the count on the chart of Option 3 is playing out, so we would have to expect a substantial rally which would very likely take out the high at 1131.23.

So, the immediately bearish count, the moderatley bullish count and the very bullish count all remain on the table. The immediately bearish counts will be invalidated above 1099.08, in which case, focus will then switch to the more bullish options.

19:33 BST - SPX Update

This count wins as far as the bearish case goes:

SPX 1 min - 5 waves down to 1056.88:

If the labelling is correct, it can be counted as complete. However, if its an [A]-[B]-[C], it may need one more push up to compete 5 waves from where I  have wave [X] (which would be a [B] wave low).

Beware that the bullish count shown on the chart of Option 3 remains very much alive, as does the continuing double zig zag which is less bullish, but will still involve more upside than we have seen today - see last night's update for these.

16:58 BST - SPX Update

If we completed 5 waves down at today's low and are retracing up in a second wave, here's a possible count (today's low is the invalidation point):

SPX 1 min chart - 5 waves down to 1056.88:

If we're in the more immediately bearish nested ones and twos down, here's a possible count with wave [3] continuing to subdivide:

SPX 1 min - wave [3] in progress:

Taking out the wave (2) high would invalidate this count.

15:29 BST - SPX Update

If we're in a wave ii retracement up as anticipated by the alternate count on this chart (updated from my earlier post), we probably don't want to see 1059.12 taken out at this stage. If it is, it may be a warning that the more bearish count shown is playing out:

SPX 1 min chart:

14:43 BST - SPX Update

If we're in a 3rd of a 3rd at various degrees, as anticipated in two of the counts I posted earlier, we should drop through the price void on this chart without much difficulty. If we're completing wave [5], as shown as an alternative on the second chart in the earlier post, we may make a brief foray into it then start back up in a 2nd wave retracement (the third count in the earlier post has been invalidated):

SPX 60 min chart:

11:24 BST - DAX Update

The Dax has been the more resilient of the major world indices over recent weeks, but it may be on the verge of playing catch up, if the bearish counts in the other markets are playing out.

Here's the daily chart showing a count that has us in wave [iii] of minor 1 down from the high at 6341.52. I've labelled the start of wave [iii] as waves i and ii of wave (i) of [iii], which is very bearish. It may be that the waves labelled i and ii should be (i) and (ii) - this will depend on how far the next decline, if it happens, takes us:

DAX daily chart:

Here's a close up of the decline from the high marked [ii] at 6330.81, updated from my post on 29 June:

Dax 15 min chart:

It does look like its on the way to forming a nice 5 waves down from the wave ii high for wave [1] of iii, but it does have a bit more to do to complete those 5 waves.

So, the bearish count for the Dax could be gaining momentum as the Dax leads the way down, at least for today. However, we can't dismiss the bullish posibilities here, so its still worth keeping an eye on this one in case its starts to lead the way back up rather than down.

10:19 BST - SPX Update - Variations of the Bearish counts from 13 July high

Here's a quick look at some ways to count the decline we have seen since the 1099.46 high on 13 July. These apply to the bearish Options, 1, 2, 4 and 5 (meaning, the counts which should be bearish in at least the short term - see the 60 min counts page). I've used the chart of Option 2 as the basis for the degrees of the labelling. All assume a truncated high on 14 July at 1098.66.

The count I've been posting has us in a [1]-[2]-(1)-(2)-1-2 down, which anticipates a 3rd of a 3rd at various degrees will occur very shortly and probably without much more upside beforehand, as mentioned in last night's update:

SPX 1 min - [1]-[2]-(1)-(2)-1-2:

This count is invalidated as labelled if 1079.64 is taken out by wave 2.

The next chart contains two possible counts. 

The first is a [1]-[2]-(1)-(2) - still bearish but there could be more upside in wave (2) before we drop. For example, if wave (2) is actually an A-B-C correction, the move from yesterday's low, where I currently have wave X (which would be wave B) would have to form 5 waves. So another up leg from 1068.4, which I would consider the 4th wave, would be needed. The 4th wave couldn't end below 1067.41, which I would consider the 1st wave (see the third chart posted below).

The second count on this chart shows a [1]-[2]-[3]-[4] from the 1099.08 high. If this is correct, wave [4] has retraced nearly 38.2% of wave [3], so could be about done. So, we would expect a decline in wave [5]. This version of the count would be invalidated if wave [4] ends above 1087.68.

SPX 1 min - [1]-[2]-(1)-(2) or [1]-[2]-[3]-[4]:

The last chart shows a complete 5 waves down from 1099.08 as at Friday's low:

SPX 1 min - 5 waves down to 16 July:

This count would assume more upside in wave ii before we start wave iii down. There is an area of price congestion between the 38.2% and 50% retracement levels, but obviously, wave ii would have the potential to go higher. If we take out the wave (1) of [C] high at 1067.41 before making a new high in wave [C] of ii, the count, as labelled, will be invalidated.