Friday, 23 July 2010

22:00 BST - SPX Update

The rally from the 1 July low can still be counted as a correction of the decline from 1131.23, as shown in the charts below for Options 1, 2, 4 and 5. These corrective counts, as labelled, would be invalidated above 1131.23, so the count on these charts assumes a limited amount of upside. The count on the chart of Option 3 anticipates rather more upside even though it is also a corrective move, since it is correcting the whole decline from 1219.80, not just the decline from 1131.23. (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).

On the counts that imply the rally from the 1 July low is correcting only the decline from 1131.23 (Options 1, 2, 4 and 5) the counts have been revised with today's new rally highs, to show a different double zig zag count from the 1 July low ay 1010.91.

Its possible that this double zig zag completed at today's high, as shown in the chart I posted at 20:06 BST.   

If correct, then for Options 1 and 2 we would now be about to start a 3rd of a 3rd wave down at various degrees - both very bearish. For Option 4, we would be about to start wave (iii) of [c] of minor Y down - temporarily bearish. For Option 5, we would be about to start (iii) of [c] of minor Y down - again, temporarily bearish. 

However, I've posted a chart below showing a count for the move from 1065.25 that anticipates a new high to complete the zig zag, so beware. 

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 re-labelled it in accordance with the count I showed last night on the 10 min chart. It puts us currently in wave [c] of minor 2 up.

Here's how things stand after today: 

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

10 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 that we would be in wave iii of (iii) once the correction of the decline from 1131.23 is complete.

Its possible to count the double zig zag as complete at today's high of 1103.73. At that level, [Y] is about .50 x [W]. Also, within [Y], wave (C) is about 1.236 x wave (A). Also, its about a 78.6% retracment of the decline from 1131.23.

If wave ii is not complete, then the level to watch is 1131.23 on any further rally. Exceeding that level will invalidate the count (though it won't preclude a continuing correction in wave (ii) - see the commentary on the 60 min counts page).

On the downside, the main level to watch is probably 1065.25. If that is taken out, the chances are good that the corrective move is over (and it would preclude the i-ii-[1] count shown on the chart of Option 3). Higher levels to watch for earlier potential signals are given at the end of this post.

Option 2 - Wave [ii] topped at 1131.23

10 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 about to start wave (iii) of [iii] down.

This is the same labelling as on the chart of Option 1 for the rally from 1 July (although the wave degress are different), so the invalidation point is  the same and the same comments made in respect of that count also apply here.

Option 3 - Ending diagonal complete at 1010.91

10 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 changed the labelling to show wave [a] of minor 2 complete at 1099.46 and so, we would now be in wave [c] up. That wave needs to be a 5 wave impulse or an ending diagonal  (see my post at 22:41 BST last night).  The way it is developing at the moment, it could be forming either a straight impulse which is sub dividing, or an ending diagonal. The latter may have less upside potential.

If we take out the low at 1065.25, the labelling from the [b] wave low will be invalid. It may be that wave [b] is still in progress, or it may be that this Option is not the one that is playing out.

(By the way, if we are in an ending diagonal for [c], I could apply the same a-b-c labelling on the charts of Options 1, 2, 4 and 5 for the move up from 1 July, so we would have a simple a-b-c correction for their 2nd waves on those bearish Options).

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

10 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, though where I have wave [a] would be wave [i] of minor A

For the moment, I've assumed we are completing a double zig zag for wave (ii) of [c], if it is not already complete at today's high of 1103.73.

If we take out 1131.23, then the bullish possibility mentioned above is likely to be playing out, assuming Option 4 is the correct count on the bigger picture. The downside levels to watch are the same as for Option 1.

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

10 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 re-labelled this with the same double zig zag shown for Options 1, 2 and 4, so the same invalidation point stated for  options 1, 2 and 4  applies here and the downside levels to watch are the same as stated in respect of Option 1.

Here is the updated 1 min chart of the double zig zag I posted at 20:06 BST. That one showed it as potentially complete at 1103.73. However, with the late drop and rally back up, here is another count that anticipates a further high in order to complete the move: 

SPX 1 min - from 1065.25:

So, a further rally high may be in the works before the double zig zag shown can be counted as complete. Based on the above chart, if we take out the low at 1097.13, its likely that it is complete, but taking out the low at 1087.88 would greatly increase the odds of this beng the case. 

Of course, once a double zig zag from 1010.91 can be counted as complete, we should then start to drop impulsively if one of the bearish Options (1, 2, 4 or 5) is playing out. If we don't, the risk remains that there may be more upside to correct the decline from 1219.80, if option 3 is playing out. Or, it increases the chance thatone of the even more bullish possibilities mentioned above and on the 60 min counts page may be at work. 

Have a great weekend!

20:06 BST - SPX Update

Well, we have a possible top for the double zig zag I posted earlier. Taking out the wave 4 low at 1099.72 would increase the odds that it is complete, though it might be safer to wait for the wave (4) low at 1090.22 to be taken out:

SPX 1 min - complete [C] wave of second zig zag, starting at the 1065.25 low:


18:44 BST - SPX Update

The bearish count shown in last night's update has been invalidated with the move above 1099.08, but the alternative double zig zag I showed during the course of yesterday is still on and is only invalidated above 1131.23.

SPX 10 min chart - Option 2:

This chart relates to Option 2 but is the same count for the other bearish Options, namely 1, 4 and 5, but with the degrees of the labels needing adjustment.

Here's the close up on the 1 min chart showing the move from 1065.25:

SPX 1 min chart from 1065.25:

18:24 BST - SPX Update

The stress test spike invalidated the earlier count with a very slight new high, so here's how it appears now (again, both the bearish and bullish counts are on here, dealing only with the rise from 1065.25, so please refer to last night's updates for the context):

SPX 1 min - from 1065.25:

16:20 BST - SPX Update

Here's a possible count from the 1065.25 low - the main labels relate to the bearish Options 1,2,3 and 5, while the alternative labels relate to the bullish Option 3 - please see last night's update for the larger context and invalidation points:

SPX 1 min - count from 1065.25:

13:09 BST - Spx Weekly Pitchforks

This chart might help to understand why we've had such choppy sideways movement  in recent weeks.

SPX Weekly Pitchforks:

The green pitchfork delineates the uptrend from March 2009. You can see that price obeyed the median line of the fork pretty well during the uptrend, which is what its supposed to do. However, the drop from April 2010 has taken it down to the lower line of the fork - the fact that its moved away from the median line is a sign that the trend marked by the fork may be over.

Indeed, a new red fork seems to have been established and price now seems to be oscillating above and below, but mostly below, its median line. The median line should provide resistance to price, if the fork is valid.

There's obviously a battle going on as price tries to stay within the bullish green fork but now has the bearish red fork to contend with. 

With price below the weekly moving averages shown on the chart and all of those averages, except the 50 declining, you would expect the red fork to win out. Price doesn't have to do much to break the green fork and while it can easily just ride the lower line of the green fork up, it has a lot of work to do to get back to the median line to re-assert the uptrend. 

However, the position of the indicators is such that further upward price action isn't out of the question, so the bearish case is by no means certain, though it may be encouraging to the bearish case that the RSI (14) seems to be unable to get above 50 and the CCI (144) has, so far, been unable to get above the zero line, despite some significant rallies.

This may be worth keeping an eye on.