Saturday, 24 July 2010

16:01 BST - SPX Update: Ending diagonal wave (c) in a zig zag from the July low

In Thursday night's 22:41 BST update, I said that we might be forming an ending diagonal from the 1056.88 low. That could still be the case with Friday's action. The tentative lines I drew in for the diagonal at that early stage have altered, and I've also altered the count for Option 3 from being in wave (v) of [a] to being in wave [c] of 2 (although the former remains possible and could mean alot more upside to come).

Here is the updated chart:

SPX 1 min chart - zig zag from 1 July low:


The potential ending diagonal is marked by the red lines and the labelling is highlighted with yellow circles. If wave (iii) of the diagonal is not yet done, the wave (iv) pullback mustn't get to the blue dotted line - that's where the lines would be parallel instead of converging. If we don't make a higher high on Monday (for wave (v) of the diagonal) and then get to that blue dotted line, then I would say that we are in the main count, namley, a (i)-(ii)-i for wave [c]. If we take out the 1065.25 low than that would be invalidated. In that case, we'd probably be in one of the other, more bearish counts. 

Or, perhaps we'll be able to say that we had a rule breaking ending diagonal -  waves (i) and  (ii) of the diagonal would be where I have them for the (i)-(ii)-i count, wave (iii) of the diagonal would be where I have the highlighted wave (i), wave (iv) would be where I have the higlighted wave (ii) and wave (v) would be where I have the highlighted wave (iii). It would be rule breaking because wave (iii) would be longer than wave (i), albeit by about 0.17 points. Would that really rule it out as an ending diagonal? 

If we do make a higher high on Monday, provided it stays below 1112.98, then the diagonal count is still potentially valid. We would need to see a quick reversal back to the start of the diagonal at 1056.88 to gain confidence that it is the correct count.

Note: this single zig zag count could also apply to the bearish Options, 1, 2, 4 and 5, where I currently have double zig zags. Its more likely to be applicable there if wave C is forming an ending diagonal which is nearly complete, given that for those Options, the 1131.23 high is the limit for their corrective waves.

Two bullish possibilities to be aware of with this diagonal:

1) it could be a leading diagonal 1st wave within a 3rd wave up - on the bullish alternative chart of Option 4 posted on the 60 min counts page, you will see that I have a wave [i] and [ii] from the 1 July low. This diagonal could, therefore, be wave (i) of [iii] on that count. We'd have to take out the 1056.88 low to avoid this;

2) using the original count I had for Option 3 where 1099.46 was wave (iii) of [a] and 1056.88 was wave (iv) of [a], the diagonal could be an ending diagonal wave (v) of [a], so, after a wave [b] pullback, we would have further upside in wave [c]. We would need to take out the 1010.91 low to avoid this.

15:14 BST - SPX: Impulse from March 2009 page and Zig Zag from March 2009 page updated

See here and here.

13:48 BST - SPX - Interesting fib stuff (well, I found it interesting)

Here's a chart with some fib stuff that I found quite interesting, even though it may have no predictive value.

The chart is the 60 min chart of Option 1:

Time wise, each down move since the April high has taken about 63 - 67 bars on the 60 min chart. That's about 2 x the fibonacci number 34.

As far as rallies go, the recovery after the flash crash took 36 bars. The wave from the low marked (i) to the high marked (ii) took 145 bars. No obvious relationship, but 145 is just one more than 144 (fib number) and 36 x 4 is 144. The number 4 is considered by some to be an important time factor due to the planet/time relationships (the earth rotates 360 degrees in one day; 24 hours in one day is 1440 minutes; every 4 days, the earth rotates on its axis 1440 degrees).

The wave from the low marked i to Friday has taken 124 bars so far. Perhaps we might see an end to the move up around the 144 bar mark some time on 27/28 July, but it may not extend to a 1:1 relationship. 128 bars would be .886 x 144 -  .886 is the square root of .786. That would suggest a high in the first few hours of trading on Monday, which would be consistent with the chart I showed at the end of last night's update suggesting one more high is needed to complete the double zig zag count for the move up from 1010.91.

Points wise, within the flash crash recovery, wave (a) was about 66 points - fib 34 x 2. The (b) wave was 37 points - just more than fib 34. The (c) wave was 79 points - well, 10 short of fib 89, but 79 is .886 x 89.

Within the wave marked (ii), wave w was 65 points - nearly fib 34 x 2. Wave x was 63 points - nearly fib 34 x 2. wave y was 89 points - fib 89.

Within the latest rally from 1010.91, wave [W] was 89 points - fib 89. Wave [X] was 43 points - about .5 x fib 89 or 2 x fib 21. Wave [Y] is currently 46 points - just over .5 x fib 89. If it extends to 2 x fib 34, that would give us 1124 as a potnetial end point, but at 46 points, its just in excess of .618 x 68. 

As to the declines, the size of each isn't obviously fib related, but wave (i) was just about .886 x wave [i] and wave i is .886 x wave (i).

As to the rallies, wave (ii) was nearly .886 x wave [ii] and wave ii will be .886 x wave [ii] at 1106 (its already equal to wave (ii)).

Of course, none of this means that this count, or any of the bearish counts I have is correct or that any of the fib relationships will play out. For all I know, we have started the next bull market (as my bullish alternative for Option 4 might suggest). All we can do is watch the levels that we consider to be important to try to glean some idea of what is playing out. I identified the levels I'm watching on the various Options I'm following in last night's update (and on the 60 min counts page which I updated today). I'll just add the above to that list of points to watch out for.

10:49 BST - 60 min counts page updated

I've updated the 60 min counts page. I've also given the levels to watch following this week's action.