21:17 BST - SPX Update

The Options shown in the 10 min charts below are the different ways to count the move down from 1219.80. There are 5 that I'm following and you can see the larger context of each on the 60 min counts page.

Options 1, 2, 4 and 5 imply that the rally from the 1 July low is correcting the decline from 1131.23 only, so will  be invalidated above 1131.23. On the count on the chart of Option 3 that rally is correcting the whole decline from 1219.80, not just the decline from 1131.23. 

On the charts of Options 1, 2, 4 and 5 I have labelled a complete double zig zag count from the 1 July low ay 1010.91.

If it did complete at 1020.95,  then for Options 1 and 2 we have started a 3rd of a 3rd wave down at various degrees - both very bearish. For Option 4, we have started wave (iii) of [c] of minor Y down - temporarily bearish. For Option 5, we have started wave (iii) of [c] of minor Y down - again, temporarily bearish. 


On the chart of Option 3 I've labelled a single zig zag which  would be minute [c] of  minor 2 up. It still does not yet look complete. However, note, the double zig zag count could also be applied here since that has retraced a sufficient amount of the decline from 1219.80 to be a minor 2 correction of that drop.  If that completed at 1020.95 and we apply it to the chart of Option 3, it means that we have started minor 3 down now.

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.

As mentioned above, if we had a double zig zag up from the July low, it counts as complete at 1020.95. The possibility that the decline from that high was wave 4 of (3) of [C] of the second zig zag was ruled out today when we dropped below 1096.38.

So, I'm counting the decline from 1020.95 as the start of a 3rd wave down - on this Option, its wave iii of (iii) of [iii] of minor 1.

This 5 min chart shows two possibilities. It shows today's decline as either wave 1 of (3) or wave (3) itself:

SPX 5 min - (1)-(2)-1-2 down from 1020.95:

If the decline is wave 1 of (3), the rally from today's low would be wave 2. The invalidation point for this is the wave (2) high at 1115.90. If that is taken out, the the likelihood is that we are in the single zig zag count (see Option 3 below). 

If today's decline was wave (3), then the wave (4) retracement must not end above the wave (1) low at 1109.78. If that is taken out, then we have to look to the main count labelled and wait to see if that gets invalidated by moving above 1115.90.

At the moment, I prefer the main count - wave 2 has retraced 61.8% of wave 1, which is exactly what you'd expect of a 2nd wave. I think it would also have a better look to it if we get an extended wave (3), but the market will have to decide.

And here's a close up of the move from the high at 1020.95:


SPX 1 min - close up of decline from 1020.95:

Looking to the downside, the main level to watch is initially today's low at 1092.82.  Taking that out will increase the odds that this is the correct count. After that, we want to watch 1088.96 since taking out that low will  reduce the likelihood that we are in the single zig zag count (see Option 3 below). After that, there is the low at  1065.25. If that is taken out, the chances are good that the corrective move is over. Until then, the risk of  new highs remains.

Option 2 - Wave [ii] topped at 1131.23

10 min chart:

For this Option, five waves down from 1131.23 represents 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 now 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 (although the wave degrees are different), so please refer to the comments and 1 and 5 min charts posted under that Option.

Option 3 - Ending diagonal complete at 1010.91

10 min chart:

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

It places us now in minute [c] of minor wave 2 up.  

If this count is in play, then it looks like we completed wave (iv) of [c]  at today's low and we are now in wave (v) of [c] up to complete the zig zag. 

Here's the chart from the July low which includes the alternate count:


SPX 1 min - wave [c] of minor 2 from the July low:

And here's a close up of the action from the 1020.95 high (wave (iii):


SPX 1 min - wave (iv) of [c] (or wave ii of (iii) of [c]):

So far, this wave (iv) pullback has stayed above 1088.96 and it looks like we may have started wave (v) up. If we take out that level before making a new high, then that will rule out the wave (iv) count. Looking at the close up chart above, an early warning that the count may be wrong would probably come if we take out the wave i high at 1097.20 assuming the labelling is correct and we are in wave iv of (v). Its possible that where I have wave iii is actually only wave [1] of iii, in which case, only taking out the wave ii low at 1093.75 on an assumed wave [2] of iii pullback would invalidate it.

The possibility that the 1020.95 high was only wave i of (iii) would then be in play. We have to stay above 1065.25 for that to remain valid. 

These are the levels to watch to rule out one or other of the counts.

As mentioned above, its possible to apply the double zig zag count to this Option given how far that has retraced. If we do that and that double zig zag did complete at the 1020.95 high, then minor 2 should be over and we should now have started minor 3 down.

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]. With that complete, we would now be in wave (iii) of [c] down.

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, the possible counts for the move up from there are shown on the 60 min chart of the bullish alternate count for Option 4 on the 60 min counts page and on the 1 min chart posted here - its the last chart.

For the moment, I've assumed we completed a double zig zag for wave (ii) of [c] at 1020.95. Please refer to the comments and 1 and 5 min charts posted under Option 1 above.

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.

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.

This is the same double zig zag shown for Options 1, 2 and 4, so please see the comments and 1 and 5 min charts posted under Option 1 above.

19:14 BST - SPX Update

On the completed double zig zag count, I'm thinking we may have completed wave 1 of (3) down from today's high, or it may be wave (3) itself. If its wave (3), this retracement up would be wave (4) and must not end above the wave (1) low at 1109.78. For the moment, I've labelled today's decline as wave 1 of (3), but we'll see how it goes:

SPX 1 min - completed double zig zag:

On the single zig zag count, we may have bottomed in wave (iv) of [c] and, if so, we have started wave (v) up. It looks best as a i-ii-[1] count at the moment, but will be invalidated if we take out the wave ii low at 1093.75. And, of course, today's low can't be taken out if we have started wave (v) up. Remember, if we're still in wave (iv), it can't end below 1088.96:

SPX 1 min - wave [c] of a single zig zag:

See the earlier summary of the counts for the move up from the July low for context.

16:57 BST - SPX Update

The count for a complete double zig zag at 1020.95 still looks OK. We may well be in wave (3) down from that high. The alternative that we still needed to complete a wave (3) up within the [C] wave of the second zig zag has been invalidated because we took out the 1096.38 level mentioned in previous updates.

Here's how the double zig zag count looks now, from the 1020.95 high:

SPX 1 min - double zig zag completed:

I've put in a wave iii label at the lows, but it may still have more to go.

However, the count that has us in a single zig zag which still needs a 5th wave to complete remains intact until we take out the levels identified previously.

SPX 1 min - single zig zag in progress:

We could be near the end of wave [C] of y to complete wave (iv), so we need to watch any bounce to see how it behaves. Referring to the double zig zag count, if we bounce now and take out the wave i low 1107.41, that's going to invalidate the count on that chart, assuming we haven't yet seen wave iv of 3 of (3) and it will raise the odds that this single zig zag count is the one playing out.

You can see the bigger picture in the update posted at 12:12 BST.

 

16:12 BST - SPX Update: The incomplete single zig zag

This is the count for the bullish case which still requires a 5th wave to complete wave [c] of a single zig zag (see my earlier post summarising the counts for the move up from the July low):

SPX 1 min - wave (iv) of [c] of a single zig zag:

Watch the levels that will invalidate the counts shown on this chart: 1088.96 and 1065.25.

15:21 BST - SPX Update: Bearish Count

We took out the wave 2 high at 1112.41 today, but that doesn't kill the bearish count just yet. With the way the market came back in from today's high, the possibility remains that we topped at 1020.95. We would now have an expanded flat type correction for wave (2):

SPX 1 min - Double zig zag complete, (1)-(2) down:

The invalidation point is the 1020.95 high, so not too far away.

13:18 BST - Options Equity Put/Call Ratio Update

On 22 July we had a potential signal from the 5 and 10 moving averages of the CPCE that a market high might be near. However, it came with two warnings that the market could continue higher despite this signal. Both warnings played out and the markets did continue up, while those moving average of the CPCE continued to drop.

Yesterday, however, we saw both tick up, with the 5 ma possibly forming a double bottom. The 5 ma has not yet moved above the 10ma, so there's no real signal yet. Here's an updated chart:

CPCE Daily:

Still, its worth keeping an eye on this. If we have a top in on this rally from the July low, as one of my counts suggests, we should see these moving averages confirm it by the 5ma crossing above the 10 ma and both bursting up through the blue dotted line. If we have further upside to come, they will likely stay below the blue dotted line as they did in the area highlighted in green, while the market continues its climb higher.

For the moment, then, they are just saying that we should be alert to the possibility of a top, even though its not yet a confirmed sell signal.

12:12 BST - SPX Update: Summary of counts for the rally from the 1 July low

Here's a quick summary of the potential counts in play for the rally from the July low at 1010.91.

1) double zig zag:

SPX 1 min - double zig zag from 1 July:

As you can see from this chart (and from previous updates), its possible to count the double zig zag as complete at the 1020.95 high. The move from that high would be counted as nested ones and twos down. You can see close ups of this in the 1 min charts posted under Option 1 in last night's update.

However, as you can also see, we may only still be in wave (3) of [C] of the second zig zag (with wave 4 of (3) being what we have seen since the 1020.95 high). We need to take out the high at 1096.38 to exlcude this (see the 1 min charts under Option 1 in last nights update). If we do that, then its very likely that the double zig zag did top at 1020.95.

However, that doesn't necessarily seal the deal for the bearish case. It may be that its not a double zig zag, but only a single zig zag that has been playing out since the July low:

2) Single zig zag:

SPX 1 min - single zig zag from July low:

If this is what is playng out, then we're probably in wave (iv) of [c] of this zig zag, with wave (v) to come. We could only rule this out if we take out the wave (i) high at 1088.96 on this assumed  wave (iv) pullback. 

Even if we do that, it won't rule out the possibility that we're actually in an extending wave (iii) of [c]. I don't think that's the case since it would likely lead to a very large [c] wave which may not actually stay below the high that its supposed to be correcting (1219.80 on Option 3). However, its not impossible. It can only really be ruled out if we drop below 1065.25 before we make a new high.

You can see close ups of this count on the 1 min charts posted under Option 3 in last night's update. 

In my view, that low, 1065.25, is a fairly important level to watch for the bearish case. It would not only scupper the alternative referred to above on the single zig zag count, but it would also severely damage the last potential count I have for the move up from the July low:

3) Impulse wave:

SPX 1 min - Impulse wave up from July low:

This count applies to the bullish alternative shown on the 60 min chart of Option 4 on the 60 min counts page. There, I've shown the move up from the low marked [ii] as a (i)-(ii)-i, but on the above chart, I show the other possibility that its all part of (i) of [iii]. 

To rule out the count shown on the above chart, we need to drop below 1088.96 in this assumed wave iv. In that case, the count on the 60 min Option 4 bullish alternative chart would come into play. That would be invalidated if we take out the 1065.25 low. That would lead to a very high probability that this bullish count isn't playing out. 

However, we couldn't rule out the possibility that we are in wave [iii] up until we take out 1056.88, the wave [ii] low. Even then, it may just be wave [ii] is forming an expanded correction. This would only be eliminated if we take out the July low at 1010.91.

So, that's the summary with the levels to watch. At the moment, the markets are set up to go either way. We just have to take it one step at a time and watch the important levels until the market rules out whatever counts we may be following.

10:18 BST - Dollar Update

Still looking for that potential low in the dollar. On 27 July, it looked like an ending diagonal was forming for wave [v] of C of intermediate (2). Its still looking that way. You can see from the chart below that I've shown a possible end to wave (2) at today's low of 81.664. However, wave (v) of the diagonal could go as low as 81.177 if the labels are correct. Beyond that, wave (v) would be greater than wave (iii) and that would invalidate the diagonal, so something else would be playing out.

Dollar Index 60 min chart:

If you were to take a long position now, you'd have a nice tight stop, just below the current low, so it may be worth a punt. However, if the diagonal is playing out and has ended, we really need to see an impulsive move to the upside that gets above the wave (iv) high at 82.381. If it does that, a three wave pullback (that obviously does not take out the lowest point of the diagonal) would present a safer entry. Until then, the risk remains to the downside, so caution is required on any long trade.