Wednesday, 1 September 2010

21:17 BST - SPX End of Day Update

The action today has eliminated two of the bearish counts that I've been following, as explained in the intra day updates today. I'll deal with the remaining bearish counts below. The bullish counts were updated in my earlier post which you can read by clicking here.

For the bigger picture on those bullish counts and the bearish counts set out below, please refer to the 60 min counts page.

So, here is the position on the remaining bearish counts: 

Chart 1 - SPX 1 min: from 1129.24, i-ii-[1] or wave i down:

The main count on this chart shows a subdividing wave iii down and puts us currently in wave [2] of iii.  I've placed the wave [1] of iii low at 1039.70 and labelled an (A)-(B)-(C) correction for wave [2] (I've dropped the (W)-(X)-(Y) option shown in the last update today given the new high above 1080). If that's correct, wave [2] could be almost done at today's high. We've retraced just over 61.8% of wave [1], and that's a good level for a wave [2] retracement.

If I put the wave 4 of (C) low at 1076.22, I can count 5 waves up to the high at 1081.30. However, if the wave 4 of (C) low is at 1076.20, it looks like another wave up is needed to make 5 waves. However, if we take out the high at 1078.59 (which I would count as the 1st wave within wave 5 of (C)) before making a new high, that could be good reason to think that wave 5 of (C) is complete (but be warned, that high at 1081.30 could then just be part of a continuing wave 4). I also wouldn't rule out the possibility that the current wave is only the 1st wave of 5 of (C). This could be ruled out if we take out 1076.22, assuming that's the wave 4 of (C) low.

This main count is invalidated if we take out the wave ii high at 1100.14.

The alternate count shown on chart 1 has us only having completed wave i down, so puts us now in wave ii up. We'd be retracing the entire decline from 1129.24, so the upside on this count could be a bit more than on the main count. A 50% retracement would be about 1084, 61.8% would be about 1095 and 78.6% would be about 1110.

This alternate count would be invalidated if we take out the high at 1129.24.

Here's the close up showing the decline from the wave ii high at 1100.14:

Chart 2: SPX 1 min - from the 1100.14 high:

As mentioned above, I've labelled the move up from the 27 August low as  an (A)-(B)-(C) correction. If wave (C) is not yet complete, the next fibonacci retracement level to look at is the 70.7 level at about 1082.50 and then the 78.6% retracement level which is at about 1087.

Here's a closer look at today's action with an update of the chart I posted earlier, showing the move off the 1039.70 low I have as wave [1] of iii or wave i:

Chart 3: SPX 1 min close up:

The third bearish count has wave i down from 1129.24 complete at the low of 1069.49 and places us currently in wave ii which is taking the form of an expanded flat. Here's the chart:

Chart 4: SPX 1 min - wave i at 1069.49, wave ii expanded flat:

I don't particularly like this count, but its valid and if its correctly labelled, we need to see 5 waves up from the low marked [B] at 1039.70. As you can see from the chart, there seem to be a few more waves necessary to achieve that. Its quite possible on this count that it could reach the 61.8% retracement level at about 1107. But equally, it could fall short - if it failed to get above the wave [A] high at 1100.14, it would be a running flat rather than an expanded flat.

This count would be invalidated if we exceed the high at 1129.24.

So, thankfully, the market has eliminated two of the bearish counts that I was following. That still leaves these three for the bear case,  plus the bullish counts which I updated earlier (click here to see that update). Still, as before, the elliott wave logic arising from each count can be used to identify when a count can be eliminated from consideration. Currently, the levels to watch are as follows:

1) for the main count shown on chart 1, the  i-ii-[1]-[2] down from 1129.24, we have to stay below the wave ii high at 1100.14, otherwise, that count is invalidated;

2) if we take out that 1100.14 high, then, for the bear case,  we may be in  the alternate count shown on chart 1, which counts the completion of wave i down from the 1129.24 high, or in the expanded flat for wave ii shown on chart 4, or one of the more bullish counts shown in the update posted earlier (see here).

3) if we take out 1129.14, that will eliminate those two remaining bearish counts for the move down from that high and will focus attention on the bullish counts. The first bullish count shown in the update posted earlier on  is bearish once wave [c] of 2 completes. If that count is in play, we would need to see impulsive downside action once wave [c] and 2 end, otherwise, focus will have to switch to the bullish counts under Option 4.

20:00 BST - SPX Update: 1 min close up - possible count for today's rally

Here's an attempt to count the move up today, starting with the low on 27 August at 1039.70 which I have as wave [1] of iii (or wave i  - not shown on this chart) on the bearish counts (see my earlier post):

SPX 1 min close up:

In yesterday's end of day update, I had the wave [2] (or ii) labelled as either an (A)-(B)-(C) or a (W)-(X)-(Y) correction. The difference between them is that if its the former, we need 5 waves up from wave (B) to complete wave (C). If its the latter we only need 3 waves up from wave (X) to complete wave (Y).

As you can see from the chart, if its a (W)-(X)-(Y) correction, we may already have a top at 1080. If its an (A)-(B)-(C) correction, we probably need another high before its done.

Unfortunately, there's no way to tell which is the correct count. The only solution is that if you were short, you'd probably want to be out above today's high to be on the safe side, unless you're willing to sit through a 5th wave that could get up to the 78.6% retracement level at about 1087, assuming that we're in wave [2] and not ii (if its wave ii, the upside is much greater).

17:03 BST - SPX Update: Bullish Counts Update

Here's an update on the bullish counts I've been following (last update can be read here)

Chart 1 - 60 min - single zig zag from 1010.91 still in progress:

This count currently has us in wave (i) of [c] of minor 2. 

Here's a close up of this count, picking up the above chart from the low at 1039.83 on 25 August:

SPX 1 min - from 1039.83 low: 

If the labelling from the [b] wave low is correct, once wave [3] of iii tops, wave [4] must stay above the wave [1] high at 1055.14, otherwise the labelling is invalidated. It wouldn't invalidate the whole count, because the count from the high at 1129.24 shown on the charts below could also be applied here. On those counts, we could still be in wave [B] of y if that high of 1055.14 goes leaving only 3 waves up from the low at 1040.88:

Chart 2: 60 min first bullish count under Option 4 - impulse up from 1010.91:

Chart 3: 60 min - second bullish count under Option 4 - leading diagonal up from 1010.91:

All of these counts remain valid provided we stay above the July low at 1010.91.

15:20 BST - SPX Update: 1 min: wave iv of (i) invalidated - next bearish alternatives in play

Progress at last. Two of the counts shown in yesterday's end of day update have now been invalidated. The count that had us in wave iv of (i) down has now been eliminated with the move above 1069.49. For the bear case, this leaves the expanded flat wave ii shown in chart 1 in yesterday's end of day update and the counts shown on charts 3 and 4. Here's the latter - a wave [1] of iii or wave i low (which I've put at the 27 August low at 1039.70):

SPX 1 min - i-ii-[1]-[2] or wave i down from 1129.24:

The next level we need to watch is 1100.14 - if that is taken out, then the main count shown on this chart will be invalidated and the expanded flat wave ii or the wave i low at 1039.70 will become the focus for the bear case.

14:45 BST - SPX Update: 1 min: wave completed wave iii of (i) down from 1129.24 and now in wave iv?

The main count on chart 1 from yesterday's end of day update which put us in a (1)-(2) within wave [5] down has been invalidated with the rise above 1065.21 today. Its possible we're still in wave [4] of iii down, but for the moment, since it will be the next count to be invalidated if we rally further, I'm showing us in wave iv of (i) down. Wave iv can't end above the wave i low at 1069.49. Here's the chart:

SPX 1 min - from the 1129.24 high - i-ii-iii-iv down:

12:15 BST - Dollar Update: In wave (ii) down of minor 3?

Here's an update for the dollar (you can see the last update by clicking here and on the dollar page):

Dollar 45 min:

In my last update I was thinking that we had topped in wave (i) of minute [i] of minor 3 up, but there was a possibility that we were still in wave  [4] of v of (i), so I wanted to see the level of 82.717 taken out by way of confirmation.

That level was eventually broken, so my main count  here is that we are now in wave (ii) of minute [i] of minor 3.

I've left the retracement levels for that on the chart and as mentioned in the previous update, I'm looking at a retracement to somewhere around the 50%-61.8% level which is between 81.800 and 81.394.

I've labelled wave (ii) so far as an a-b-c zig zag with wave c probably in wave [3]. Within that wave [3] of c, on a smaller time frame it looks like wave [3] still needs a 4th and 5th wave to complete, and then we'll see waves [4] and [5] of c.

If this is correct, at least the 50% retracement level should be attainable. Its also possible that this a-b-c correction might only be wave w of (ii) and that we will have more downside to a deeper retracement level with wave y. Once I see 5 waves down from the b wave high, I'll be watching how price moves up for clues as to whether or not its the end of the correction. 

Its also possible that what I'm labelling as an a-b-c should itself be an almost complete w-x-y correction, so instead of seeing 5 waves down from where I have labelled wave b, we would only need 3 waves down to complete wave y. On my reckoning, it would be almost done, if not already, and would fall short of the retracement levels I'm looking at.

The only warning of this would be to see what happens after the low in what I would label as wave [3] of c currently. It should be followed by a corrective looking move up for wave [4] and must not end above the wave [1] low at 82.988. If it moves up there, that would be a strong indication that we may have seen an end to the correction. Taking out the high I've labelled as wave b at 83.303 would be a stronger sign that the correction was probably over. However, we'd also have to see a strong impulsive move up  and above the high labelled (i) at 83.522 given that we would be in wave (iii) of minute [i] for greater confidence.