Thursday, 2 September 2010

23:49 BST - SPX 1 Update: Replacement for chart 2 in the end of day update

I posted the wrong chart 2 in today's end of day update. I was updating the labels on one computer and using another to post, but forgot to update the chart on the latter computer before saving and posting it. So, here it is with that count for a possible end to wave 5 of (C) of [2]:

SPX 1 min - close up:

When I said in the end of day update that I wasn't convinced about the count shown, it was a reference to the purple numbering within wave v of  5.

21:25 BST - SPX End of Day Update

For both bullish and bearish counts, I'm looking for 5 waves up from the low at 1040.88 which occurred on 31 August. 

If you look at my last update on the bullish counts (you can read by clicking here), you'll see that for the count shown in chart 1 in that update, it would be wave iii of (i) of [c] in a zig zag. For the count shown in charts 2, it would be wave (i) of [iii] up and for the count shown in chart 3, it would be wave [i] of C up.

On the bearish counts, 5 waves up from 1040.88 would be all or part of a 2nd wave correction in an overall downtrend.

The counts I show below on the charts of the bearish counts for a 5 wave move up from 1040.88 apply also to the bullish counts.

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 bearish counts following today's action: 

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

The main count on this chart shows a subdividing wave iii down and puts us close to the end of wave [2] of iii.  As mentioned in the intraday updates, we've retraced about 78.6% of wave [1]. Wave 5 of (C) is about equal to  wave 1 of (C). Its not a bad point for wave [2] to end.

However, as mentioned in the intraday updates, if I put the wave 4 of (C) low at 1076.22, we may well only have completed wave i of 5 of (C) up today, and started wave iii of 5 of (C).

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. We've already exceeded the 50% retracement which was at 1084. If this count is playing out, the next levels to look at would probably be the, 61.8% at about 1095 and 78.6% at about 1110.

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

Here's a closer look at today's action showing the move off the 1039.70 low I have as wave [1] of iii (or wave i on the alternate count shown on chart 1 above):

Chart 2: SPX 1 min close up:

I've shown a possible count that completes wave 5 of (C), but I'm not convinced its correct. I'd have to see an immediate impulsive drop tomorrow that at least takes out 1082.72 in order to start thinking that a top might be in.

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

As I said in yesterday's end of day update, 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,  if we have seen the completion of 5 waves up from the 1040.88 low to complete wave (3), we still need a dip in wave (4) and a further high in wave (5) to complete wave [C] on this count. 

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, no counts were invalidated today, either bullish or bearish and therefore,  the levels to watch remain as set out yesterday: 

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 3, or one of the more bullish counts shown in the update posted yesterday (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 yesterday  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.

19:52 BST - SPX Update: 1 min chart - possible top for wave [2]?

Well, its possible that the new high at 1087.53 marks the end (or nearly the end) of wave 5 of (C), though I have to say, that wave iv of 5 went on a bit when compared to wave ii:

SPX 1 min - i-ii-[1]-[2] from 1129.24 high, close up from 27 August:

You can see the alternate noted on the chart, that we've only completed wave i of wave 5 of (C). This arises only because of the size of wave iv against wave ii of 5 on the labelling I've shown. Its a risk that has to be factored in, in my view.

If we've topped, or nearly topped in wave (C), we need to start dropping impulsively and take out the 1076.20 low. Until we do that, the possibility of an extending wave 5 will continue to loom.

As mentioned before, it would be nice if wave [2] were to top here at the 78.6% retracement of wave [1] and with wave 5 being a .786 extension of wave 1 of (C). In addition, timewise, wave [2] is now just about .618 x wave [1] in terms of time (.786 is the square root of .618). All very interesting, but price action now needs to show us that a top is in. At the time of posting, I can't say its convincing me as yet.

19:04 BST - Dax and FTSE update

While SPX has been moving sideways, I though I'd take a quick look at the Dax and the FTSE.

Here's the Dax daily chart (it hasn't been updated with today's action, but the close today was 6083.85):

Dax Daily: 

Last time I posted on this I was thinking we may have seen a top - see the post of the 15 min chart by clicking here - (we were in the midst of the wave I've labelled (i) in the daily chart above as it turns out).

You can see from the daily chart what looks like a nice 5 waves down from the August high (the Dax, you might recall, took out its April high, diverging against the other main indices like SPX, FTSE, etc). So, it seems like there's a good chance that a top was seen in early August.

However, looking at the 60 min chart from the August high, you can see that like SPX, it can be labelled as an impulse or as a double zig zag (see the black lines):

Dax 60 min:

If its a zig zag, it would likely be part of the (X) wave labelled as an alternaive on the daily chart. Even if its 5 waves down from the August high, it could be an [a] or [c] wave within that (X) wave correction. This would imply  further highs to come, much like the bullish alternate counts under Option 4 which I show on SPX (see the 60 min counts page and the last update on those counts).

In this respect, the Dax, which was outperforming, resulting in its August high, is now in line with SPX - right down to the ambiguity over whether its an impulse or a corrective wave down from its high.

The FTSE caught my eye because its getting so close to it recent high at 5418.58. 

Last time I looked at it,  it seemed like we were topping if we hadn't already done so - see the last post here. In fact, we went on to make a slightly higher high at 5418.58 on 9 August. I can still count that into a nice top with the same labelling shown on the chart in that last post.

The only problem is that the price action since that high isn't easy to count as 5 waves down. Furthermore, the move up from the  low made on 25 August is not that far off the 9 August high.  

I'm starting to think that maybe FTSE hasn't quite finished the wave [ii] correction labelled on the chart in the previous.

So, here's a possible count to accommodate a further push up to complete wave [ii] (this daily chart hasn't been updated with today's action, but FTSE closed at 5371.04):

FTSE daily:

You'll note the alternative count shown on this chart, which would mean that the July low could have been the start of a major move up in the FTSE, again, in line with the bullish alternate counts under Option 4 for SPX.

Here's the 60 min chart showing the main count in close up from the 5418.45 high:

FTSE 60 min:

You can see that the move down from that high doesn't look like an impulse. It can be counted as such, but it wouldn't be very pretty, as you can see from the alternate labelling. At first look, it could be a leading diagonal, but on closer examination, it transpires that what would be the 3rd wave of such a diagonal is shorter  than the 5th wave. 

So, this zig zag seems to be the best way to count it if we take out the 5418.45 high. If we don't take out that high, I'll have to adopt that ugly impulse count. Today's high would be a good turning point for FTSE if it did top in wave [ii] at 5418.58 - its an 88.6% retracement.

16:21 BST - SPX Update: 1 min chart updated

If the wave 4 of (C) low was at 1076.20, then it looks like we still need another high above 1087.11:

SPX 1 min - i-ii-[1]-[2] from 1129.24, close up from 27 August:

If we take out 1078.59 on this assumed wave iv of 5, then it will seem more likely that wave 4 bottomed at 1076.22 and that the 5 waves up from there completed wave 5 (but until we take out 1076.22, the risk that it was only the 1st wave of wave 5 remains).

Today's high would be a nice place for a top - wave 5 of (C) is 78.6% of wave 1 of (C) at 1087.11 and we've retraced 78.6% of the decline from 1100.14.

16:09 BST - SPX Update: 15 min chart: divergences between price and technical indicators suggest a top should be in or near

Divergences on the 15 min suggest we should be near a top of some sort for this move off the late August low:

SPX 15 min:

Its consistent with a count of 5 waves up near completion from the low on 31 August as shown in my previous post. However, price action needs to confirm now.

15:19 BST - SPX Update: 1 min possible wave [2] high?

It is possible to count 5 waves up from the 1076.20 low I've labelled as wave 4 of (C) at pretty much the 78.6% retracement level assuming we're in a i-ii-[1]-[2] down from the 1129.24 high:

SPX 1 min - i-ii-[1]-[2] close up from 27 August low:

However, be warned, we could be in an extending wave iii within 5 of (C). Taking out the high at 1081.30 (the high I've labelled wave iii but which would be the 1st wave in an extending wave iii) before making a new high would preclude this.  Or, if the wave 4 of (C) low should be at 1076.22 (I mentioned this in yesterday's end of day update) today's high looks like it would only be wave iii of 5. Again, taking out the high of 1081.30 would likely eliminate this. 

So, on this labelling, the high at 1081.30 looks like the level to keep an eye on. Until we take it out, the risk of further upside remains.