Tuesday, 28 September 2010

21:43 BST - SPX End of Day Update

On the 3 Options set out on the 60 min counts page, I'm still looking for the end of 5 waves up from the August low  to mark the end of minor 2 (or (i) of [c] of 2) on Option 1, the end of wave X on Option 2 or the end of wave [i] of C (or (i) of [iii] of A) on Option 3.

Please refer to the 60 counts page for context.

Taking out the high at 1149.92 means that the count in the chart I posted earlier, or some variation of it, looking for further upside is playing out. The question is how much further upside.

Here's the bigger picture for the move up from the August low (labelled as if Option 3 is playing out):

Chart 1: SPX 1 min - 5 waves up from the August low:

If wave (iv) is correctly placed at the 1122.79 low, then there could be a good deal of potential upside to come, though if the diagonal possibility I mentioned when I posted this chart earlier is playing out, it may be more limited.

You'll see I've got an alternate labelling for wave (iv) at the 1132.09 low. Even on this labelling, however, the upside could be substantial.

For these counts, they really need to stay above the wave [2] low at 1141.22. Taking it out would cast doubt on them. Taking out the low at 1132.09 would seriously call the main labelled count into question and would invalidate the alternate labelled count. Taking out the low at 1122.79 would invalidate the main labelled count altogether.

If 1132.09 is the wave (iv) low its possible that we might be seeing an ending diagonal form from there which may have less upside potential. Here's that possibility on a close up chart from the 1122.79 low (this chart is labelled as if Option 1 is playing out):

Chart 2: SPX 1 min - 5 waves up from the August low close up: 

You can see the potential diagonal shown by the green lines. I've put on tentative labels for the diagonal, but we may only have seen the 1st wave rather than waves i, ii and iii of it. If we did complete wave iii at today's high, then wave iv must stay above the dotted green line, otherwise, the diagonal that I've drawn in is off the table. 

Having said all of that, there is a count that may have a top in at today's high or not too far above, as shown on the following chart: 

Chart 3: SPX 1 min - top of 5 waves from August low in at 1150:

Taking out 1132.09 would give some credence to this count. 
So, the levels I'm watching are now 1141.22, 1132.09 and 1122.79.

19:23 BST - SPX Update: Last chance for the immediately bearish count

Its now an 88.6% retracement, so it had better start dropping now if this labelled count is to survive:

SPX 1 min - (1)-(2) down from 1149.92 - last chance:

Taking out that B wave low at 1142.47 might be the first encouraging sign, though not conclusive, that this count might be playing out, but it has to be done in an impulsive manner. Until then, I'd expect more upside, perhaps in the count shown in my last post.

17:57 BST - SPX Update: Do we still have more upside to come before 5 waves from the August low are complete?

If we don't start showing some impulsive downward action soon, I'm going to start thinking that this count (shown on a close up of Option 3 - see the 60 min counts page) for 5 waves up from the August low may be playing out:

SPX 1 min - 5 waves up from August low still in progress?:

If we take out the high at 1149.92, then it becomes the most likely count. Whether wave (v) will form as an impulse or as a diagonal, we'll have to wait and see, but a diagonal would be a possibility, with the 1st wave ending at 1149.92 instead of where I've placed it. 

So, this is something to keep in mind as we fail to make any downside progress.

16:44 BST - SPX Update: (1)-(2) down from 1149.92? Jury's still out

Its a much deeper retracement than I would have liked for this wave - 78.6%. The way I've labelled it, Y=W. If its wave (2) in a new downtrend, then it needs to start falling now or there's a clear risk that we're going to take out yesterday's high and invalidate the labelled count:

SPX 1 min - (1)-(2) down from 1149.92?:

15:17 BST - SPX Update: 5 waves down from 1149.92?

Its possible that we've now seen 5 waves down from yesterday's high. Here it is on chart 2 from yesterday's end of day update:

SPX 1 min - 5 waves down from 1149.92 complete?:

I can't be sure its the end of 5 waves down, but its right at the top of Friday's gap up, so it could be and we might see support come in here, so its a logical place to be on the look out for a low. If things are really weak, we could just continue to fall and fill the gap.

However, you get the idea and whether its bottomed where I've labelled it or there's more to go to the downside first, once we have completed wave (1), then the bounce is going to be critical - obviously, we have to stay below 1149.92 for the labelling shown on this chart to remain valid. Preferably, the retracement will stay between the 50%-61.8% retracement levels, though we know a 2nd wave can retrace more. The deeper it retraces the more doubt that will create that an end to the rally from the August low ended yesterday.

8:22 BST - SPX Update: 60 min time and price chart - early signs of a top, but price and indicators now need to confirm

When I last posted this time and price chart, SPX had broken down into the lower half of the price channel for the first time since the rally that started at the end of August - see last Thursday's post here. To me, this  was an inital sign of weakness creeping into the rally. 

It actually broke down out of the channel at the end of Thursday, though didn't close outside of it. As you can see from the updated chart, Friday's rally took it back up to the mid line of the channel and it duly spent the rest of the day crawling along the underside of the mid line, which was a possibility I mentioned in that post. An inability to get over the mid line would, as I mentioned, also be a sign of potential weakness, perhaps suggesting that an end to the rally would be close:

SPX 60 min time and price chart:

Yesterday, it fell away from the mid line and the rally into the day's high failed to reach it. This looks bearish, coupled with the divergences that I've marked in the indicators between the high in price made on Friday and yesterday's high (along with the larger divergences between yesterday's high and that of 21 Sept).

Still, the RSI and CCI continue to remain at bullish (to neutral in the case of RSI) levels. If we've seen the end of the rally from the August low then I want to see these indicators turn decisively bearish along with a significant decline in price. For RSI that means falling to the 30 level. For CCI that means falling at least to the zero line, but better still, below it and towards the -100 line.

The MACD histogram has turmed slightly negative which means that the MACD itself has had a bearish cross. However, the latter is still above the zero line. It needs to drop below that line to confirm any bearish move in price.

The stochastic has had a bearish cross, but remains in the overbought zone. We need to see it fall quickly to the 50 line at least, with a good decline in price.

You can see that we're coming into the next time line today, so it would be a good area for price to confirm a top to the rally from the August low, even though it has not quite hit the next price level at 1156. If we have seen a top, then price should fall decisively below the channel and not be able to recover it and we should start seeing the downward price levels (in red) get hit. Moves in the indicators as described above that accompany such a price move would help confirm that perhaps a top to the rally is in.

If we don't see all or any of the above, then it'll be a warning to be prepared for more upside. In particular, I don't want to see price decline but the indicators fail to reach their respective bearish/oversold levels, or price go sideways, but the indicators reach their respective bearish/oversold levels. Those combinations of price/indicator behaviour would be potentially bullish in my view. And, of course, if the channel gets broken to the downside, I don't want to see price recover back inside it.