Wednesday, 29 September 2010

21:22 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.

We stayed below the high at 1150, so the potential ending diagonal that I posted in yesterday's end of day update and updated earlier, remains valid. 

Here it is on the bigger picture for the move up from the August low (labelled as if Option 1 is playing out):

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

For this labelling to remain valid we need to stay below the high that I've labelled (2), which is at 1148.63. A move above that would suggest that we are likely to take out the high at 1150, perhaps in one of the alternatives within this diagonal that I set out in my earlier post or on one of the more bullish counts (see below).

Here's a closer look at the diagonal: 
Chart 2: SPX 1 min - 5 waves up from the August low close up:

You can see one of the alternatives for the diagonal labelled on this chart, namely, that 1150 was only the end of wave iii and we're now in wave iv. To preclude this, I want to see 1122.79 taken out and/or the dotted line reached. Once we have a wave iv low for this alternative, the limit for wave v would be 27.21 points from that low since wave v must be shorter than wave iii.

The other possibility I mentioned in the earlier post is that we're still in wave v of the diagonal, so 1150 would have been wave [W] of v and we'd now be in wave [X] of v. This would be invalidated if we drop below 1132.09 since that would prevent wave v being a (double) zig zag, which all waves in an ending diagonal need to be. We'd have to remain below 1159.22 in wave v since it has to be shorter than wave iii. If we take that level out, I'd be looking to one of the more bullish counts.

Turning to the more bullish counts, here's the bigger picture: 

Chart 3: SPX 1 min - 5 waves up from August still in progress:

And here's a close up:

Chart 4: SPX 1 min - 5 waves up still in progress, close up:

Here, I think that taking out 1140.26 would start to cast doubt on this count. If we take out 1132.09, I'd be even more doubtful. Taking out 1122.79 would probably put it to bed, though I don't think we can rule out that we are still in wave (iv), so I'd want to see an impulsive move down and a very significant drop below 1122.79 to start thinking about discarding that possibility.

The possible diagonal I've sketched in would suggest more limited upside than the ones and twos labelled. It may be something to keep an eye on, but below 1132.09 it will be invalidated.

So, the levels I'm watching for some sort of confirmation of an end to the rally from the August low are 1140.26, 1132.09, 1122.79. To the upside, if we take out 1148.63, its likely we'll move above the 1150 high. If we're still in an ending diagonal shown in charts 1 and 2 above, the highest we could go is 1159.22. Above that and the bullish counts in charts 3 and 4 will become the focus.

15:53 BST - SPX Update on the potential ending diagonal to complete 5 waves up from the August low

This is a close up of chart 3 from yesterday's end of day update showing the possible ending diagonal for the final 5th wave up from the August low:

SPX 1 min - ending diagonal 5th wave to complete 5 waves up from August low, close up:

As shown by the main labels, we may have completed the diagonal at 1150. Its also possible however, that we're still completing wave v. In that case, we have to stay above 1132.09 to retain a zig zag count for wave v and we have to stay below 1159.22 for wave v to be shorter than wave iii.

However, you can see that the alternate labelling labels the high at 1150 as wave iii, with wave iv now in progress. If that's correct, wave iv has to stay above that dotted line and/or 1122.79. 

Another possibility would be that wave iii is still in progress.  Again, to retain a zig zag count for wave iii, it would then have to stay above 1132.09. To remain shorter than wave i , wave iii would have to stay below 1152.50.

So, these are the possibilities on this potential ending diagonal count. Bear in mind that the more bullish counts shown in charts 1 and 2 in yesterday's end of day update still stand (except the small ending diagonal in chart 2), albeit with some labelling adjustment. I wouldn't rule them out until we take out 1122.79.