Friday, 1 October 2010

23:01 BST - SPX: 60 Min Counts Page Charts Updated

I've updated the charts on the 60 min counts page to take account of this week's action. Options 1 and 2 show the bearish count of a top ay 1157.16 based on the ending diagonal (though as mentioned in the intra day  and end of day updates, its possible that we're still in wave v of the diagonal, with a further high yet to come).

Option 3 shows the short term bullish count that I posted pre-market today.

21:16 BST - SPX End of Day Update

On the 3 Options set out on the 60 min counts page, I'm  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.

So far, the high at 1157.16 has held as a potential top based on the ending diagonal count.

Here it is on the bigger picture of that count for the move up from the August low (labelled as if Option 1 on the 60 min counts page is playing out):

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

Here's a closer look: 

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

The labelling of the move from the 1157.16 high as the initial stages of minor wave 3 down remains tentative at the moment since we haven't taken out any significant levels to the downside as yet.

As I said in yesterday's end of day update, I want to now see an impulsive move down that takes out the low at 1132.09 and the low at 1122.79. Taking out the first level will preclude a further high to come in wave v of the diagonal that I've labelled on the above charts. Taking out the second level could start to make the bullish case look doubtful (though it won't be invalidated).

It may be encouraging for this count that since the drop from the high, we've moved in what looks like a corrective, mostly sideways manner. However, at the same time, until we see something clearly impulsive to the downside, we can't be sure that a bearish count is playing out. That's because the drop and sideways action is consistent with a continuing wave v within this diagonal or with the wave (iv) correction shown on the short term bullish count below.

Obviously, for this count to remain valid, we need to stay below the high at 1157.16.

Turning to the more bullish count, you can see the bigger picture of the one that I'm now following on the first chart in the pre-market post (click here).  Here's the close up (the labelling on this chart relates to Option 3 on the 60 min counts page): 

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

As explained in the update I posted earlier (see here) I have to assume that we're still in wave (iv) and that it did not end at 1136.08 as originally labelled.

As you can see, I've labelled a potential zig zag, but the alternative is a triangle as shown by the red dotted lines. The latter would entail less downside to complete wave (iv) than the former (it can't take out 1136.08 in the e wave if its a triangle).

The problem with this bullish count is that its not invalidated unless we take out 1065.21 in an assumed wave (iv). However, as explained in the pre-market post of this count, if I see a strong impulsive decline that takes out 1091.15, I'd really start to doubt this count. 

So, the levels I'm watching for some sort of confirmation of an end to the rally from the August low at 1157.16 are 1132.09, 1122.79. To the upside, we have to stay below the current high at 1157.16.

Have a great weekend!

19:31 BST - Correct chart inserted in the last post

Sorry if I confused anyone - I've replaced the first chart in the previous post with the correct one for the bearish count (I originally put the bullish chart in where the bearish chart should have gone).

19:19 BST - SPX Update on the bullish and bearish counts

For the bearish count, this is what I have to go with at the moment:

SPX 1 min - top in at 1157.16:

I'm still looking at 1149.59 as the invalidation point, but  if that gets taken out, we could still be in wave [2] provided we stay below1157.16. 

For the short term bullish count shown in the pre-market post (see here) I'd have to assume we're still in wave (iv) since there doesn't seem to be a compelling impulsive move to the upside from where I had labelled wave (iv) at 1136.08, other than one which looks best as part of an on-going correction:

SPX 1 min - waves (iv) and (v) still in progress:

15:39 BST - SPX Update on the bearish count

On the bearish count of an ending diagonal complete at yesterday's high, I think we may have seen a double zig zag from yesterday's low, with a truncation in the C wave of the second zig zag:

SPX 1 min [1]-[2] down from 1157.16:

So, the end of wave [2] is at 1149.59 which means that we shouldn't now get back above that high if this is the correct count. I'd start to feel more confident in this if we take out 1136.08 and do it swiftly with a clear impulse down. If we take out that high, then this count will need to be reassessed.

12:53 BST - SPX : Update on the short term bullish count

As I mentioned in yesterday's end of day update, I'm not that keen on the bullish count shown in charts 3 and 4 in that update, consisting as it does of a number of ones and twos to the upside. Even if the alternate labelling is applied, with wave (iv) at 1132.09, it still doesn't look great in my view. So, I'm looking at this as a possibility, where the ending diagonal I've been showing on the bearish count (see charts 1 and 2 in that update) was actually the end of wave (iii), not wave (v) up from the August low. 

Here's a 60 min chart for a larger view (labelled as if Option 3 from the 60 min counts page is playing out):

SPX 60 min - waves (iv) and (v) up still in progress:

As I mentioned in one of the intra day updates yesterday, the initial move down from yesterday's high to 1148.82 looked very much like a double zig zag rather than 5 waves for an impulse, so it wouldn't surprise me to find that it was just part of the wave (iv) correction shown on the above chart. I'd actually count the move from the high to the 3 wave low down to 1151.37 as a zig zag, then a running triangle x wave ending at 1151.75, followed by another zig zag for wave y.

Here's a closer look from the wave iii of (iii) high at 1127.36 (though you can't really see the detail of wave (iv) on this chart):

SPX 1 min - waves (iv) and (v) up still in progress, close up:

If this count is correct, then, by reference to wave (i), if wave (iv) bottomed at 1136.08, wave (v) would be equal at 1161. It would be a 1.236 extension at 1167, 1.382 x (i) at 1171 and 1.618 x (i) at 1177. If wave (iv) hasn't yet ended, then these potential targets will need adjustment.

The counts shown on  charts 3 and 4 in yesterday's end of day update have invalidation points at 1132.09 (for the alternate with wave (iv) at 1132.09) and 1122.79 (for the main count). The count above would survive a drop below those levels and isn't tecnichally invalidated unless we drop below 1065.21.

Remember that the bearish count shown in charts 1 and 2 of that end of day update carries the risk of a further high in a continuing wave v of the diagonal as long as we remain above 1132.09. That new high would, however, be limited to 1159.22 since wave v has to remain shorter than wave iii. If we rally and exceed that level then the count shown in this post will become my favoured short term bullish count.

To start to disregard this count, if we've seen waves [1] and [2] down from the low (as shown in charts 1 and 2 in the end of day update, with [2] possibly still needing more upside as described in that update)  I'd want to see a significant decline in waves [3], [4] and [5], preferably taking out the pivot low at 1091.15. Even though that wouldn't technically invalidate counting wave (iv) in progress, it would start to make it look unlikely in my view.