Tuesday, 5 October 2010

21:11 BST - SPX End of Day Update

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

A new high today meant that the immediately bearish count which had the end of 5 waves from the August low at 1157.16 was eliminated and the near term bullish count became the focus. On that count, 1157.16 was only the high of wave (iii), so we still needed wave (v) up to complete the rally from the August low.

Here's the bigger picture shown on the 60 min chart of Option 1, (which is my overall bearish count for the decline from the April 2010 high) which I've updated to take account of today's move (you can see the 60 min chart for the bullish Option, Option 3, on the 60 min counts page):

Chart 1: SPX 60 min - Option 1 - 5 waves up from the August low:

Here's the close up chart I've been posting today which zooms in on the action from the wave (iii) of [c] high at 1157.16:

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

I don't think the count for 5 waves up from the wave (iv) low at 1131.87 looks too bad.  However, we haven't seen anything yet to suggest a top. 

We need to see an impulsive 5 wave decline. Currently, I'd like to see such a decline take out 1159.11. We then need to see a 3 wave retracement of that decline that holds below the high (presently 1162.76) and for another 5 wave decline to follow. Once we get that, I'll be watching the next retracement up and I'll be looking for it to hold below the low of the first 5 waves down. If it doesn't, I'm going to be very suspicious that further upside may lie ahead.

As to that potential for further upside, at the moment, its possible that the high I've labelled as wave iii at 1152.50 is only wave [1] of iii (and the high at 1162.76 would be wave [3] of iii). If we take out that high in an assumed wave [4] of iii, that possibility will be ruled out. I'd then want to see the low at 1149.21 which I've labelled as wave iv get taken out to preclude the possibility that wave v might extend.

So, the levels I'm watching for now are 1162.76, 1159.11, 1152.50 and 1149.21. Taking out the 1159.11 level will start to suggest that a top may be in. Taking out 1152.50 and then 1149.21 will greatly increase confidence that a top is in at 1162.76 (but obviously, the nature of that top will depend on which of the counts shown on the 60 min counts page is playing out).

20:21 BST - SPX Update: nearing a top?

I've re-labelled the count slightly. Still looking for that elusive top to the rally from the August low on both the bullish and bearish counts.

SPX 1 min - close up:

We may be close now. Wave (v) is 1.236 x wave (i) at 1163. A drop below 1159.11 may be the first sign of a top.

17:45 BST - SPX Update - a further high required to complete 5 waves up from 1131.87?

For the sake of completeness, here's the count I mentioned  in the last post which suggests a further high is needed to complete wave v of (v) up from the wave iv of (v) low:

SPX 1 min - near term bullish count: further high needed to complete it:

Until we see an impulsive move down, the risk, as always, remains to the upside.

17:22 BST - SPX Update: Near term bullish count wins, but have we topped?

Taking out the high at 1157.16 means that the near term bullish count that I've been showing is playing out. Here it is on the overall bearish Option (Option 1 on the 60 min counts page) showing a count for 5 waves up from that wave (iv) low at today's high:

SPX 1 min - near term bullish count: topped?:

And here's a closer look:

SPX 1 min - near term bullish count close up:

Obviously, if we take out the high at 1158.82 then we haven't yet topped. I can certainly see a count from the wave iv of (v) low that would suggest another high is needed to complete wave v of (v), so this current decline from 1158.82 would only be wave [4] of v.

If we have topped, or once we do, we'll have to see how the retracement behaves to gauge whether or not its the end of the rally from the August low or whether the 5 waves up from the low labelled (iv) at 1131.87 is just the first of a larger impulse from that low. At 1158.82, wave (v) is equal to wave (i) so its possible that the rally from 1131.87 is the whole of wave (v).

14:41 BST - SPX Update on the bullish and bearish counts

This is the only way the bear count can survive now - 1157.16 is the invalidation point:

SPX 1 min - bear count:

The near term bullish count will take out that high, if it represents what is playing out, but it needs to stay above 1131.87:

SPX 1 min near term bullish count:

12:31 BST - Dollar Update

The dollar made a new low this morning. I was expecting a new low as you can see from the update I did on Saturday, but because we retraced up quite deeply first, I've relabelled the charts to show the wave (iii) of [v] low at Friday's low (instead of that low being wave iii of (v)), with the retracement up being wave (iv) rather than wave iv of (v):

Dollar 60 min:

Here's a closer look from what I now have as the wave iv of (iii) high at 79.020:

Dollar 5 min:

As you can see, we may be near to completing wave (v) down, provided it doesn't extend. It looks to me like one more low is required to complete 5 waves down from the wave (iv) high at 78.687. If that's right, the monitoring process for a potential impulse move up will resume then.  If we fail to make a new low but instead rally above 78.365, it'll start to suggest that we may have bottomed at the current low of 77.975.

However, be aware that the 78.6% retracement level is at about 77.300 and price may well be headed there. Having said that, currently, wave C is about .618 x wave A and also, wave C is about 1.618 x wave B. That would be an intersting relationship for an end to wave C. 

As I mentioned on Saturday, to have any confidence that the decline may be over, we need to see a 5 wave rally, followed by a 3 wave decline that stays above the starting point of the rally. We then need a further 5 wave rally followed by a pullback that stays above the high of the first 5 wave leg up - that's still something that we haven't seen.

You can see on the 5 min chart how we failed to see that following Friday's low - the first 5 waves up which could have been the first wave in an impulse is the leg I have labelled as [A] of a of (iv). A 3 wave retracement to where I have [B] of a of (iv) followed. We then saw another 5 wave rally to where I have [C] of a of (iv). The crucial thing at this stage for an impulse was for the subsquent retracement to stay above the high at [A], which it failed to do. That was the first sign that the possibility that I had mentioned on Saturday that Friday's low was the end of wave (v) was unlikely.

The next sign of this was when we rallied above the high at a, it was possible we were in a one-two-(one)-(two)-(three) up. However, taking out the high at a on the next retracement ruled that out and increased the likelihood of a new low.

So, as mentioned above, I'm expecting another low below 77.975 to complete wave (v) of [v] and C. Then I'll resume the process described on Saturday and above, of looking for signs of an impulse move up, beginning with a 5 wave rally from the new low and a 3 wave pullback.

If we rally now without making a new low and take out the low at 78.365, especially if it occurs in a clear 5 wave move up, I'll start to think we have already seen the end of wave (v). I would then want to see a quick move to take out the highs at 78.687 and 79.020.