Wednesday, 6 October 2010

21:18 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.

We stayed below the high of 1162.76, so that high remains a potential top for the rally from the August low.

However, we haven't yet seen a clear 5 wave impulsive decline from that high, taking out any significant levels so the risk of further upside continues.

You can see the bigger picture into which the following chart fits by going to the 60 min counts page where you'll find the 3 Options I'm following for the move down from the April 2010 high. The following chart is labelled as if Option 1 is playing out and zooms in on the action from the wave (iii) of [c] high at 1157.16. Its updated from the earlier posts to take account of subsequent price action:

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

I've labelled it as if we've compled 5 waves up from the August low. Its tentative at the moment because, as explained in the intra day updates, we haven't seen anything yet to enable us to have any great confidence that a top is in. 

The 3 waves down from the high that we've seen so far could be wave [4]  or iv (on this or some variation of this count). The diagonal I've sketched in from today's low for wave a of 2 could be the start of wave [5] or v up. We need to take out the low at 1154.85 to preclude that. The (1)-(2)-1-2 that I've labelled will be invalidated if we move above the high at 1161.75 in an assumed wave 2. If that happens, the likelihood of a new high will be signifcantly increased.

As I said yesterday, to really start thinking that we've seen a top of some sort (what it represent will depend on which Option is playing out), we need to see an impulsive 5 wave decline that takes out a pivot that would enable us to eliminate the bullish possibilities. On the count I've labelled, the two levels I'm continuing to watch are 1152.50 and 1149.21.

I'm watching these levels because on the labelling I have,  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.

Of course, taking out those levels doesn't preclude further upside, because on the bigger picture, there are levels lower down that need to be taken out if we have seen the end of 5 waves up from the August low. The first of those will be the low labelled as wave (iv) at 1131.87 (to preclude the possibility that wave (v) is extending).

So, the levels I'm watching for now are 1161.75, 1152.50 and 1149.21.  Taking out 1161.75 reduces the likelihood that we've seen a top and we'll probably go on to take out the high at 1162.76. Taking out 1152.50 and then 1149.21 will greatly increase confidence that a top is in at 1162.76.

20:15 BST - SPX Update on the possible (1)-(2)-1-2 developing from the high

The (1)-(2)-1-2 won out, so now wave 2 of (3) must stay below 1161.75. It counts well at the moment as a double zig zag. 

However, since we've still only got 3 waves down from the high at 1162.76, I'm still wary that today's low may only have been the end of wave [4] (until we take out the levels I've mentioned previously). As you can see, I've sketched in a potential diagonal up from today's low which could be the start of the next leg up if today's low was wave [4] - we must take out today's low to eliminate this:

SPX 1 min - top at 1162.76?

19:18 BST - SPX Update: The likelihood of a top at 1162.76 may be increasing

This is what I have at the moment - the bearish count could be on track, but I still want to see the levels mentioned previously (and explained in yesterday's end of day update) taken out (until then I remain wary of further potential upside):

SPX 1 min - top at 1162.76?

Since we stayed below the wave (1) low at 1158.13 on the move up from today's low (so far, at least), the leg down that I've labelled as 1 of (3) could be the whole of (3). If we take out the low at 1154.85 without first taking out 1158.13, I might go with that alternate labelling, but I'll have to see how we retrace if we do get a low below 1154.85 now.

If we take out the low at 1158.13 before making a new low, then the (1)-(2)-1-2 comes into play and the invalidation point will be the wave (2) high at 1161.75.

17:25 BST - SPX Update: Still possible that we topped at 1162.76, but we still need price confirmation

For the count that has us having topped at yesterday's high, I'm now labelling a larger diagonal for wave (1) down, with a 78.6% retracement in wave (2):

SPX 1 min - top in at 1162.76?

I think the Dow took out its equivalent high so the risk that today's low on SPX was the end of wave [4] remains high at present (even though none of the other main indices I'm watching followed the Dow). 

If the count I'm showing is correct, we should now move quickly below today's low without any difficulty. That would certainly increase confidence in this labelling while a failure to do so would have the opposite effect. As before, the lower levels mentioned in my previous post then need to be taken out in an impulsive move, otherwise, I would have to expect more upside.

15:36 BST - SPX Update - possible bearish count for the move off yesterday's high, but its low odds currently

We took out the first level I was watching to the downside (see yesterday's end of day update), at 1159.11, but didn't do it in a 5 wave impulse. So, in my view, it remains open whether or not we saw a top to the rally from the August low at yesterday's high. 

For the moment, here's how I'd count it if a top is in, but bear in mind, we could still be in wave [4] of v of (v) or some variation of this count since I don't think we've seen the type of price behaviour I described in yesterday's end of day update:

SPX 1 min - top in at 1162.76?

If a top is in then I don't think we should have any difficulty taking out the other two downside levels I mentioned in yesterday's end of day update, 1152.50 and 1149.21. If we can't take out those levels in an impulsive move, then I'm going to be thinking there may be further upside to come (which may involve some re-labelling). So, until those levels go, there's a high risk of further upside in my view.