21:07 BST - SPX End of Day Update

Today's move was a good start if we've completed 5 waves up from the August low at the high of 1185.53. You'll see from the 60 min counts page that 5 waves up from that low is required on all three Options shown, from the very bearish through to the very bullish, so what 5 waves up from that low means will depend on which of those Options is playing out. To determine that, we'll have to wait and see how far the decline from 1185.53 goes.

In the meantime, here's the 60 min chart (labelled as if Option 1 is playing out) showing the count for a top:

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

Obviously, we can't now move above the high at 1185.53 if the main labelling  is correct. 

Here's a close up from the wave (iv) low at 1131.87:

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

Taking out the 1163.87 wave i of (v) high ruled out the possibility that we might still be in wave iv of (v). So, the count for a top seems OK.

If the alternate labelling is playing out, we have to stay below 1177.49 in wave 2 of (3). If we don't, then, provided the high at 1185.53 holds, the main labelling stands.

However, there remains a bullish count which can't be dismissed until we drop below the low at 1155.71. Its a variation of the count shown in Chart 1 in yesterday's end of day update - I've just streamlined it by removing one set of  the ones and twos into the 1184.38 high.  Again, its a close up from the wave (iv) low at 1131.87:

Chart 3: SPX 1 min - wave (v) up from August low still in progress:

On the labelling shown, a drop below 1155.71 would invalidate this count since wave [2] of iii can't drop below the start of wave [1] of iii. As long as we remain above that low, however, the risk of further upside remains.

So, the levels I'm watching on the counts that I've labelled are 1185.53 (which has to hold if a top for the rally from the August low is in), 1177.49 (moving above which would rule out the alternate count on Chart 1 above) and 1155.71 (taking that out would rule out the bullish count shown in Chart 3).

 

17:07 BST - SPX Update on the count for a possible top at 1185.53

If the main labelling on the chart below is correct, we have to take out the B wave low at 1171.84. Doing so won't be conclusive that the main labelling is playing out. We'd really have to take out today's low to gain more confidence in it, followed by the low at 1155.71:

SPX 1 min - possible top at 1185.53:

If the alternate labelling is playing out, we have to stay above 1163.87.

15:09 BST - SPX Update - Possible top for the rally from the August low?

The chances may be increasing that this count, from Chart 2 in yesterday's end of day update, may be what we have seen playing out from the August low:

SPX 60 min - 5 waves up from August low possibly complete at 1185.53:

This shows the count as if Option 3 from the 60 min counts page is playing out, so this would be a temporary high. If Options 1 or 2 on the 60 min counts page is playing out, its a more bearish top.

Here's a close up:

SPX 1 min - possible end of 5 waves up from August low:

To be honest, however, with the market having been so strong recently, I think we need to be wary that this drop today may be wave [C] of an expanded flat wave iv. The argument against this would be that on my labelling, we had a running flat for wave ii, so if this is an expanded flat for wave iv, there's no alternation. However, alternation is only a guideline, so I think this risk is something to keep in mind.

Clearly, if we've seen a top at 1185.53, we have to stay below that high in any retracement, so that's the level to watch to the upside.

If this is still part of wave iv, then it has to stay above the wave i high at 1163.87, so that's the level to watch to the downside.