Wednesday, 20 October 2010

21:16 BST - SPX End of Day Update

You'll see from the 60 min counts page that 5 waves up from the August low is what I'm looking for on all three Options shown, from the very bearish through to the very bullish. 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 what sort of decline we get once we actually see a top to the rally, if we haven't already seen it.

In the meantime, here's the bearish count which assumes a top at 1185.53 (you can see the bigger picture of this count on the 60 min counts page):

Chart 1: SPX 1 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 closer look:

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

If this count is correct, we need to see an impulsive decline which, so far, we haven't see. Until we do see that, the risk remains to the upside.

If we take out the high at 1185.53, it doesn't necessarily mean that there is a great deal more upside to come in the bullish count I've been showing which puts us in a sub-dividing wave (v). Here's a count which assumes a further high to come, but probably not too much higher:

Chart 3 - 60 min alternate bearish count:

We only need 5 waves up from the low labelled (iv) to complete this count and you'll see from the count in Chart 4 below that we could be close to getting that after a wave (4) correction. So, provided wave (v) on the above count doesn't extened, a top on this count may not be far off.

Here's the more bullish count:

Chart 4 : 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. However, falling below 1168.74 would, in my view weaken this count considerably and taking out 1159.71 at this stage would make me really start to question it.

Here it is close up:

Chart 5: SPX 1 min - bullish count close up:

Taking out the high at 1174.13 in an assumed wave (4) would invalidate the main labelling. Taking out the low at 1168.74 invalidates the alternate labelling and will begin to focus attention on the bearish count.

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), 1174.13 (moving below which would rule out the main bullish count on Charts 4 and 5 above) and 1168.74 (taking that out would rule out the alternate bullish count shown on Charts 4 and 5). 

Then there are the 1159.71 and 1155.71 levels to watch. If we take those out, the very bullish count would start to lose credibility and then be invalidated, respectively. Ironically, such a move would be OK as a continuing wave (iv) correction on the alternate bearish count shown on Chart 3 above, so we'd still have the risk of a further high to come on that count.

20:12 BST - SPX Update on the bullish and bearish counts

Possibly completed wave [2] on the bearish count - not much room left if it isn't complete:

SPX 1 min - bearish count close up:

We really need to see something impulsive to the downside to have any confidence in this.

Here's how it looks on the bullish count:

SPX 1 min - bullish count close up:

If the main labelling is playing out, we need to stay above the wave (1) high at 1174.13 in wave (4). If the alternate labelling is playing out, the key level is the wave (2) low at 1168.74.

15:41 BST - SPX Update on the bullish and bearish counts

Here's a close up of Chart 2 from yesterday's end of day update:

SPX 1 min - bearish count close up:

The 61.8% retracement level is at about 1175. We need to stay below 1185.53 for this count to remain valid.

The alternate count shown in Chart 2 from yesterday's end of day update still stands as a possibility unless we take out 1177.49.

Here's a close up of Chart 3 from yesterday's end of day update:

SPX 1 min close up of the bullish count:

Straightforward here. We just need to stay above 1159.71.

11:45 BST - FTSE Update

If FTSE put in an important top in April, its going to have to start dropping pretty much now. Here's an updated count showing how the move since the April high may be counted - the main labelling is the bearish view, with the alternate labelling showing the bullish view:

FTSE Daily:

So far, wave [ii] on the bearish count has just exceeded a 78.6% retracement of wave [i] down.

You can see that I've labelled the move up from 5070.94 as a diagonal. On the bearish count, its an  ending diagonal for wave c of (y) of [ii]. On the bullish count it would be a leading diagonal, so it can't be wave 3, so it would have to be wave [i] of 3 - that's very bullish and means that this bullish count, on this labelling, won't be invalidated unless we drop below 5070.94.

Here's a closer look:

FTSE 60 min:

This shows only the bearish count, but the following comment on the diagonal applies equally to the bullish count.  I've labelled the diagonal from 5070.94 as complete, but we may still be in wave [5]. It can't exceed 5833.1 if its to remain shorter than wave [3] as required by the rules. In theory, wave [5] could, therefore, reach its maximum level and still not eliminate the bearish count since the April high is 5833.73.

Here's an even closer look:

FTSE 5 min:

Again, I've only labelled the bearish count. 

It looks like a diagonal down from the high at 5761.93, although I could just as easily label it as an impulse down to where I have wave (1) of the diagonal, followed by an expanded flat wave (2), with today's rally being the C wave of wave (2).

If we take out the high labelled [ii], that would mean that the diagonal is still in progress or something more bullish is developing.

Taking out the wave [4] low of the diagonal at 5597.46 would mean that the diagonal is complete on this labelleing, though it won't seal the bear case since even on the bullish count, a pullback (in wave [ii] of 3) is called for. As mentioned above, we'd really have to drop below 5070.94 to start thinking that the bullish case may not be viable.

So, taking out 5770.92 would suggest more potential upside and the bullish case might then be the focus. However, the bear case isn't invalidated unless we take out 5833.73. Taking out 5833.1 invalidates the diagonal from the 5070.94 low and would increase the likelihood that the bullish count is playing out. Dropping below 5597.46 would suggest we could see more downside, but it may only be a corrective wave [ii] on the bullish count. We'd have to drop below 5070.94 to rule that out. Dropping below today's low at 5680.43 would be a the first step in a larger down move.