Tuesday, 26 October 2010

21:07 BST - SPX End of day Update

All three counts I'm following, bearish, moderately bullish and bullish, remain on the table. You can see them in context on the 60 min counts page, where the bearish count is on Chart 1, the moderately bullish count is on Chart 2 and the bulish count is on Chart 3.


Chart 1: SPX 1 min - bearish count:

This assumes that a top to the rally from the August low was put in at 1196.14, with a 5th wave ending diagonal.

From that high, I'm labelling a (1)-(2)-1-2 down. Its crucial that we stay below the high at 1191.44. If we take that out now, this count is going to be invalidated and it will be highly unlikely that we topped at 1196.14.

Moderately bullish:

Chart 2: SPX 1 min - moderately bullish count:

On this count, the high at 1196.14 is assumed to be the 3rd wave of an ending diagonal to complete the rally from the August low.

If the 4th wave of this diagonal is at 1177.72 as labelled, then the limit for the 5th wave is 1214.15, in order for it to remain shorter than the 3rd wave. However, all it needs to do is take out the high at 1196.14 in a zig zag pattern to complete the 5th wave.

Taking out the low at 1177.72 now, before we make a new high, might start to raise questions about this count. However, it would be possible that we're still in wave [4] if that happens, as a double zig zag (with today's move being the end of the (W) wave and the (X) wave), but it would have to stay above the dotted blue line for this diagonal to remain a valid count. If it fails to do so, then that might raise the odds that the bearish count is playing out.

Bullish count:

Chart 3: SPX 1 min - bullish count:

On this count, I've labelled a subdividing 5th wave for the rally from the August low. Provided we stay above 1159.71, this count remains on the table, though I still can't say I like it given that its likely to result in a 5th wave that's out of proportion to the 1st wave in the rally from the August low. However, that doesn't invalidate it, so its something I'm keeping an eye on.

So, the levels I'm watching on these counts are: 1191.44 (to keep the bearish count on the table, even though, strictly, its not invalidated unless we take out 1196.14), the blue dotted line which is at about 1172-1175 (which price has to stay above if the moderatley bullish count is playing out) and 1159.71 (which, if taken out, will invalidate the bullish count as I've labelled it).

17:29 BST - SPX Update

The bearish count showing a top at 1196.14 now needs to stay below 1191.44 in order to remain valid:

SPX 1 min - ending diagonal complete:

The continuing ending diagional may have started its 5th wave up:

SPX 1 min - continuing ending diagonal:

If we take out 1177.72, I'll start to question this count, but it won't be invalidated unless we drop to the blue dotted line before making a new high above 1196.14.

On the bullish count, we may also have started the next leg up:

SPX 1 min bullish count:

If we drop below 1177.72, this might start to look questionable, but won't be invalidated unless we take out 1159.71.

15:18 BST - SPX Update on the ending diagonal counts for the 5th wave up from the August low

Its possible that the completed ending diagonal count shown on Chart 1 of yesterday's end of day update is playing out. However, I'll be questioning it if we take out the low at 1186.36 before we take out today's low to make 5 waves down from 1196.14:

SPX 1 min - completed ending diagonal:

If we do that, and even more so if we take out 1191.44 while we only have 3 waves down from yesterday's high, I'll be looking to the unfinished ending diagonal that was shown on Chart 2 of yesterday's end of day update:

SPX 1 min - continuing ending diagonal: