Wednesday, 27 October 2010

21:15 BST - SPX End of Day Update

Following today's action, I'm left with two counts, one bullish and one bearish. The bearish one assumes that the rally from the august low topped at 1196.14 while the bullish count anticipates more upside before we see a top. You can see where these shorter term charts fit into the bigger picture on the 60 min counts page.

Here's the bearish count:

Chart 1: SPX 1 min - bearish count:

This shows a (1)-(2)-1-2-i-ii down from the 1196.14 high. For this count, as labelled, to remain valid, we need to stay below the high at 1187.11 on this current rally which I have as wave ii of 3 of (3). Its retraced nearly 78.6% of wave i now, so really needs to start dropping.

While that high remains intact, I'm thinking the odds are for more downside.

Its possible that we have 5 waves down from the 1196.14 high as you can see from the labelling on Chart 2 below, in which case, only taking out the 1196.14 high will invalidate the bearish count. However, I think that a move above 1187.11 will make me very cautious about the bearish count.

Here's the bullish count:

Chart 2: SPX 1 min - bullish count:

As mentioned in my last update, wave iv may be complete at today's low as labelled, or wave [C] may be subdividing as shown on Chart 1 above, to achieve a deeper retracement than we've seen so far (23.6%). The 38.2% retracement level is at about 1152, so that needs to be borne in mind.

Again, I think that the 1187.11 level is the level to watch here. If it remains intact, the chances are we'll see more downside. Taking out that level doesn't necessairly mean that wave iv is over, however, since the triangle possibility (see the blue dotted lines) remains and we'd now be in wave [D] of such a triangle. However, 1171.70 would mark the lower limit for wave [E] if a triangle is playing out here.

So, its nice and simple today - I'm watching 1187.11. Above that level, I'll be seriously questioning the bearish count even though it won't be invalidated unless we take out 1196.14. While we remain below 1187.11, I'll favour more downside.


19:19 BST - SPX Update on the bullish and bearish counts

Here's what I'm looking at on the bullish and bearish counts at the moment:

SPX 1 min - bearish count:
We have to stay below 1187.11 for this count to remain valid. 

SPX 1 min - bullish count:
Its possible that wave iv has bottomed - I've relabelled it to an [A]-[B]-[C]. However, we could be in a subdividing wave [C] down if I apply the count shown on the bearish chart  for the decline from 1196.14, so again, I'm watching the 1187.11 level. If we don't take that out, we should see more downside either on this bullish count or on the bearish count.


16:16 BST - SPX Update on the bullish and bearish counts

The ending diagonal shown in Chart 2 of yesterday's end of day update has now been invalidated with price reaching the dotted blue line shown in that chart.

That leaves the completed ending diagonal shown in Chart 1 of that update and the new bullish count I posted earlier today (see here). Here are the close up charts updated with the action so far today.

SPX 1 min - bearish count:

On this count, today's decline would be wave i of 3 of (3) down. Its not clear whether its complete yet. If things are really bearish and we just keep falling, it may start to look like the decline is wave (3) itself. However, one step at a time - I'll just see how things go.

SPX 1 min - bullish count:

The possibility of a triangle for wave iv will be invalidated below 1171.17. In that event, I'd be looking at wave iv as an expanded flat type of correction. I'm not sure its complete yet. the 38.2% retracement of wave iii is at about 1152, so there could be more downside to come in this wave iv. However, we're now at the 23.6% retracement, so its an area to watch for a potential reversal.


11:47 BST - SPX Update - revised bullish count

I've been saying for the last few days that I don't really like the bullish count that I've been showing where the 5th wave of the rally from the August low is subdividing. So, I've come up with a new bullish count which I prefer and which I'll be following instead.

Here it is on a 60 min chart which zooms in on the rally from the August low:

SPX 60 min - new bullish count:

As you can see, it puts us in an extending wave (iii), which incorporates an extended wave iii and which is forming in a nice channel. 

At the moment, the count places us possible at the start of wave v of (iii), though as noted on the chart, wave iv may still be in progress if its forming a triangle instead of what looks like a completed running correction.

The triangle possibility for wave iv would be off the table if we take out the low at 1171.17 which I would consider to be the [A] wave if a triangle is in progress.

There is a slightly less bullish way to count this, which would make the high at 1189.43 wave (iii) and the low at 1177.72 wave (iv), so leaving only wave (v) up to come. I've labelled it on the close up chart:

SPX 1 min - new bullish count close up from the 1184.38 high:

With this count, the obvious invalidation points are well below where we are currently: if we're in wave iv of (iii) then it can't drop below 1105.10 (the wave i of (iii) high) and if we're in wave (iv) of [i] then it can't drop below 1065.21 (the wave (i) of [i] high). Therefore, for earlier clues, I'd be relying on wave behaviour to suggest that this count may not be playing out. By that I mean, of course, a significant 5 wave decline that has undoubtedly impulsive characteristics - something that we simply haven't seen since this rally started at the end of August, so hopefully, it should be easy to recognise when it does happen.

Until we see that, then I'd assume that further upside remains.