Tuesday, 9 November 2010

21:20 GMT - SPX End of Day Update

This is the chart I've posted previously (labelled as if Option 3 on the 60 min counts page is playing out) showing a potentially complete 5 waves up from the August low and which is the basis of the main count on the 1 min close up chart I've been showing:

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

So, that's the bigger picture for the bearish count I've been posting. Here's the updated 1 min chart showing the count from 1159.71 low (this chart is labelled as if Option 2 on the 60 min counts page is playing out):

Chart 2: SPX 1 min - bearish count:

There does still remain the possibility that we still need another high to complete the 5 wave rally from the August low. - see the alternate labels. As mentioned over the past few days, we'd need to take out the high at 1194.53 to eliminate that possibility.

However, even if we take out that high, there remains the possibility that the 1127.08 high was only the end of the 3rd wave up from the August low so we have a larger degree 4th wave decline to come and then another rally. The bigger picture for this is on the chart of Option 3 on the 60 min counts page. Here's the 1 min chart from the 1159.71 low that shows this (labelled as if Option 3 is playing out):

Chart 3: SPX 1 min - bullish count:

Again, there's the question here of whether we're still in wave [4] of v of (iii) and that will be eliminated if we now take out the high at 1194.53. But this count would then put us in wave (iv) which could take us down to about 1156 if it achieves a 38.2% retracement, but we'd then see a further rally to complete 5 waves up from the August low.

Here's the close up chart I've been posting for the move from the 1227.08 high (I've re-done the label degrees so both main and alternate counts coincide with the main and alternate counts shown on Charts 2 and 3 above):

Chart 4: SPX 1 min - close up:

The main labelling assumes that a top was put in at 1127.08 (on the bear count (Chart 2) it would be the 5th wave of the rally from the August low and on the bullish count (Chart 3) it would be the end of only the 3rd wave from that low).

The main labelling does seem a bit stretched given the size of wave (2) compared to the size of wave (1). However, the high at 1127.08 held so the count is valid.

Having said that, the risk that the alternate labelling is the correct count remains until we take out the high at 1194.53 and invalidate it. So far, on the alternate labelling, we've retraced 38.2% of wave [3], so I'd probably expect a turn around here if the alternate labelling is playing out.

For the main labelling, there are various ways to label the decline from today's high. For the labelling I've chosen, the bear count should ideally stay below the high labelled 2 at 1219.08. It wouldn't be fatal to the bear count if we take that out. It could well be that the low I've labelled as wave 1 is, in fact, only wave iii of 1, with the 1219.08 high being wave iv of 1 and the low at 1208.94 being the end of wave 1.

The crucial high for this count is, in my view, 1226.84. While that remains intact, the possibility remains that we made some sort of top at 1127.08.

So, I'm watching 1219.08 (taking that out would invalidate the main labelling on Chart 4 above, but wouldn't void the bearish count) and 1226.84 (taking that out would invalidate the labelling for the main count and make it very unlikely that a top was put in at 1127.08)  and 1194.53 (taking out that high would invalidate the alternate labelling on Charts 2, 3 and 4).

19:00 GMT - SPX Update

Taking out the low at 1217.55 that I mentioned in my last post gives the bearish count a fighting chance:

SPX 1 min close up:

As you can see the alternate count remains on the table, with wave [4] just forming a more complex correction.

For the bear count, it could be labelled as a 5 down from today's high or as the (1)-(2)-1-2 that I've shown. If the wave 1 low at 1219.46 gets taken out in an assumed wave 4 of (3), then I'll likely relabel the chart to show the 5 down instead.

The next target for the bear count is 1194.53, the wave [1] high (see yesterday's end of day update). Taking that out would rule out the alternate count on the above chart.

15:55 GMT - SPX Update

Here's an update of Chart 3 from yesterday's end of day update:

SPX 1 min close up:

You can see the slightly bigger picture for this chart on Charts 1 and 2 of that update and the even bigger picture on the 60 min counts page.

The most bearish count survives (just) with an adjustment to make it only a one-two down instead of nested ones and twos. However, we have to take out the low at 1217.55 for this count to have any chance. While we're above that level, the alternative count on the chart above should really be favoured

8:25 GMT - Dollar Update

Last time I posted the daily chart of the dollar, it looked likely that there would be more downside before we could really start thinking that a low may be in on the overall bullish count (see the post on 30 October 2010).

We did get the new low that was anticipated and this has resulted in some nice looking bullish divergences on the indicators in the daily chart:

Dollar Daily:

As you can see, as price made a new low, the indicators shown all made higher lows. This suggests that there is a good chance that we may have seen a low of some sort.

However, despite the dollar's comeback over the last couple of days, there's still alot it has to do to prove that a low is in.

As you can see from the daily chart, we're back into the yellow resistance area I've highlighted in previous posts of this chart. We need to break above it and turn that area into support in order for the bullish case to have any prospect (though doing so wouldn't preclude more downside, so wouldn't be conclusive that the dollar has bottomed). If that can be achieved, the next thing to look for would be a break out above the downward sloping price channel that has formed during this decline.

As a follow through to the bullish divergences in the indicators, we now need them also to get to bullish levels along with a good move up in price: the RSI above 50 and up to the 66.67 level; the MACD above the zero line and the stochastic up to the 80 area. I don't want to see this happen with price only moving sideways - that, in my view, would be a warning of potentially more downside to come.

Here's a 95 min chart showing the move down from the high labelled B on the daily:

Dollar 95 min:

The red horizontal lines show the area of resistance highlighted in yellow on the daily chart. 

The high at 78.273 is key to the bullish case. It has to be broken above on the bullish case. However, doing so wouldn't mean that the bullish case must be the one playing out. If the next significant pullback were to stay above the low at 75.631, we might then have more reason to believe that a bottom has been put in.

Here's a 15 min chart with a potential wave count for an impulse off the low at 75.631:

Dollar 15 min:

It looks like we may still be in wave (5) of [1], but a significant break below the green channel would suggest that its over and we'd then be looking to see a three wave pullback that stays above 75.631 if the bullish case is playing out.

So, while we're above 75.631, the bullish case has a chance, but we need to break above 78.273 if serious consideration is to be given to the possibility that we've bottomed on this count. While we're below 78.273, further downside remains the higher odds option.

You can see the bullish and bearish counts I'm watching on the updated dollar page.