Monday, 15 November 2010

21:19 GMT - SPX End of Day Update

The status of the move down from 1227.08 remains unclear at the moment. It could be 5 waves down to Friday's low or it could be a double three corrective pattern. The move off Friday's low continues to look more corrective than impulsive, suggesting that there should be more downside to come. 

For the bearish case, the main count has us in wave [2] up, with wave [1] down having been completed at Friday's low. The bearish alternate is that we're in wave [3] down. For the bullish count, the 5 waves down from 1227.08 would be wave a of (iv) (or a higher degree 4th wave if 1227.08 completed 5 waves up from the August low) or is a double three still in progress. The bullish alternate is that wave (iv) completed at Friday's low and we're now in wave (v) up to complete the rally from the August low.

Here are the 10 min charts for the bearish and bullish counts (you can see a bigger picture view of these for context on the 60 min counts page):

Chart 1: SPX 10 min - bearish count:

Chart 2: SPX 10 min - bullish count:

Here's a close up of the bullish and bearish counts showing the move from the 1227.08 high:

Chart 3: SPX 1 min - close up: 

For the main bearish count, I've labelled a complete triple zig zag with a truncated (Z) wave (the Dow did make a new high).  Bear in mind that we could still be in wave [2]since, where I've labelled it, we've only retraced 38.2% of wave [1].  Its possible to label a single zig zag up from Friday's low to today's high (where I have the (Y) label), so we could now be seeing an (X) wave before another move up, perhaps to the 50% retracement level at about 1210 or the 61.8% level at about 1214.

If we instead take out Friday's low at 1194.08 in a clearly impulsive decline, then either wave [2] is over or the alternate bear count could be what's playing out, with Friday's low being wave (1) of [3] and today's high being wave (2) of [3] (it would be a 61.8% retracement of wave (1) of [3], counting wave [2] as being the 1215.45 high). Either count would imply more downside to come.

Taking out Friday's low would eliminate the alternate bullish count which labels that low as the end of wave (iv). However, the main bullish count which has us still in wave (iv) would still be in play along with the bearish counts. Whether its the bullish or bearish counts that are playing out would then remain to be determined. We'd have to see how far the decline takes us and then watch the retracement.

If we've completed wave [2] on the main bearish count, then we now have to stay below the high at 1207.22 (where I have the (Z) label). If we take that out, then the main bearish count would be that wave [2] is still underway and may move up to the 1210 or 1214 area. 

So, I'll be watching that high, along with Friday's low at 1194.08. For the bearish count as currently labelled, that high must remain intact and that low at 1194.08 must be taken out. If we take out that low, the alternate bullish count will be eliminated, but the main bullish count will stand, along with the bearish counts.

17:05 GMT SPX Update

The count that I had mentioned in the green note on the last chart has been invalidated and the count that was shown as the main labelling in that chart has become highly unlikely. So, this is what I'm left with for now:

SPX 1 min - close up:

The alternate bearish count shown in the red note will be invalidated above 1215.45.

For the main bearish count, I've labelled a double zig zag in progress but it could just as easily be labelled as a triple zig zag.

For the bullish count, the move up from Friday's low doesn't look obviously impulsive at the moment, so that suggests that we're in b of (iv) rather than Friday's low being all of (iv). However, it could yet develop into an impulse, so this is something to watch for.


15:18 GMT SPX Update

All of the counts shown on Chart 1 in Friday's end of day update, bullish and bearish, remain valid at the moment. Remember, there are four possibilities for the bearish count as shown by the main labelling and the red, green and blue notes on the chart:

SPX 1 min close up:

On the main labelling, wave 4 of (5) looks a bit out of proportion to wave 2. It may well be that the counts in the green or red notes should be preferred. On the green count,  today's high would still be wave 4 of (5), so the next low below Friday's low could be the end of wave (5) and [1]. On the red count, Friday's low would be wave (1) of [3] and today's high could be wave (2) of [3].

If we fail to take out Friday's low, the count in the blue note becomes more likely for the bearish case, and of course, the bullish case would also be looking quite good.