22:07 BST - SPX Update

Quite the reversal today, but there's still no certainty that we have seen an important top yet.

From today's high, we have three waves down. It could be a 1-2-3 or it could be an A-B-C.

Referring back to the various counts I am watching (see the 60 min charts here), the most bearish ones are Options 1, 3 and 4. Here are the short term charts for each: 

Option 1 has us completing wave (ii) of [iii] down. We've retraced over 61.8% of wave (i), so its feasible that today's high was the end of wave (ii) and the decline is the start of wave (iii) of [iii] down:

Option 1 - 6 min chart:

Option  3,  has us completing wave [iv] of a leading diagonal. Here, there is a reasonable count of a double zig zag from the 8 June low. It could go higher, but not too much since the lines of the diagonal have to be converging:


Option 3 - 5 min chart:

Option 4,  has us completing wave [b] of a second zig zag minor Y wave. This too, could go higher, but its limit will be 1173.57. As it is, it counts nicely as a zig zag up from 8 June to complete (y) of [b]:

Option 4 - 15 min chart:

Option 2 has us in wave (c) of [ii] up. It could be immediately bearish like the three counts above, or, its possible that the rally from 8 June has only been wave i of (c) (not the whole of (c)). If its only i of (c), then today's three wave decline from the high may only be all or part of a wave ii correction before we rally higher. Even if we make 5 waves down tomorrow, until we take out the 8 June low, this is the upside risk on this count:

 Option 2 - 5 min chart:

Option 5 is the most bullish count. On this count, today's high would be the end of wave iii of (i) of [iii] up within minor A. The decline from today's high could well be all (or part) of wave iv - its retraced back down to the lower line of the elliott channel and its between a 23.6% and 38.2% retracement of wave iii:

Option 5 - 8 min chart:

So, despite today's bearish looking reversal, there remain bullish counts on the table. The low at 1042.17 is the key level for those bullish counts, so until we take out that level, they remain valid. Even on the bearish counts (Options 1, 3 and 4), we could still be in a subdividing 5th wave up, as I showed in this chart posted earlier today, and that possibility stands until we take out 1105.87.

20:15 BST - SPX Update

Well, two bullish counts have become invalid. I still have this one until 1105.87 is taken out:

SPX 1 min chart:

19:09 BST - SPX Update

Here's a bullish count for SPX. It needs to stay above 1115.15 or, if this decline is wave [4], it needs to stay above 1117.77:

SPX 1 min chart:

18:47 BST - SPX Update

Here's an update on the SPX chart I posted before the open suggesting a possible count that could mean an important top on a new high today:

SPX 2 min chart:

I don't know if this count is correct, but the action today does now look on the bearish side. The levels I mentioned in the earlier post are still intact so far, so at this time, the bearish count is not definite.

18:29 BST - Dollar Update

Here's the 60 min chart of the dollar index, which I've overlaid with esignal's effort at ichimoku (unfortunately, the cloud doesn't extend into the future as its supposed to, but the other components are fine):

Dollar 60 min chart with ichimoku overlay:

You can see that we may have the first sign of a trend change. Referring back to my weekend post on ichimoku charts, you can see that the lagging line (green), which lags by 26 periods, can  has moved above price and price is above the turning (blue) and standard (red) lines. We now need to see the lagging line stay above price on any pullback in price (I've marked on the chart an example of this happening).

Ideally, I also want to see both the lagging line and price get above the cloud and find support there on any pullback - the cloud is seen as resistance when price is below it.  Failure on this front would start to suggest that we are in for more of a downward correction and the count putting us in wave [v] of minor 3 may not be correct.

13:39 BST - Dollar Index Update

I can count s complete zig zag on the dollar, as shown in this 60 min chart:

Whether its the entirety of the correction or just the first of a double zig zag or a zig zag within a double three, remains to be seen. My favoured count (see the various counts here) is that we are completing wave [iv] of minor 3 (we've retraced 38.2% of wave [iii]). If that's right, we should rally now in a wave [v]. However, I'll be on the alert for the risk of a deeper correction. Here's the daily chart:

13:14 BST ES Update

This count on ES is the alternative count shown on Friday for this contract. It fits in with the possible count for SPX which I showed earlier, placing us in a 5th wave, which, on counts 1, (possibly) 2, 3 and 4, could put us at an important top (as opposed to the more bullish counts which place us at the start of a 5th wave which has the potential to go much higher):

ES 5 min chart:

Its possible that where I have 3 of (5) is actually the end of (5), but giving the benefit of the doubt to the upside, the action since that high may only be wave 4 of (5), so another high to come.

If this count is correct, we could end up with a gap and crap on the cash markets, but we'll have to wait and see.

10:18 BST - SPX Update

In my post after the close on Friday, I gave a couple of counts showing where we might be if Friday's high at 1121.01 was the end of a 5th wave. With the futures up as much as they are currently, it seems unlikely that those counts will hold. Assuming they do not, it may still be possible to count a completed 5th wave applicable to all of the alternate counts I am following, on any new high today.

Here is the potential count on a 2 min chart:

SPX 2 min chart - potential 5th wave high today?

Obviously, we can't ignore the more bullish counts I showed in Friday's after the close post, which put us in the early stages of a 5th wave. I think I'll be looking initially at the (E) wave low of the triangle wave [4] being taken out as a sign that this count may be the operative count. However,  bear in mind that the levels I gave for invalidation if the two bullish counts, 1113.93 and 1106.85 may prove to be a better indication of the more bearish count being in play.

15:15 BST SPX Ichimoku Charts

As well as elliott wave analysis I also like to look at other techniques and have always found ichimoku charts interesting. They can seem a bit mysterious at first, but I find them quite valuable in determining potential changes in trend on all time frames.

I don't want to give a detailed explanation of the method here; there are many useful resources on the internet that do this. Here is a link to just one.

The cloud is what determines the trend, but at major turning points, it takes time for price to move above or below it and price can have moved substantially before it changes trend on this basis. However, the other components of the chart can be used for early signals and for warning when a potential signal may fail.

My main focus is the lagging line. If its above the price and the cloud, that's bullish. If it moves below price even whilst price is still above the cloud,  that can be a warning that the uptrend is in jeopardy. Obviously, its the reverse when the lagging line is below price and the cloud or moves above price whilst price is still below the cloud.

Essentially, my interpretation is this:

1) Everything above the cloud:

a - if the lagging line is above price, price falling below the turning and standard lines and the turning line crossing below the standard line are usually false trend change signals;

b - if the lagging line falls below price and/or the cloud- that's a warning of a possible trend change;

c - if the turning line then falls below  the standard line and price and/or price falls below both, the likelihood is that price will also fall below the cloud, confirming the trend change. The lagging line must still be below the cloud and price.

2) Everything below the cloud:

a - if the lagging line is below price, price rising above the turning and standard lines and the turning line crossing above the standard line are usually false trend change signals;

b - if the lagging line rises above price and/or the cloud- that's a warning of a possible trend change;

c - if the turning line then rises above  the standard line and price and/or price rises above both, the likelihood is that price will also get above the cloud, confirming the trend change. The lagging line must still be above the cloud and price.

I'll illustrate in more detail how I use these charts with a weekly chart from May 1994 to December 2003 (it may not be how everyone uses them):

SPX Weekly ichimoku May 1994 to Dec 2003

You can see the application of the points I have set out above noted on the chart.

Here are those points illustrated on a weekly chart from Jan 2003 to date, in particular showing how the lagging line was warning of a possible trend change before the October 2007 declines started, as early as May 2007. It was then warning of a potential trend change after the 2007/2008 declines as early as Jan 2009.

SPX Weekly ichimoku Jan 2003 to date:

Note the possible trend change warning on the right hand side of the chart.  The lagging line needs to stay below price. If it moves back above price, then there is no signal. At the moment, its trying to move back above price. That's what it tried to do in May/June 2007, but it failed and subsequently fell down through the cloud with avengence. That's what we need to see happen again if the trend is going to change to down on the weekly time frame.

Looking at the daily chart, a down trend has been confirmed on my interpretation - the warning signs were there in March 2010. You can see from the chart how very different this recent decline has been on this basis compared to the June/July 2009 and the February 2010 declines. This may suggest that its not just a pullback  in an overall rally, but something more serious. However, I think we'd need to keep an eye on the weekly chart to see if the lagging line can stay below price on that time frame. 

SPX Daily Ichimoku:

So far, although the the rally since May/June 2010 has caused the lagging line to move back towards the cloud and has caused price to move above the turning and standard lines, the lagging line remains below price and the turning line, as yet, shows no sign of moving above the standard line. So, the down trend shown on this chart remains intact, despite the recent rally.

Now here's the 60 min chart:

We're in an uptrend on this chart and as yet, there's no sign of a turn. Obviously, the picture here can change more rapidly than in the daily or weekly time frames, so its probably one to keep a closer eye on for an indication that the current rally may have run its course.

Once the 60 min shows a trend change, I'll  then need to refer to the daily time frame to see whether or not the daily down trend has remained intact. Then on to the weekly, to check on whether or not that lagging line has managed to stay below price.

So, there it is, my brief explanation of how I use ichimoku charts. On their own, they are useful in anticipating potential trend changes. Coupled with elliott wave analysis, they can help to determine when a wave count may be nearing its end. 

 

22:13 BST - SPX Update

Well, that was a whole lot of nothing after the initial rally and decline back down.

It still leaves alot of options on the table. Looking at the action since the 1118.74 high here are some ways to label it in relation to the 5 counts that I have on the larger time frames:


1) Today's high at 1121.01 was the end of a 5th wave. 


This has different implications for the 5 counts, but on counts 1, 3 and 4 it would be very bearish (well, only near term bearish on count 4). 

On count 1 it would be the end of a wave (ii) of [iii] correction, meaning we would now be starting wave [iii] down.

On count 3, it would be the end of wave [iv] in a leading diagonal and we would now be starting wave [v] down.

On count 4, it would be the end of a [b] wave in a zig zag wave Y so we would now be starting wave [c] down (this one might not be as bearish as the other two, but it has the potential to be).


On count 2, it might be the end of the first wave within wave (c) of [ii], so near term, we'd expect a wave ii correction down before further rallies. However, its possible it could be the whole of wave (c) of [ii] and, therefore, very bearish. Its only retraced just over 38.2% of wave [i], but its at resistance and if we really are back in a big bear market, wave [ii] may only be capable of a 38.2% retrace.

On count 5 it would be the end of wave [5] of iii within (i) of [iii] up.


Here are a couple of ways to count the action as the end of a 5th wave at today's high:


5th wave up complete, wave [1] down complete, wave [2] still in progress:


SPX 2 min chart:

(Its possible that today's high on this count was just [1] of v up. That would be ruled out if we take out the low marked iv at 1105.87).

5th wave up complete, waves [1], [2] and (1) complete, currently in wave (2) of [3]:


SPX 1 min chart:

This would be invaildated above 1118.53. In that case, wave [2] may still be in progress.

(Its possible on this count that today's high was only wave [1] of v up. That would be invalidated with a drop below 1106.85)

2) Today's high was simply part of a 5th wave. 

This would not be appropriate for count 3 since it would likely mean that wave [iv] of the assumed leading diagonal would be too large and create parallel instead of converging lines, therefore invalidating the pattern.

For counts 1 and 4, its feasible, though in both cases the 1173.57 high would be the limit for any further rally.

For count 2, it would be fine, especially if we are in a sub-minuette rally for (c) rather than a micro degree rally.

For count 5, it would be perfectly reasonable and in keeping with the very bullish nature of that count.

Here are a couple of ways to count the action on this basis:

A [1],[2],(1),(2) up:

SPX 1 min chart:

This would be invalidated below 1113.93.

A leading diagonal wave [1] up to today's high, possibly still in a wave [2] correction:

SPX 1 min chart:

On this count, we might see a deeper wave [2] correction, in keeping with what is supposed to happen after a diagonal completes. 

So, as with the longer time frames, even on these smaller time frames, there remain various option. we just have to watch the important levels. for each of the possibilities.  If we completed 5 waves up at today's high, then 1121.01 shouldn't be taken out if we are in counts 1,3 or 4 or, on count 2, if it represents the end of wave (c) of [ii]. If we're in a [1],[2],(1),(2) up, we can't drop below 1113.93. If we completed a leading diagonal at today's high for wave [1] of v up, we can't take out 1106.85 (other levels are mentioned above).

Have a good weekend!

19:56 BST - SPX Update

In addition to the two ways to count the action since the high at 1118.74 that I showed earlier, here's another possibility, a leading diagonal to complete wave [1] of v. 

The wave [2] may still be in progress so may not necessarily be where I have the label. The action since that point hasn't been very impulsive looking, suggesting its still in a correction, but these things have a way of morphing into impulses.

Its also possible that the move up from iv is the whole of v and, therefore, an ending diagonal. We'd have to take out the wave iv low to prove this though.

SPX 1 min chart:

18:18 BST SPX Update

Something to keep an eye on here perhaps - a possible head and shoulders (height is about 7 points):

SPX 1 min chart:

16:11 BST - SPX Update

With the new highs above 1118.74, focus now switches to the two moderately to very bullish counts shown in last night's update. So, for all of the Options 1 to 5, the 1118.74 high was a 3rd wave. Yesterday was a 4th wave.

Here is how the two counts from last night look currently (showing the picture from the high at 1118.74):

The more bearish count:

2 min chart:

It might look odd, but the wave I have as [3] is about 1.618 x wave [1]. To think this is working out, I'd like to see the low marked iv taken out - that's 1105.87.  

Of course, this count could actually be very bullish also, putting us in what could be  an extending 3rd wave. Taking out today's low at 1113.93 would invalidate that possibility but the risk of an extending 3rd wave wouldn't really be excluded altogether until we take out the low marked [2].


The more bullish count:

1 min chart:

Probably a lot more upside left on this count and it fits well with the two most bullish Options, 2 and 5.

11:05 BST - ES Update

All five counts that I'm following for SPX remain on the table and will probably do so for some time. 

Last night I zoomed in on the action from the high in SPX of 1118.74, showing some ways to count it. One would be almost immediately bearish and applicable to Options 1,3 and 4 in particular.  The other two would require at least one more higher high above 1118.74 even on those three options (which are the most bearish of the five, though option 4 is only near term bearish). 

Looking at the futures this morning, I have them labelled in accordance with Option 1, showing a wave x low on 8 June and therefore, requiring an [A]-[B]-[C] advance for wave y, to complete wave (ii) of [iii].

As with SPX,  it seems possible to count them as either completing  wave y at yesterday's overnight high (so far, SPX made its high the previous day) or as requiring one more leg up to complete (5) of [C] of y.

Here's a 5 min chart showing the immediately bearish count and the alternative:

ES 5 min chart:

And here's a close up look to show how the drop from the high might count as 5 waves down for wave [1] for the start of minute wave [iii] down:

ES 2 min chart:

Obviously, the labelleing of wave [2] is entirely speculative at the moment and it may have to be moved if this count survives. In order to survive, it must stay below the high marked [5] (see the red line). If that is taken out then the focus must switch to the alternative count. So, the line in the sand for the immediately bearish case is not very far overhead. It could easily be negated prior to the cash open - futures have been very volatile this morning, albeit within a small range, and its quadruple witching.

22:19 BST - SPX Update

I won't post individual charts for each of the 5 options tonight. Suffice it to say that Options 1, 3 and 4 may either be in an immediatley bearish position, or they may require one more up leg to complete their respective moves, as I explained in last night's update.

Options 2 and 5 require a 4th wave to complete before resuming their upward movement.

So, taking the action from the 1118.74 high of yesterday, which marked the end of what appears to have been an ending diagonal which can be applied to all the options, here are the counts:




Immediately bearish:

SPX 2 min chart:

This count is immediately bearish for Options 1, 3 and 4.

Obviously, it will be invalidated above the wave [2] high. It would be possible, however, to count the move since [1] as wave [2] in that event. But that would be invalidated above 1118.74. We're very close to both of those levels.

Moderately to very bullish:



SPX 1 min chart:

 This count is moderately bullish for Options 1, 3 and 4, meaning that the high of 1118.74 was just a 3rd wave high and today's moves were  the 4th and part of the 5th wave needed to complete the counts before we move down under those options. 

Wave [3] would be 1.618 x wave [1] at about 1117, so it would probably go to at least the next higher fib level (2.618) at about 1123. Since wave [2] was a deep correction, I'd expect a shallower affair for wave [4].



Under Option 2, the expected 5 wave move up from today's low could be part of [5] of  i within a 5 wave move for (c) of [ii], or,  it may be the entirety of the (c) wave of [ii].

Under Option 5, 5 waves up from today's low would be the 5 waves required to complete three waves up from 1042.17. 


An alternate count for the moderately bullish/very bullish case is that the whole of the sideways move today was a 4th wave and the late rally was just the start of the 5th wave (ie, no [1], [2]).


Alternate bullish count:

So, we'd now be in wave [1] up for the very bullish counts or, for the moderately bullish counts, the end of the rally from 1106.85 may represent the end of their up moves

19:51 BST - SPX Update

Funnily enough, its the bearish count that seems easier to make on SPX at the moment. On the bullish count, its difficult to see impulsive movement from today's low, but of course, it may still be in development. Or, we may still be in the 4th wave - maybe its forming a triangle.

Anyway, here's how I'm currently counting the action for the bearish counts:


SPX 2 min chart:

Obviously, however, until we take out the levels mentioned in my previous post, there remains a risk of the further upside even on the bearish counts.

17:09 BST - SPX Update

In last night's update I mentioned the possibility that even on the bearish counts (Options 1,3 and (in the near term) 4), the leading diagonal shown during the session might only have been the end of a 3rd wave.

So far, that remains on the table. I think today's action coupled with what happened at the end of yesterday, probably counts more naturally as a 3 wave move for a 4th wave. As an impulse, it would only be partially formed and has much to do to prove itself as an impulse underway.

Here are two charts showing two ways to count from the diagonal (ignore the degree of the labels - they are just rough charts not related to any particular one of the various options). 


1 min chart - 4th wave count:

2 min chart - start of an impulse wave down:

On the bearish options 1 and 4, the 4th wave possibility only gets negated below 1083.20 on the way I have them labelled. On Option 3 its negated below 1101.20.

At the moment, on Options 2 and 5, it looks like a perfect 4th wave.

12:32 BST ES Update

On the bearish count, looks like the futures may be in the process of finishing off an ending diagonal. Here's how it looks at the moment on ES:

ES 5 min chart:

There's alot of time and a lot of data coming out before the cash open and, of course, we could be in one of the more bullish counts as outlined in my post after the close last night for SPX. So, caution required.

 

22:25 BST - SPX Update

Well, another day and still all the options I'm following remain on the table.

Here they are in close up:


Option 1 - Wave (ii) of [iii] down nearing completion if not complete today:


4 min chart - Option 1:

Option 2 - Wave [i] down from 1219.80 complete at 1040.78, now in (c) of [ii] up:


4 min chart - Option 2:

Option 3 - Still in wave [iv] of a leading diagonal:

5 min chart - Option 3:

Option 4: - In wave Y of [X] down from 1219.80. Currently completing [b] of Y:


15 min chart - Option 4:

 Option 5 - Completed wave [X] down at 1040.78, now in minor A up:

8 min chart - Option 5:

In respect of Options 1, 2 and 4, I mention the possibility of a further rally high because at the moment the decline from today's high looks like 3 waves only. Here's the count (its the same as I've shown in the chart of Option 5):

4 min chart - Alternative count for rally from 1052.25:

Not much more to say at this stage except that on the 60 min chart, the bearish divergences in the MACD histogram (since 9 June) and RSI (since 14 June) suggest that a turn down of some degree should occur soon. But, of course, these divergences can continue for a while before price actually turns down.

19:23 BST - SPX Update

Here's a possible way to count the move up from the 14 June low - as an ending diagonal. It would account for the three wave look of the rally from this morning's low to the 1117.49 high:

SPX 1 min chart:

Of course, the move up from today's low could still develop into a normal impulse wave.  I think it would help this count if we could take out the low marked [4] (and, as we all know, wave [5] must remain shorter than wave [3] for this to be vaild - there's still room for it to go higher - and must be a zig zag). 

PS A variation would be to retain today's low as the 4th wave of a 5 wave move up from 14 June and count a diagonal from there - we would only have had waves 1 to 3, so we'd need a 4 and 5.

17:42 BST - SPX Update

On the most bearish counts, Options 1, 3 and 4, we could count today's move off yesterday's high and the subsequent rally as the 4th and 5th waves which would end these moves (so moving the highs shown previously to today's high).

Here it is on a 3 min chart of Option 1:


SPX 3 min chart - Option 1:

Its into the next level of resistance at about 1119, but whether this will only hold it back temporarily or will end the moves on these three counts, remains to be seen - its possible that we still need another drop and rally to complete 5 up from today's low. Until we see an impulsive drop, the risk of higher highs remains.

On the more bullish counts, for Option 2, it seems too shallow to be wave [4] so I would count it as for the three bearish options, as the 4th and 5th waves of the 5 waves up from 14 June. This means we still need a larger wave [4] pullback at some point.

For Option 5, I'd probably count it the same as for the bearish counts, but its feasible that on the count I showed for this Option it was wave [4].

14:02 BST - ES Update and SPX summary

Again, as yet, the overnight futures action hasn't done anything to clarify which count, bullish, bearish or in between, is the relevant count.

Here's the 5 min chart of ES numbered in accordance with Option 1 on SPX which puts us pretty much at the end of a wave (ii) correction within wave [iii] down. It calls for a drop in (iii) of [iii] soon, if not now.


es 5 min chart;

However, the drop off from yesterday's high in ES could be wave [4] of i of (c) (or wave iv of (c)), which is what I'd be looking for in SPX in Option 2   . 

For Option 3 on SPX, we just need to see this drop since a nice double zig zag to complete wave [iv] of the leading diagonal counts as completed yesterday.

Option 4 on SPX also requires a drop soon, assuming a complete a-b-c from the low on 8 June. The drop would be wave [c] of minor Y within an intermediate [X] wave down from 1219.80.

For Option 5 on SPX, we need to see a wave [4] of iii down before a further rally to complete iii of (i) up within a minor wave A rally, so a pullback soon would be fine for this count.

 

9:28 BST Dollar Update

This is the daily chart of my favoured count for the dollar, namely that we are in an extending minor 3 and have completed wave [iii] of 3 (you can see the other counts on the dollar page):

Daily Chart:

You can see that the retracement from the high on 7 June has, so far, reached the lower line of the elliott channel for the minuette waves within [iii] (which is where a wave (iv) could end), as well as the lower line of the elliott channel for the minute waves and the upper base channel line for the minute waves (which is where a wave [iv] could end).

So, at the moment, the drop from the high could still either be wave [iv], or it could still be wave (iv) of [iii] as an expanded or running flat (if it fails to go below wave a of the flat).

Here it is on the 60 min chart:

This shows a possibly complete 5 waves down from the high for wave (a) of [iv], which means [iv] should be a zig zag (I have wave [ii] as a flat type correction, so this would be good alternation).

On the alternative, this 5 wave move down could be wave c in an expanded (or potential running) flat for wave (iv) of [iii] (I have wave (ii) of [iii] as a double zig zag, so again, good alternation).

I think we'll have to see where any rally now takes us, assuming that we have 5 complete waves down from the 7 June high. On either of the above alternatives, a rally would be due if 5 waves down are complete. 

Once we have a 5-3-5 up from the assumed low of the 5 wave drop, I'd be watching the top of the first of those 5 waves up. If taken out by a subsequent drop, it would make the move up a three wave move, suggesting its a (b) wave of a zig zag down from the 7 June high. Of course, there's no guarantee there since it may just mean that 5 waves up is extending, but it would be an initial sign.

 

8:22 BST SPX 60 min count page updated

I've updated the 60 Min Count page.