11:50 BST - CPCE - Options Equity Put/Call Ratio

Just looking at my CPCE chart, we may have the beginnings of a new uptrend in the 5 and 10 day moving averages (I think these are a fairly standard means of smoothing out the movements in the CPCE itself, so no magic there), which would be overall bearish for the markets - see the red dotted lines at the right end of the chart below:

CPCE Daily chart:

Obviously its very tentative at this stage, but every trend has to start somewhere!

What I found of interest is that the recent high on 21 June occured at a level in the CPCE which marked a number of high points during the 2007-2009 downtrend in the markets (and the early stages of the new uptrend) - see the blue dotted horizontal line and the highs I've highlighted with magenta circles.

Clearly, the moving averages are going to move up and down within any new trend and we do have to be aware that they are currently at levels where previous lows have occured. It doesn't mean that the markets can't go lower (there is certainly scope for these moving averages to push further up as you can see from the chart), it just means we need to be alert for signs of a low. I find that the 10 day moving average often turns down ahead of a low - it doesn't always work out, but its worth keeping an eye on.

10:30 BST - Dollar Update

After looking like wave (ii) may have ended yesterday, the dollar displayed some weakness later, with price slipping through the bottom of the cloud. The warning sign I mentioned in the post shown in the link above did occur - as price rallied (from point a on the chart below), the lagging line failed to move above the price line - see how it stopped just under where I have the iv label - not a good sign for a rally.

However, whilst the lagging line (I've changed the colour to turquoise) did drop through the cloud, it was only briefly - it stayed largely within it, even while price remained below. This suggested that a more sustained drop was probably not on the cards.

Now, price has rallied today and this time, the lagging line has moved above the price line.

Here's a close up of the action on the 60 min chart:

Dollar 60 min in close up:

The rally today has moved price back into and slightly above the cloud and the lagging line is confirming this as potentially bullish by moving above prices of 26 periods ago.

You can see the elliot wave count - it looks better as a wave (ii) correction now, with that drop yesterday.

In ichimoku terms, we need to see price and the lagging line get above the cloud. We have a bullish cross of the turning line (blue) above the standard line (red) - its a weak buy signal since it occurred when price was below the cloud, but price can confirm it by getting above the cloud and taking the laging line with it. As before, once above the cloud, price needs to find support on the cloud and any pullback in price should not result in the lagging line falling below prices of 26 periods ago (if it did, that would again be warning that all is not well with the potential rally).

Here's the zoomed out view on the 60 min chart for the bigger picture of the wave count:

Dollar 60 min zoomed out:

23:37 BST - SPX Update

I don't know if anyone is following the ichimoku charts, but there have been some further developments on those charts since I posted them yesterday.

Here is the updated daily chart:

SPX Daily ichimoku:

You can see that both price and the lagging line have moved further away from the cloud. In my view, the inability of the lagging line to rally above prices of 26 days ago, despite the early June rally remains a bearish sign. 

Although the turning line is above the standard line, the latter is falling, as is price, and I suspect that the turning line will start dropping soon also if things are as bearish as they appear to be from this chart.

Turning to the 60 min chart:

SPX 60 min ichimoku:

Yesterday I said that I wanted to see price continue to drop through the cloud and the lagging line following it as well as staying below the price from 26 periods ago. That seems to be what is occuring, so far. Price has even come back up to the cloud and the turning line to retest them from below and failed. They have provided resistance, as they should in a downtrend. Of course, that doesn't mean it won't try again, but with the daily positioned as it is, it seems unlikely at the moment that any further retest will succeed.  Today was actually the third time price found resistance at the turning line - that paints a pretty bearish picture.

The lagging line hasn't yet dropped through the cloud, but at the moment, that's not a great concern, as long as it remains below prices of 26 periods ago.

22:12 BST - SPX Update

After yesterday's sideways action, we got some nice moves today. It was bearish, but not enough to rule out all potential bullish possibilities. Its also added a couple of counts for the bearish side because we didn't get a decisive enough retracement up that could be called a 2nd or 4th wave.

Here are the 5 counts (see the 60 min counts for context). Remember that the counts shown in Options 1, 3 and 4 are interchangeable. Its just that there are so many ways to count the decline from 1131.23, so I've just used each of those options to illustrate different bearish counts:

Option 1 - wave (ii) topped at 1131.23

SPX 6 min chart:

I showed yesterday what was possibly the start of wave (5) of [3] down and today we did, indeed go on to complete a 5 wave move down that would be wave [3] on this count. The rally that followed was a 23.6% retracement of wave [3] - enough for a wave [4], but I might have expected it to get to the 38.2% retracement level to be certain. 

The fact that it didn't raises the possibility that the rally was only wave 4 of (5), so we still have 5 of (5) to come (well, it seems to be well underway!). This means we would expect a wave [4] maybe sometime tomorrow. 

Another alternative is that wave [4] is playing out as an expanded flat so after today's decline into the close, we would expect a rally, perhaps up to the 38.2% level at about 1093.

Option 2 - wave i of (c) of [ii] complete at 1131.23:


 SPX 5 min chart:

This count makes the current decline wave ii of (c). I've amended the count given today's action, to show a single zig zag with a possible ending diagonal wave [C]. Obviously, it depends on wave (i) of [C] being a three - I think the waves are ambiguous enough to cater for that!

Also remember that its possible that 1131.23 was the end of wave (c) of [ii], in which case, the counts in Options 1, 3 or 4 may be applicable and we'd be in wave [iii] down.

Option 3 - wave [iv] of a leading diagonal completed at 1131.23:


SPX 5 min chart:

I'm still showing 5 waves down complete to 1085.31. This expanded flat count, which is updated from earlier, isn't out of the question, so I'll keep it on as a possibility (but obviously, the counts shown for Options 1 or 4 would go equally as well).

Option 4 - wave [b] of minor Y within a wave [X] completed at 1131.23:

SPX 15 min chart:

I've got two counts on this chart.

The first has wave [1] bottoming at 1074.63 and we are now forming an expanded flat for wave [2]. 

The alternative is what I showed earlier, that we are in a series of ones and twos down. I showed two sets this morning, and this had developed  into three sets this afternoon. This count would be invalidated by a move above 1099.64, although it could then be we were still in a [1],[2],(1),(2), but with (2) being an expanded correction (as shown in Option 3). That would only be invaildated by a move above 1116.67.

We still need to take out the (x) wave low at 1052.25 before its confirmed that we're in wave [c] of Y. 

For Options 1, 3 and 4, bear in mind the additional count I showed this afternoon, with wave [5] extending. Here it is updated to the close:

Taking out 1185.95 would begin to cast doubt on it. Taking out 1099.64 would invalidate it.

Option 5 - we completed wave (i) of [iii] at 1131.23:

SPX - 8 min chart:

The count I showed for this yesterday, putting us in wave iv of (i) up was invalidated with the move below 1077.74. However, until we drop below the wave [ii] low at 1042.17 this bullish option remains and I've changed the count to show wave (i) of [iii] complete and the drop from 1131.23 as wave (ii) of [iii].

As before, if it takes out the low at 1042.17 (the end of wave [ii]) then this particular count will go but it may just mean we ended  a minor X wave at 1131.23 and that the drop from 1219.80 is forming a double zig zag rather than the single zig zag that completed at 1040.78. It would mean more downside near term, but longer term, would be bullish.

19:30 BST - SPX Update

As well as the possible [1],[2],(1),(2) shown earlier, here's a possible count that might also account for what has, so far, been a moderate reaction to what looks like 5 waves complete at today's low (on the bearish counts):

SPX 1 min chart:

It shows a possible extending wave [5], so the bounce from today's low would be wave (2) of [5]. It will be invalidated above 1099.64. Although I show it as complete, it hasn't quite retraced 50% and could clearly run up further, provided it stays below 1099.64.

15:33 BST - SPX Update

We still appear to need another leg down to complete 5 down for wave (5) on this count.

SPX 3 min chart:

Obviously, if we get above the wave 1 of (5) low before making a new low, something is likely wrong with the count.

15:25 BST - SPX Update

Just two things to watch out for, one bullish near term, one bearish:

A possible expanded flat following a complete 5 waves down yesterday:

SPX 5 min chart:

If we get 5 waves down from where I have [W] then this count, as labelled, wouldn't work (but it may still do with some reconfiguration).

A possible 3rd of a 3rd count happening now:

SPX 15 min chart (see the alternative count):

I prefer the main count shown on the chart above, but the alternate is something to bear in mind. The alternate is invalid above where I have the "or (2)" label.

14:13 BST - ES Update

This bearish count just lines up ES with the count for SPX I showed on the chart for Option 4 last night:

SPX 5 min chart:

I've shown the alternative bullish count too (which is on the chart of Options 2 and 5 for SPX).

Its possible that we had a slightly truncated 5th wave within wave [5] on ES, making a complete wave i down now, in which case, this would align ES with the count I showed on the chart of Option 3 for SPX which would now put us in a wave ii rally. Even if we still have more to go to complete wave [5] or (C) of [Y], there does seem to be a probability that we will get a  rally at some point today. 

But bear in mind the count I showed for Option 1 on SPX, which would make a 5th wave low now only the end of wave [3] down, so a rally today would only be wave [4].

So I think we may need to be on the look out for a rally at some point today - perhaps the choppier and more sideways it is, the more likely it is to be  only a 4th wave and not a 2nd wave rally.

11:00 BST - DAX Update

Its possible that the Dax may have completed its wave [ii] high on 21 June, getting very close to the start of wave [i]. As I pointed out in my post of 22 June, the Dax made a similar deep retracement of the first wave off its July 2007 high.

Here is the daily chart for perspective on the longer term count:

Dax Daily chart:

And here is the possible count into the wave [ii] high on the 60 min chart:

Dax 60 min chart:

Taking out the low at wave a of the triangle, at 5634.64 would invalidate the alternative bullish count on the daily chart as labelled, but it would not necessarily put an end to the possibility of an [X] wave forming as a flat (given the three wave drop from the high) or a double three, in which case, the June high would be a wave X and we would now see a flat, zig zag or triangle develop for the second three. 

So, we could see near term downside which might be substantial (especially if the next leg down is a 5 for  a C wave or a zig zag ), yet we would still be in a bullish count longer term.  I think we'd need to take out the low of the first [X] wave to avoid a third zig zag.

For the bearish count, we now need a clear 5 wave decline probably at minuette degree, that takes us below the 5634.64 low. As mentioned above, that wouldn't rule out the bullish possibilities, but it would still be a start for the bearish case.

8:29 BST - Dollar Update

Since yesterday afternoon's post on the dollar, its pulled right back to the bottom of the cloud and the lagging line has fallen below prices of 26 periods ago on the 60 min chart:

Dollar 60 min chart:

If this is a wave (ii) (within wave [v] of minor 3) as I've marked it, then we should see the support from the cloud, for both price and the lagging line, hold and the dollar now push back up above the cloud, with the lagging line rising back above prices of 26 periods ago.

Looking at the elliott wave picture, there is a three wave decline from where I've marked wave (i) and its about a 61.8% retracement, so a perfect place for a wave (ii) to end.

A warning sign that we may continue down instead of pushing up in a wave (iii) will be if price finds resistance within or around the top of the cloud, and/or the lagging line fails to move above prices of 26 periods ago with any push up in the current price.

I'm watching thos one closely! 

21:50 BST - SPX Update

It was pretty much sideways today really - suggesting a corrective wave of some sort. Whether it was a 4th wave, a 2nd wave or a (B) wave remains to be seen.

Here are the 5 counts - all still in play (see the 60 min counts for context):

Option 1 - wave (ii) topped at 1131.23

SPX 6 min chart:

Still showing the [1],[2],(1),(2) count for this one. Today's action is counted as wave (4) of [3], with wave (5) of [3] starting. If we take out today's high at 1099.64, then either wave (4) of [3] is continuing or a more bullish count is in play.

Option 2 - wave i of (c) of [ii] complete at 1131.23:


 SPX 5 min chart:

This count makes the current decline wave ii of (c)  which appears to be forming a double zig zag. You can see the retracement levels for wave ii on the chart. As I showed in the 1 min chart posted earlier, its possible that we completed a single zig zag at today's low, in which case, we should have started wave iii up. Unless we saw a series of 1,2s off today's low, it may be more likely that we need a (C) wave to complete the double zig zag.

Also remember that its possible that 1131.23 was the end of wave (c) of [ii], in which case, the counts in Option 1, 3 or 4 may be applicable and we'd be in wave [iii] down.

Option 3 - wave [iv] of a leading diagonal completed at 1131.23:


SPX 5 min chart:

I've shown 5 waves down complete on this chart, but counts shown for Options 1 or 4 would go equally as well. It calls for more upside in a wave ii correction. The retracement levels for wave ii are shown on the chart. If we take out today's low without a deeper retracement, its still possible that we had a wave ii, but probably unlikely and I'd focus more on the count shown for Options 1 or 4.

Option 4 - wave [b] of minor Y within a wave [X] completed at 1131.23:

SPX 15 min chart:

This is a slight variation on the themes in Options 1 and 3 above. On this count, the next leg lower would complete wave [1] down. 

We still need to take out the (x) wave low at 1052.25 before its confirmed that we're in wave [c] of Y. 

Option 5 - we completed wave iii of (i) of [iii] at 1131.23:

SPX - 8 min chart:

This makes the current decline wave iv. The retracement levels are shown on the chart. The wave iv count is invalidated if  the end of wave iv is below 1077.74 (the wave i high). It got quite close today. The depth of the retracement may suggest its not a 4th wave correction, but I think I'll leave it on the table until its ruled out by breaching the level mentioned above.


If it takes out the low at 1042.17 (the end of wave [ii]) then this particular count will go but it may just mean we ended  a minor X wave at 1131.23 and that the drop from 1219.80 is forming a double zig zag rather than the single zig zag that completed at 1040.78. It would mean more downside near term, but longer term, would be bullish.

19:52 BST - SPX Update

Its possible that we've seen a 4th or (B) wave correction complete. Here are the two charts posted earlier, brought up to date with the post-Fed action:

SPX 2 min chart:

SPX 1 min chart:

It still doesn't look impulsive from the lows, so I don't think the alternative count in the second chart is playing out, but I'm still going to keep an eye on it. Obviously, we need to take out today's low to invalidate it.

And let's hope this correction doesn't just extend by becoming more complex!

17:42 BST - SPX Update

Here's a count (plus an alternative) for the bullish side (for example, this from last night), showing a double zig zag forming. We'd currently be in wave (B) of the second zig zag. But note the more bullish interpretation, of a complete single zig zag from 1131.23. There's not been anything too impulsive looking from the low yet, but that can change pretty quickly, so its something to watch for.

SPX 1 min chart:

17:03 BST - SPX Update

Here's one possible way to count today's action in SPX:

SPX 2 min chart:

If we take out today's low, it might still be a correction, in the form of an expanded flat, which might give it the opportunity to retrace up a bit more, to, say, the 38.2% level (assuming we are in a 4th wave correction).

Of course, we may have started the 5th wave down on this count, from the 1091.76 high. It doesn't immediately strike me as impulsive, though it could be forming a diagonal - just something to watch.

16:27 BST - Dollar Update

Speaking of the dollar, here's the updated 60 min chart. The lagging line and price have behaved as I would want them to (see here) in order to confirm that the trend has turned up:

Dollar 60 min chart:

As long as price now gets support from the cloud and/or the turning and standard lines and the lagging line stays above price on any decline, the uptrend should hold. If any of these fail to occur, it may be an early warning of more downside to come.

16:15 BST - VIX Update

The 60 min chart of the vix is in a similar position to the dollar chart I showed on Monday, giving signs of a potential change in the 60 min trend:

Vix 60 min chart:

As explained on the chart, we need to see price get above the cloud and the lagging line to follow. On any pullback in price, the lagging line should stay above prices from 26 periods ago, otherwise, the risk is that this little rally was nothing more than a retracement in a continuing downtrend - see the area I have circled on the chart.

13:44 BST - ES Update

The position in the futures is essentially the same as for the cash - uncertainty as to whether there is further upside above the high made on 21 June, or whether we have started a significant decline. 

Here is a chart showing the bearish count, but with the bullish alternative as well.

ES 5 min chart:

On the bearish side, the invalidation point has to be the high marked (ii) on the chart. On the bullish side, the invaildation point is much lower down, at the low on 25 May (although then, it may be that the rally to the June high will have completed an X wave, if the decline into 25 May was a zig zag on the bullish case).

11:05 BST SPX Ichimoku Update

I'm not sure if anyone is really interested since not many people leave a reaction to the posts, but I like these charts, so I'll show them anyway!

Its really updating the position since I posted these charts at the weekend.

At that time, the 60 min chart was still showing an uptrend (see the chart here), but we're now starting to see the possibility of that changing:

60 min ichimoku chart:

At the moment, its still possible that support will be found within the cloud and that we will see a further rally from around current levels. However, on my interpretation, any rally in price that does not cause the lagging line to get above the close of 26 periods ago should indicate that the rally is likely to fail. It could go either way at the moment, so I'll be keeping a close eye on this.

Turning to the daily chart I posted at the weekend (see here), I listed the things I wanted to see happen in order to keep the downtrend that had started to develop intact - see points 1)-3) in the box on the far right of the chart.

Here is the updated daily chart:


Daily ichimoku chart:

You can see that two of the three things on my list have happened - so far. The third, that the turning line stay below the standard line, hasn't happened, but the turning line is only above the standard line by .28 of a point. If it crosses back down from here, it would look like a bearish hook you see in, for example, the MACD and would be bearish for the market.

The position on the daily chart doesn't preclude the uptrend on the 60 min chart continuing, but if the daily downtrend is to be maintained, any further rally on the 60 min chart would need to be limited. In a downtrend, that is the job of the cloud and currently, on the daily chart, the resistance is between 1130 - 1144 which represent, approximately, the lower and upper boundaries of the cloud. However, spikes above the cloud resistance that do not change the trend are not uncommon - I'll be watching the lagging line if such a spike occurs, to see whether or not it is able to follow price and get above the close of 26 periods ago.

21:22 BST - SPX Update

Well, the bears certainly took control today, but there still remain bullish counts on the table.

Here's a review of the 5 counts I'm following, looking at the moves from the high of 1131.23 yesterday (for persepctive, see the 60 min charts):

Option 1 - wave (ii) topped at 1131.23:

SPX 6 min chart:

I've shown here the [1],[2],(1),(2) count from yesterday. This would mean probably a reasonable amount of more downside before we bounce in a 2nd wave since once wave [3] is complete (and the count puts us only in (3) of [3]), we will need waves [4] and [5] before a 2nd wave retracement.

Within wave [3], once wave (3) bottoms (and it may have done so today), we will get a wave (4) - that must not end above the wave (1) of [3] low at 1108.24. If it does, it would suggest that the count showing a triangle 4th wave was likely the correct count for this bearish option (see chart for Option 3 below).

Option 2 - wave i of (c) of [ii] complete at 1131.23:


SPX 5 min chart:

This count makes the current decline wave ii of (c) - the triangle would be wave [X] within a double zig zag. You can see the retracement levels for wave ii on the chart. As last night, it may be that (c) actually completed at 1131.23 and we have now started wave [iii] down. We can't be sure of this until 1042.17 is taken out.

Option 3 - wave [iv] of a leading diagonal completed at 1131.23:

SPX 5 min chart:

I've shown the triangle count on this chart, but the [1],[2],(1),(2) would go equally as well. Taking out the (x) wave low is probably the confirmation that wave [iv] did end at 1131.23.

Option 4 - wave [b] of minor Y within a wave [X] completed at 1131.23:

SPX 15 min chart:

Taking out the (x) wave low at 1052.25 probably confirms that we're in wave [c] of Y. 

Option 5 - we completed wave iii of (i) of [iii] at 1131.23:

SPX - 8 min chart:

This makes the current decline wave iv. The retracement levels are shown on the chart. The wave iv count is invalidated if  the end of wave iv is below 1077.74 (the wave i high).

20:34 BST - SPX UPdate

Here's an alternative to the triangle count - 

SPX 2 min chart:

It should mean less of a retracement once this current decline bottoms, since it will only be wave [3], not a complete 5 waves down as it would be under the triangle count.

18:52 BST - SPX Update

We seem to have the D leg of the triangle now, if that's what is forming. If it is a triangle, we need the E leg to stay below 1116.67:

SPX 1 min chart:

If it doesn't, then something else is going on.

17:46 BST - SPX Update

On the count I posted prior to the open, we could be forming a triangle for the 4th wave. If we're currently in the D wave, we shouldn't go below the C wave low at 1109.15.

If we drop below 1108.24 without an E wave, then the 4th wave will probably be counted as complete where I have put the label. Or it may be that we're in the [1],[2],(1),(2) count I posted shortly after the open.

SPX 1 min chart:

 

15:29 BST - ES Update

Its not exactly in the same position as the last chart I posted for SPX, but ES may also be starting a 3rd wave down from yesterday's high:

ES 5 min chart:

Again, if its in a third wave down, it needs to behave like it is, otheriwse, its a warning sign that something else may be happening. Watch out also if it can't take out the wave [1] low pretty soon. Yesterday's high is the invalidation point for this count.

14:56 BST - SPX Update

Well, that's a tad strong for a 4th wave. Still could be a 4th, but here's a possibility to consider for the bearish case - something even more bearish!

SPX 6 min chart:

Its invalid above 1123.70 and, if its right, we'd be in a 3rd of a 3rd, so it would need to behave like it is.

13:49 BST SPX Update

In addition to the bearish count I showed in last night's update, with waves [1], [2] and, possibly [3] down complete, here's a count that puts us still in wave [1] down, so, once complete, we will see a deeper wave [2] retracement:

SPX 1  min chart:

We may still be in wave 4 of (3). Once we have waves (4) and (5) complete for wave [1], I'd expect a 50%-61.8% retracement in wave [2]. Obviously, the bullish counts shouldn't yet be disregarded, so any retracement up needs to be watched carefully - the 1131.23 high clearly can't be taken out for this count to stand.

11:03 BST - DAX - A look at what its recent strength may mean for SPX

Will we see a new rally high in the Dax - if so, does it mean SPX will also make a new rally high?

The recent strength in the Dax of late has been undeniable. Yesterday it came close to invalidating the count that has it topping on 26 April 2010 along with the other major indices, as you can see from this daily chart:

DAX Daily chart:

It backed off the 26 April high and closed below the 6300 level yesterday. 

If it were to take out the 26 April high, that would put it out of snych with the bearish counts on the other major indices. In that case, the more bullish alternative marked on the chart might come into play, meaning we are in another zig zag up from the 2009 low. That would also open up the possibility that that is where we are also on SPX - I have a count for that possibility (see Option 5 on the 60 min counts page).

However, as strong as the DAX has been, it wouldn't surprise me if it does not exceed the April high, so we can still count a [i], [ii] down. As you can see from this weekly chart showing the 2007 top in the DAX,  it can have very deep 2nd wave retraces - pretty much reaching the start of the 1st wave:

DAX Weekly chart, 2007 top:

Of course, if it does get above the April high, it might just mean that the Dax is only now completing the expanding diagonal shown on the daily chart, which would be followed by significant declines, perhaps seeing it catch up with the other major indices -after all, back in 2007, it topped out in July. SPX on the other hand topped out in October, but they came back into synch after that right down to the March 2009 low. Here is a weekly chart showing these indices at the 2007 high. I've labelled the drop on each down to intermediate wave (1). You can see that by minor 2 of wave (1) down, they had got back in synch, despite the different topping dates.

SPX/DAX Comparative Chart of 2007 Top:

So, I'm not sure that a new high on the Dax, if it were to occur, would necessarily mean that we would have to start thinking that more bullish counts are also in play on SPX. Also, despite the depth of the retracement of the decline since the April high, a new high in the DAX for the rally since March 2009 is by no means certain.

9:30 BST - 60 min Counts page Updated

See here