17:38 BST - SPX Update: Alternative to the complete ending diagonal

On the bullish counts (see the update on the bullish counts posted yesterday), although the move up from 1040.88 can be counted as a diagonal as I've shown on the bearish counts, it would be a leading diagonal.

However, there's an alternative which could also apply to the [C] wave on the bearish count, which has us currently in an ending diagonal 5th wave in the 5 wave move off 1040.88. Here it is shown on the count that has us in a zig zag up from 1010.91 (see chart 1 in the update referred to above):

SPX 1 min - ending diagonal 5th wave still in progress:

I've labelled it as if wave (3) is still in progress, but  it may not be. Either way, if we take out the low at 1101.53, this diagonal is ruled out.

16:58 BST - SPX Update on the bearish count

We could have a top for the bearish count, but I think we need to see the wave (4) low get taken out. That's down at 1101.53:

SPX 1 min - Ending diagonal [C] of ii complete?

15:39 BST - SPX Update on the bearish count

Well, that didn't take long! Now, if this count is right, we have to stay below 1120.53 in this wave (5):

SPX 1 min - ending diagonal for wave [C] of ii: 

15:27 BST - SPX Update on the bearish count

This is how I'm counting the move from the 1109.92 high which I labelled as the top of wave ii on the bearish count (see yesterday's end of day update):

SPX 1 min close up from 1109.92 high:

The alternative labelling on this chart relates to the bullish counts which you can see in the update I posted on those counts yesterday.

On the bearish counts, there's not a great deal of room left for this count - its invalidated above 1109.92.

If that high is taken out, it would mean that wave ii is continuing higher, but as I said in yesterday's end of day update, there's not much room for a larger impulse wave up before this [i]-[ii]-i-ii count gets invalidated. So, for the bearish count, I'd have to look at wave [C] as possibly forming an ending diagonal as I've sketched in on the following chart with the orange lines:

SPX 1 min - ending diagonal for [C] of ii:

If its an ending diaginal, I'd have us in wave (5) and as you can see from the note on the chart, that wave must stay below 1120.53 in order to comply with the rules. It also has to take out the wave (3) high at 1110.27.

21:10 BST - SPX End of Day Update

For both bullish and bearish counts, I was looking for 5 waves up from the 31 August low at 1040.88. 

If you look at the update I posted earlier  on the bullish counts (you can read it by clicking here), you'll see that for the count shown in chart 1 in that update, it would be wave iii of (i) of [c] in a zig zag. For the count shown in chart 2, it would be wave (i) of [iii] up and for the count shown in chart 3, it would be wave [i] of C up.

On the bearish counts, 5 waves up from 1040.88 would complete a 2nd wave correction in an overall downtrend.

For the bigger picture on those bullish counts and the bearish counts set out below, please refer to the 60 min counts page.

You'll see from the update on the bullish counts that I posted earlier that its possible that we have now seen 5 waves up from the 1040.88 low. and I explained in that update what that means in the context of those bullish counts. 

In this update I'll only show that move in the context of the bearish counts.

Chart 1: SPX 1 min - [i]-[ii]- i-ii down from the 1129.24 high:

I've labelled 5 waves up from 1040.88 as complete at 1110.27, which would be the end of the wave ii correction.

However, on the labelling shown, I'd feel a bit more confident about this if we were to take out the low of the wave (4) triangle at 1097.23. Assuming wave (4) is correctly labelled as a triangle, that would preclude the possibility that wave (5) is subdividing.

Here's a closer look, zooming in on the move from the 1105.10 high:

Chart 2: SPX 1 min - from the 1105.10 high: 

You can see the count for 5 waves down from the 1110.27 high (I explained the truncated 5th wave in wave (5) of [C] in my earlier update). So I now have us in wave (2) up. Obviously, wave (2) can't take out the start of wave (1) at 1109.92, otherwise, this count is invalidated. 

 

If this labelling is correct, once wave (2) is complete, we should see a clear impulsive move to the downside in wave (3). If we don't see that sort of wave behaviour, it would raise questions as to whether or not this count is playing out.

So, putting together the bullish and bearish counts, the levels I'm watching are as follows:

1) for the bearish counts, we need to stay below the high at 1109.92. If that goes, it will mean that wave ii is extending higher. We'd then have to stay below the high at 1129.24 otherwise the [i]-[ii]-i-ii count will be invalidated (it could still be a [i]-[ii], however, as explained on the 60 min counts page);

2) if we take out 1129.24, that will focus attention on the bullish counts. The first bullish count shown in the update posted earlier  is bearish once wave [c] of 2 completes. If that count is in play, we would need to see impulsive downside action once wave [c] and 2 end, otherwise, focus will have to switch to the bullish counts under Option 4;

3) taking out 1097.23 before we make a new high will improve the chances of the bearish count.  However, it wouldn't be conclusive that the bearish counts are playing out since the bullish counts can easily accommodate a fall below that level in the corrective waves that they would now be in;

4) taking out 1065.21 will reduce the odds that the bullish count shown on chart 1 in the update I posted earlier is playing out;

5) taking out 1039.70  will eliminate the bullish counts as labelled. Until we take out 1010.91, however, there would still be a possibility that they are in continuing downward corrections, so didn't start their respective bullish moves at the 1040.88/1039.70 lows, but it might then be considered low probability and my focus would switch to the bearish counts.

20:54 BST - SPX - Update on the bullish counts

If we've completed 5 waves up from the August lows, on the bullish counts, we'd now be looking for at least a 4th wave pullback or a potentially deeper 2nd wave decline, depending on where you start the count for those 5 waves. The two possibilities are shown on the 60 min charts below which set out the labelling for the three bullish counts I'm following:


Chart 1: SPX 60 min - zig zag up from July low:

This chart shows wave iii of (i) complete at today's high and now puts us in wave iv of (i). Even on this chart, with wave i of (i) starting at the low at 1039.70, its possible that wave (i) completed at today's high and so we'd now be in a wave (ii) retracement. (see the 1 min chart below).  The difference is that the latter would likely retrace more of the prior up move than the former. 

For the moment, I've assumed on this chart that we're in wave iv down with a possible target at about 1083, the 38.2% retracement. So, I'd be on the look out for a 3 wave move ending in that area. 

If we are in wave iv on this count, its possible that the degree labels are one degree too low and that I should be labelling the move up from the August low as waves (i)-(ii)-(iii) and (iv) of [c] so that once we get wave (v), wave [c] would be completed and it would also be the end of minor 2 up. Certainly, if we take out 1129.24 in the 5th wave that I'm looking for on this count following the 4th wave correction, it'll be something to consider - but it would have to be confirmed by wave action, ie movement consistent with a minor wave 3 down.

Chart 2: SPX 60 min - first bullish alternate under Option 4 on the 60 min counts page: impulse up from 1010.91:

On this and the following chart, I've labelled 5 waves up from the low at 1040.88, which is where wave i and (i) on these charts started. So, on this and the following chart, I'd be looking for a 3 wave decline ending around the 50% to 61.8% retracement levels between 1075 and 1067.

For this and the following count, we have to stay above 1040.88 otherwise the labelling shown is invalid and would mean that we did not start the next waves up on these counts. However, they aren't technically invalidated completely until we take out 1010.91. Until then, we could simply still be completing their corrective waves down before starting the next leg up. 

Chart 3: SPX 60 min - second bullish alternate under Option 4 on the 60 min counts page: leading diagonal up from 1010.91:

Here's a closer look at the count on chart 1 above from the August low:

SPX 1 min - wave [c] of a zig zag from 1010.91 underway:

So, the main count on this chart is that we're in wave iv down, probably to around the 1083 area. I've labelled today's decline as wave [A] of iv, but this may need adjustment as the wave develops. 

As mentioned above and as shown by the alternate labels, it may be that we topped in wave v and (i) today (this would be in line with the labelling I showed on this chart in yesterday's end of day update), in which case, the retracement could be deeper, but I'll just wait and see what sort of move down we get - 3 waves into 1083 with a clear reversal back up would start to favour this count.

If we're in wave iv, we have to stay above the wave i high at 1065.21. If it goes below that then I'll switch to the alternate labelling.

On this count, we have to stay above 1039.70 in order not to invalidate the labelling that has us moving up in wave [c] of minor 2. Taking out that low wouldn't invalidate the overall count - that would only happen if we take out 1010.91. However, it would weaken it considerably in my view.

18:29 BST - SPX Update: 1 min close up - wave ii high on the bearish counts?

Although we really need to get below 1097.23, this sudden move down suggests that we may well have seen a top to the move off the August lows which would be wave ii up on the bearish counts. Assuming we did top at today's high, here's how I'd count it:

SPX 1 min close up: 

The move off today's high down to 1106.06 is overlapping but can't be a leading diagonal because the 3rd wave is longer than the 1st. So, I've counted the initial leg down from the high as part of wave (5) up, with the lower high at 1109.92 as a truncated 5th wave. From there, its easier to count 5 non-overlapping waves down to 1106.06, followed by an expanded flat.

On this count, we'd now be in wave 3 down. If its right, the next move back up should be a wave 4 correction and would have to stay below the wave 1 low at 1106.06. If we take that out in an assumed wave 4, it may be possible to count a set of ones and twos down, but that would require the high labelled 2 at 1109.64 to remain intact. Above that, and more upside would probably be more likely.

 

17:52 BST - SPX Update: 60 min time and price chart

Here's a 60 min time and price chart showing the timelines from the daily, but using Gann price levels based on the 1039.70 August low (the levels on the daily chart were based on the July low):

SPX 60 min - time and price:

You can see that there are some nice divergences on the indicators, which would support a wave count that puts us in the vicinity of a high if we didn't top at 1110.27.

Assuming we did top at today's high, I've calculated some Gann based price targets that may attract price on the way down. Watching price behaviour around those levels (assuming we get to any of them!) might provide a clue as to whether the bullish or bearish counts are playing out. 

If its the bullish counts, then I'd like to see price find support somewhere around the 1077 and 1060 levels and show action suggesting a turn back up. If its the bearish counts, I'd like to see price fall easily through the 1093 level and hesitate only slightly at the 1077 level, but then move quickly down to the lower levels and to below the August low.

15:15 BST - SPX Update: SPX Daily time and price chart on track to turn the market?

This is the update time and price chart I posted on Monday, suggesting that we're nearing a top of some sort, if we haven't already seen it today:

SPX Daily - time and price:

The time and price resistance is consistent with the completion of 5 waves up from the August lows. Of course, this chart can't tell us what that 5 waves represents - we have to use other techniques to try to work that out. Still, although its not, of course, guaranteed to work every time, its looks on track at the moment to turn the market at least temporarily.

15:07 BST - SPX Update: Close up of the bear count

Here's a close up of the count from my last post:

SPX 1 min - bear count close up:

1097.23 is the level that, if taken out, will suggest an end to the rally from the August low, assuming wave (4) was a triangle. We've now hit the 78.6% retracement of wave i down.

Its possible that wave (4) ended at 1091.15, and we're seeing an impulse up from there. Today's rally would be all or part of wave 3 of (5), but there's not a lot of room for it to move up and the wave 4 pullback would have to be very shallow and wave 5 of (5) would have to be quite short.  Still, if that's the correct count, then 1091.15 is the level that needs to be take out.

14:35 BST - SPX Update: best count for the bear case

With not a great deal of room left to the upside for the bear case to survive (1129.24 is the invalidation point), this may be the best count to enable it to make a final 5th wave within [C] of ii without invalidating the [i]-[ii]-i-ii down count:

SPX 1 min:

9:30 BST - Dollar Update

In my last post on the dollar, it appeared that we may have seen the start of wave (iii) up. In fact, the dollar put in a bit more upside from there with what counts quite well as a 3rd wave extension. It then appears to have completed 5 waves up from the 81.876  wave (ii) low, at 82.923. 

Here's a continuation of the 60 min chart from my last post, but zooming in on what I've labelled as a complete wave (ii) correction and the rally from there (you can see a chart of the wider view in my last post):

Dollar 60 min:

I've labelled a [1]-[2] off the wave (ii) low, but wave [2] may not be finished - at the moment, we only have 3 waves up from the wave [2] low. The current decline from the high labelled 1 would be wave 2 (of (3) of [3]) and must stay above the wave (2) low at 82.475 otherwise, the probability will be that wave [2] is continuing down. It retraced 50% of wave [1] at the 82.383 low.  The 61.8% retrace is at about 82.271 and the 78.6% retrace is at about 82.094.

Also, its not conclusive that we've seen the wave (ii) low. We retraced about 50% of wave (i) in the decline from 83.522, buts is perfectly possible that wave (ii) could still be in progress and will go on to make a deeper retracement to the 61.8% or 78.6% levels.

I think it would be more reassuring for long positions if we were to explode up above the correction channel that largely contained wave (ii) (see the red channel lines) and above the green base channel that I've tentatively put in for this rally off the wave (ii) low - if this is an impulse wave it ought to have no difficulty breaking above the upper line of the green channel and not really looking back after that.

Until then, downside risk in a continuing wave (ii) (or the other bearish possibilities outlined on the dollar page) remains. So, the best strategy to minimise the risk is to step aside from long positions if either of the two  pivot lows at 82.475 and 82.383 are taken out - the choice depends on individual risk tolerance.

21:19 BST - SPX End of day update

For both bullish and bearish counts, I was looking for 5 waves up from the 31 August low at 1040.88. 

If you look at the update I posted on Friday  on the bullish counts (you can read it by clicking here), you'll see that for the count shown in chart 1 in that update, it would be wave iii of (i) of [c] in a zig zag. For the count shown in chart 2, it would be wave (i) of [iii] up and for the count shown in chart 3, it would be wave [i] of C up. I did a further update on the bullish counts yesterday, which you can read here.

On the bearish counts, 5 waves up from 1040.88 would complete a 2nd wave correction in an overall downtrend.

For the bigger picture on those bullish counts and the bearish counts set out below, please refer to the 60 min counts page.

We're still really no further forward than we were yesterday on the question whether we've completed those 5 waves up or whether there is still another leg to go.

You can see the possibilities on the bullish and bearish counts below, starting with the bearish count:

Bearish case  

Chart 1: SPX 1 min -  i-ii down from the 1129.24 high:

I've labelled 5 waves up from 1040.88 as complete at 1104.58, but, its perfectly possible that yesterday's low at 1091.15 was the 4th wave of the final 5 up so today's move would be the start of the final 5th wave up within wave ii. That possibility would be eliminated  if we take out that low.

For this count to regain the focus, we now need to stay below 1103.26 and take out the low at 1091.15 in a  clear impulsive downside move that isn't immediately reversed. Otherwise, the risk of further upside remains.

Here's a closer look, zooming in on the move from the 1105.10 high at 1105.10:

Chart 2: SPX 1 min - from the 1105.10 high:

You can see more clearly from this chart why the low at 1091.15 needs to be take out for this count to become higher odds. If we don't take out that low, the risk that we still have more upside in wave ii remains.

Bullish Case 

Here's the bullish count shown on chart 1 in the update on the bullish counts posted on Friday (but the count for 5 waves up from 1040.88 applies to the other two bullish counts in that update as well):

Chart 3: SPX 1 min - wave [c] of minor 2 up:

On this count, the 5 waves up from 1040.88 is wave iii within wave (i) of [c] of minor 2.

If wave iii topped at 1104.58, then we'd now be in wave iv. But, you can see noted on the chart, the possibility that wave iii topped at 1105.10 and wave iv ended at 1091.15 so we'd now be in wave v of (i) up. That's eliminated if we take out 1091.50. I think wave [5] of iii looks better as 5 waves if it ended at 1104.58 even though it would then have truncated slightly, which is why I've labelled it at that high.

Its also possible that we're only in wave (4) of [5] of wave iii, so have yet to see a wave iii top. You can see this in the following chart which shows this bullish count closer up:

Chart 4: SPX 1 min - wave [c] of minor 2, close up from 25 August: 

Its probably a less likely option, but needs to be borne in mind.

So, on this count, if we take out 1091.15 without a new high above 1103.26 first, it'll increase the likelihood that we're in wave iv down. If we take out the 1103.26 high, the likelihood increases that we are in wave v (or possibly still in wave iii) of (i) up and we'd probably move quickly above the highs at 1104.58 and 1105.10 before we see and end to wave (i).

So, after today's action, the levels I'm watching are as follows:

1) for the bearish counts, we need to stay below the high at 1103.26. If that goes, its likely we'd soon see a move above the high at 1104.58 also, meaning that wave ii was continuing higher. We'd then have to stay below the high at 1129.24 otherwise the [i]-[ii]-i-ii count will be invalidated (it could still be a [i]-[ii], however, as explained on the 60 min counts page);

2) if we take out 1129.24, that will focus attention on the bullish counts. The first bullish count shown in the update posted yesterday  is bearish once wave [c] of 2 completes. If that count is in play, we would need to see impulsive downside action once wave [c] and 2 end, otherwise, focus will have to switch to the bullish counts under Option 4;

3) taking out 1091.15 before we make a new high will increase the odds that 5 waves up from 1040.88 completed at 1104.58. On the bullish counts that would be a temporary high which would be taken out once a corrective decline completes. On the bearish counts, it should signal the start of the next impulse down which would be a 3rd of a 3rd wave at various degrees;

4) taking out 1065.21 will reduce the odds that the bullish count shown on chart 1 in the update I posted on Friday is playing out (also see the update I posted yesterday);

5) taking out 1039.70  will eliminate the bullish counts as labelled. Until we take out 1010.91, however, there would still be a possibility that they are in continuing downward corrections, so didn't start their respective bullish moves at the 1040.88/1039.70 lows, but it might then be considered low probability and my focus would switch to the bearish counts.

19:23 BST - SPX Update: 1 min close up - watching 1103.26 and 1091.15

This next move up could be telling if my labels are correct:

SPX 1 min - close up:

I've re-labelled the degrees of the drop from my last post. I've also re-labelled the alternative count - that's why we need to get below 1091.15 for the bearish (1)-(2) count. And if course, for that count, we now have to stay below 1103.26.

19:05 BST - SPX Update: 1 min - wave (2) up topped?

The (1)-(2) count has suddenly become more attractive:

SPX 1 min - (1)-(2) down?

For now, anyway!

The next rally needs to be a controlled 3 wave affair, preferably not too deep and really, we need to take out the 1091.15 low now.

18:07 BST - SPX Update: 1 min close up - Now ot never for the (1)-(2) down

Last chance for the (1)-(2) down from the 1104.58 high - I can see a subdividing wave 5 of (5) up starting to develop:

SPX 1 min close up - (1)-(2) down complete or subdividing wave 5 of (5) of [C] up:

If the (1)-(2) count is to remain valid, its got to drop now, otherwise the alternative labelling showing us currently in wave iii of 5 of (5) up comes into play. If we take out 1099.93 (the low labelled "or 2"), before making a new high, the alternative labelling will look ropey. It'll look even less likely if we drop below 1095.97 (the low labelled "or ii") before making a new high.

16:41 BST - SPX Update: 1 min close up

Its difficult to see today's rally as a straight impulse if we're in wave 5 of (5) of [C] to complete wave ii up. It could be a leading diagonal for the first leg up within wave 5, but it didn't make a very deep retracement for the second wave if it was a leading diagonal. Maybe its a developing impulse (these choppy looking waves do have a tendency to just keep going up and develop into impulses) but at the moment it probably looks best as a wave Y correction within wave (2) as shown on this chart:

SPX 1 min close up:

At least for the wave (2) count the invalidation point is close by at 1104.58 and, as I've said previously,  until we see impulsive downward movement, the risk of further upside remains - if we could get 5 waves down to about 1087, without a new high above 1104.58, this wave (2) count would look like a good bet.

To the upside, the next levels I'm looking at if we're in 5 of (5) of [C] up are at about 1107 and 1125.

15:03 BST - SPX Update: 1 min close up wave (2) correction or wave 5 of (5) up both still valid

The risk of further upside either in a continuing wave (2) or  in wave 5 of (5) of [C] (to a high above 1104.58) was highlighted yesterday.  Here's how I'm looking at today's rally:

SPX 1 min close up:

Both possibilities remain equally valid. The wave (2) count is invalidated above 1104.58 on this count. If that's taken out, then the wave 5 of (5) of [C] to complete wave ii on the bearish count will become the focus. If we don't take out 1104.58 then it'll look like we did top at 1104.58.

21:12 BST - SPX End of day update

For both bullish and bearish counts, I was looking for 5 waves up from the 31 August low at 1040.88. 

If you look at the update I posted on Friday  on the bullish counts (you can read it by clicking here), you'll see that for the count shown in chart 1 in that update, it would be wave iii of (i) of [c] in a zig zag. For the count shown in charts 2, it would be wave (i) of [iii] up and for the count shown in chart 3, it would be wave [i] of C up. I did a further update on the bullish counts earlier today, which you can read here.

On the bearish counts, 5 waves up from 1040.88 would complete a 2nd wave correction in an overall downtrend.

For the bigger picture on those bullish counts and the bearish counts set out below, please refer to the 60 min counts page.

Today's action may have left a truncated 5th wave in the 5 waves up I was looking for from 1040.88, or we may still be in the 4th wave of that 5 wave move. 

Here is the position shown on the main bearish count  that has us in a [i]-[ii]-i-ii down from 1129.24, with wave ii as a zig zag (it also applies to the other bearish count where wave ii is an expanded flat, as well as to the bullish counts):


Chart 1: SPX 1 min -  i-ii down from the 1129.24 high:

I've labelled 5 waves up from 1040.88 as complete at 1104.58, but, as I've said above,  its perfectly possible that we just finished the 4th wave of the final 5 up with today's move. That possibility would be eliminated on the bullish and bearish counts if we take out the high at 1087.11, which is the high labelled 1 of (5) in the above chart.

Looking at the bearish count shown on the above chart,  we're retracing the decline from 1129.24.  So far, we've retraced just over 70.7% of that decline. If we only completed wave 4 of (5) of [C] at today's low, for wave 5 and (5) back up, the 78.6% retracement level at about 1110 may be a target.

If we did top at 1104.58 and completed  the first wave down in wave iii with today's early decline, although I can label a 2nd wave retracement complete at 1097.41, its possible we still have more upside in that 2nd wave (its 38.2% retracement is shallow). However, if we start seeing clear impulsive downside action that isn't immediately reversed, the risk of this will be reduced substantially.

Here's a closer look, zooming in on the move from the 1105.10 high at 1105.10:

Chart 2: SPX 1 min - from the 1105.10 high:

The initial decline today certainly looks impulsive but we really need to take out the 1187.11 high to eliminate the possibility that we're still just in wave 4 of (5) of [C]. Until then, the risk of further upside remains.

Even if that level is taken out, since the bullish counts would be in 2nd wave downward retracements if we have completed 5 waves up from 1040.88, the risk of further upside will remain at least until we take out 1040.88. After that level, the bullish counts are still technically valid (unless we take out 1010.91), but would probably be severely damaged.

Obviously, there's no way to tell whether we're in the bullish or bearish counts, so without taking out the levels mentioned above, we can't say if this current decline means the start of a big down move or if its just a pause in a longer term uptrend. We can only continue to identify the levels that the developing elliott wave counts provide which increase or decrease the odds in favour of one count or another.

At the moment, with the counts I'm following, those levels to watch are now as follows:

1) for both remaining bearish counts, we have to stay below the high at 1129.24;

2) if we take out 1129.24, that will eliminate those two remaining bearish counts for the move down from that high and will focus attention on the bullish counts. The first bullish count shown in the update posted today  is bearish once wave [c] of 2 completes. If that count is in play, we would need to see impulsive downside action once wave [c] and 2 end, otherwise, focus will have to switch to the bullish counts under Option 4;

3) taking out 1087.11 before we make a new high will eliminate the possibility that we are still in a 4th wave correction before a further move up to complete the 5 waves up needed on all counts from the 1040.88 low;

4) taking out 1065.21 will reduce the odds that the bullish count shown on chart 1 in the update I posted on Friday is playing out (see the update I posted today);

5) taking out 1039.70  will eliminate the bullish counts as labelled. Until we take out 1010.91, however, there would still be a possibility that they are in continuing downward corrections, so didn't start their respective bullish moves at the 1040.88/1039.70 lows, but it might then be considered low probability and my focus would switch to the bearish counts.

18:14 BST - SPX Update - 1 min close up bear count and 60 min time and price levels

Here's a possible count for the start of wave iii down:

SPX 1 min close up from 1105.10:

I've shown a count for a complete wave (2), but with the retracement only being 38.2% so far, further upside can't be ruled out. Neither can the possibility that we're still in wave 4 of (5) of [C] up, so yet to complete wave ii.

Its interesting that this move down today has stopped at the first Gann based price target assuming a top was made at 1104.58:

SPX 60 min Gann time and price levels:

The time cycle shown on this chart is the same as that shown on the daily chart I posted last night.

Of course, the fact that we stopped at this first Gann level based on a high at 1104.58 doesn't mean that we have topped at that high. For the moment, we just have to stay below 1104.58 for the bear case and get another 5 waves down (taking out 1087.11 to rule out the on-going wave 4 of (5) possibility).

15:37 BST - SPX - Bullish counts update

Today's decline also fits in with the bullish counts which all needed 5 waves up from 1040.88 as part of their bullish moves off the July low - please see the update on those counts that I posted on Friday.

Here's the close up chart relating to the count shown on chart 1 of that previous update:

SPX 1 min - wave [c] of a zig zag from the July low:

For this count, 5 waves up from 1040.88 is wave iii of (i) of [c] within a minor wave 2 corrective rally. So, if we're now in wave iv of (i), we need to stay above the wave i high at 1065.21 in order not to invalidate the count. If we drop below it, then we'd have to assume that wave (i) ended at the 1040.58 high and that the retracement down would be wave (ii). I can't say it would look very good, so I might then start to prefer the other two bullish counts. However, this bullish count won't be invalidated unless we take out 1039.70. There would still be a possibility then that we are still in wave [b], but again, it wouldn't look that great and the bearish counts might then start looking more likely.

For the other two bullish counts, 5 waves up from 1040.88 would be wave (i) of [iii] for the count shown on chart 2 of Friday's update and wave [i] of C for the count shown on chart 3 of that update. 

So, assuming those 1st waves are now complete, we'd have to stay above 1040.88 on this current pullback (though as I mentioned on Friday, 1039.70 could possibiliy be the starting point and, so the invalidation point for these counts). If we don't, focus would have to switch to the bearish counts.

14:58 BST - SPX Update: wave ii top with a truncated 5th within [C]?

There's a possibilty that, on the bearish counts (see Friday'e end of day update) we topped at Friday's end of day rally in wave ii, with a truncated 5th wave:

SPX 1 min from 27 August low:

Its possible that the (1)-(2) count that put the wave ii high at 1105.10 that I showed on Friday is actually what we've seen, but its certainly easier to count the 5 waves up for [C] that we needed from the low at 1040.88 with a truncated 5th at 1104.58. For this reason, I favour the count shown above rather than the (1)-(2) count with the wave ii top at 1105.10.

Here's a close up showing wave 5 of (5) of [C]:

So, the current count for the bear case puts us at the start of wave iii down. Obviously, this count is invalidated by a move above 1104.58 - in that case, the alternative shown (that today we just had a wave c within wave 4 of (5) of [C] would be the most likely count for the bear case (that could be ruled out if we drop below 1087.11 before making a new high).

14:26 BST - Dollar Update

The dollar looks like it may have completed a 3 wave move off the high of 83.522 at yesterday's low of 81.876 - not far off the 50% retracement level mentioned in my last post.

Here's a 60 min chart:

You can see that even on this time frame we appear to have 5 waves up from that low. If we're starting wave (iii) up then holding the low is, of course, crucial, so that's the level to watch for now. 

We need a controlled 3 wave pullback, at which point, I'll be thinking long with a stop below the low of the pullback or the low at 81.876. With the risk of more downside outlined in my last post, I wouldn't want to give this too much room at this stage.

 

14:43 BST - FTSE Update

Referring back to my post on 2nd September, the FTSE is looking today like it may now have made that wave up and over its previous high of 5418 I was looking for on both bullish and bearish counts (Please click here to see that post which shows my interpretation of the elliott wave position on FTSE - bullish and bearish).

Today, we've seen what looks like a nice 5 waves down from its recent high at 5459.40. The question now, if we have seen 5 waves down, is whether its a wave A or a wave 1. Obviously, we can't know for sure. We just have to wait and see how it moves back up and once it forms three waves back up, that could be a reasonable place to take a short. However, you'd want to be out above the high of the three waves (or, if your trading rules allow it, above the high at 5459.40).

Here's a view of the FTSE which shows why we may have seen at least a temporary top, aside from the elliott wave count - a confluence of gann fan resistance right at yesterday's high:

FTSE Daily price and time with gann fans:

The green and red fans are drawn with the 1x1 lines connecting the opposite corners of the time and price square (which is based on gann levels). The pink and black fans are drawn from one pivot high across another and from one pivot low across another. You can see that lines from three of the fans crossed at yesterday's high.

Here's another gann chart going back to the February low, showing what appears to be a 48 day cycle from low to high, high to low and now, low to potential high:

FTSE Daily price and time from February low:

Finally, some fibonacci stuff:

FTSE Daily retacement of April to July decline:

As you can see from the chart, in fibonacci terms, we've reached the 61.8% retracement of the decline from the April high - a good stopping point for a 2nd wave retracement if we're in the bearish count. 

Also (but not shown on the chart) the rally from the August low is .618 the length of the rally from the July low to the August high in terms of price, almost to the penny (61.8% would have been 5459.37). In terms of time, its just about .382 x the length of the July/August rally (.618 is the square root of .382).

Finally, as you can see, if you draw an upward pitchfork using the July low, the August high and the August low, FTSE's rally touched the median line of that fork and has backed off from it today. If you're rooting for the bearish count, you want to now see a quick dash for the lower line of the green fork in a move that takes FTSE down and through the median line of the downward blue fork.

Anything less than that, given that the bearish wave count would put FTSE in a 3rd wave down, would have to be cause for concern on the bear case.

22:45 BST - SPX Update: Time and Price Resistance suggesting a turn?

Undoubtedly, the bullish case looks very appealing following last week's action so I thought I'd post something that might suggest that there should be at least a temporary halt to the advance, if it has any impact. 

I should warn you that the following charts are very busy and require a bit of effort but really, they're not that bad once you get over the initial confusion of a mass of lines. Just don't look at them with a hangover.

Both charts use Gann based techniques relating to support and resistance and time.

This first chart shows the SPX from the 26 April high within a grid I've constructed from a Gann based time cycle (vertical lines) that the market seems to have observed, and Gann derived price levels at which price has pivoted or congested (horizontal lines). I then drew diagonals crossing through, as far as possible, the points at which time and price crossed. 

The result is a grid showing potential turning points in time and/or price at the vertical or horizontal lines and/or the diagonals, including points at which two or more cross. The diagonals can also be used to mark out the path of trends:

SPX Daily - Time and Price:

You'll see that the vertical time lines have pretty much caught the turn dates - see yellow circles. It was early at the May high, but that early turn seems to have resulted from price rising up to the red dotted diagonal which price had already hit on its first attempt to recover from the intial drop from the 26 April high. That diagonal did subsequently form the upper line of the down channel that price stayed within for most of the decline to the July low.

From the July low, price moved within the diagonals highlighted in purple and from the August high, it pretty much stayed within the diagonals highlighted with the black dotted lines.

It now seems to be moving up within the channel delineated by the diagonals I've highlighted in green.

We're now at the upperline of the green channel and approaching the next time line on about 10 September. We're also approaching a point where two diagonals cross as well as one of the horizontal price lines - see the turquoise circle.

All of this together seems to suggest a reversal coming up. 

The two diagonals that cross in this area, do so at about 1113/1114 on 9 September. The diagonal that forms the upper line of the green channel crosses through the time line at about 1116 and there is the horizontal price line at about 1121. The upperline of the green channel is at about 1108 on 7 Sept and about 1110 on 8 Sept. Coupled with the time points mentioned in my update in relation to the 60 min counts page on Saturday and the update to that page itself, which suggest a possible turn date of 7 Sept, this gives a range for a turn date of between 7 and 10 Sept.

Of course, you shoudn't just short simply on this basis. You need to see some price action that confirms a potential top. For example, at the flash crash low in early May there was the gap up the next day, while at the July low, there was the large bottoming tail candle, the high of which was traded above two days later.

The reason its important to wait for price action to show a reversal is because its perfectly possible for price to just keep moving up above the upper green channel line, to the next diagonal above it, and so, widening the channel for this up move (you can see that this happened with the drop from the April high to the early May low on the way down).  

This is a risk to consider given that just above the turquoise circle you can see that on this 10 September time line there is a point where its not only crossed by a horizontal price line at 1141, but there is also a cross of two diagonals - see the green square. Potentially powerful time and price resistance if price were to get there.

This next chart uses the Gann fan with the 1x1 line drawn across the top of two pivot highs in order to find levels of future resistance. Its not the traditional method of drawing the 1x1 at a 45 degree angle, but it was effective during the uptrend in identifying support - obviously, the 1x1 lines were then drawn across two pivot lows.

There are six different fans (I've removed most of the lines associated with each which are not currently relevant - yes, it could have looked alot worse):

SPX Gann fans from 26 April:

Now, it may only take one or two fan lines to provide resistance to a move. For example, the the rally into 13 May stopped at resistance from only one fan  line drawn from the 26 April high and the high on 29 April. The rally into 21 June stopped at resistance from two different fans. 

So, with 6 different fans suggesting resistance at or not too far above where we are now - well, you'd think it would mean something, especially when coupled with the price and time resistance that we're approaching as illustrated on the first chart above.

Still, as I've tried to emphasise, its crucial to wait for a reversal signal in the form of price action and until we see that, the bullish move that was started last week must be given the benefit of the doubt.