21:16 BST - SPX End of Day Update

You'll see from the 60 min counts page that 5 waves up from the August low is what I'm looking for on all three Options shown, from the very bearish through to the very bullish. What 5 waves up from that low means will depend on which of those Options is playing out. To determine that, we'll have to wait and see what sort of decline we get once we actually see a top to the rally, if we haven't already seen it.

In the meantime, here's the bearish count which assumes a top at 1185.53 (you can see the bigger picture of this count on the 60 min counts page):

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

Obviously, we can't now move above the high at 1185.53 if the main labelling  is correct. 

Here's a closer look:

Chart 2: SPX 1 min - 5 waves up from August low close up:

If this count is correct, we need to see an impulsive decline which, so far, we haven't see. Until we do see that, the risk remains to the upside.

If we take out the high at 1185.53, it doesn't necessarily mean that there is a great deal more upside to come in the bullish count I've been showing which puts us in a sub-dividing wave (v). Here's a count which assumes a further high to come, but probably not too much higher:

Chart 3 - 60 min alternate bearish count:

We only need 5 waves up from the low labelled (iv) to complete this count and you'll see from the count in Chart 4 below that we could be close to getting that after a wave (4) correction. So, provided wave (v) on the above count doesn't extened, a top on this count may not be far off.

Here's the more bullish count:

Chart 4 : SPX 1 min - wave (v) up from August low still in progress:

On the labelling shown, a drop below 1155.71 would invalidate this count since wave [2] of iii can't drop below the start of wave [1] of iii. As long as we remain above that low, however, the risk of further upside remains. However, falling below 1168.74 would, in my view weaken this count considerably and taking out 1159.71 at this stage would make me really start to question it.

Here it is close up:

Chart 5: SPX 1 min - bullish count close up:

Taking out the high at 1174.13 in an assumed wave (4) would invalidate the main labelling. Taking out the low at 1168.74 invalidates the alternate labelling and will begin to focus attention on the bearish count.

So, the levels I'm watching on the counts that I've labelled are 1185.53 (which has to hold if a top for the rally from the August low is in), 1174.13 (moving below which would rule out the main bullish count on Charts 4 and 5 above) and 1168.74 (taking that out would rule out the alternate bullish count shown on Charts 4 and 5). 

Then there are the 1159.71 and 1155.71 levels to watch. If we take those out, the very bullish count would start to lose credibility and then be invalidated, respectively. Ironically, such a move would be OK as a continuing wave (iv) correction on the alternate bearish count shown on Chart 3 above, so we'd still have the risk of a further high to come on that count.

20:12 BST - SPX Update on the bullish and bearish counts

Possibly completed wave [2] on the bearish count - not much room left if it isn't complete:

SPX 1 min - bearish count close up:

We really need to see something impulsive to the downside to have any confidence in this.

Here's how it looks on the bullish count:

SPX 1 min - bullish count close up:

If the main labelling is playing out, we need to stay above the wave (1) high at 1174.13 in wave (4). If the alternate labelling is playing out, the key level is the wave (2) low at 1168.74.

15:41 BST - SPX Update on the bullish and bearish counts

Here's a close up of Chart 2 from yesterday's end of day update:

SPX 1 min - bearish count close up:

The 61.8% retracement level is at about 1175. We need to stay below 1185.53 for this count to remain valid.

The alternate count shown in Chart 2 from yesterday's end of day update still stands as a possibility unless we take out 1177.49.

Here's a close up of Chart 3 from yesterday's end of day update:

SPX 1 min close up of the bullish count:

Straightforward here. We just need to stay above 1159.71.

11:45 BST - FTSE Update

If FTSE put in an important top in April, its going to have to start dropping pretty much now. Here's an updated count showing how the move since the April high may be counted - the main labelling is the bearish view, with the alternate labelling showing the bullish view:

FTSE Daily:

So far, wave [ii] on the bearish count has just exceeded a 78.6% retracement of wave [i] down.

You can see that I've labelled the move up from 5070.94 as a diagonal. On the bearish count, its an  ending diagonal for wave c of (y) of [ii]. On the bullish count it would be a leading diagonal, so it can't be wave 3, so it would have to be wave [i] of 3 - that's very bullish and means that this bullish count, on this labelling, won't be invalidated unless we drop below 5070.94.

Here's a closer look:

FTSE 60 min:

This shows only the bearish count, but the following comment on the diagonal applies equally to the bullish count.  I've labelled the diagonal from 5070.94 as complete, but we may still be in wave [5]. It can't exceed 5833.1 if its to remain shorter than wave [3] as required by the rules. In theory, wave [5] could, therefore, reach its maximum level and still not eliminate the bearish count since the April high is 5833.73.

Here's an even closer look:

FTSE 5 min:

Again, I've only labelled the bearish count. 

It looks like a diagonal down from the high at 5761.93, although I could just as easily label it as an impulse down to where I have wave (1) of the diagonal, followed by an expanded flat wave (2), with today's rally being the C wave of wave (2).

If we take out the high labelled [ii], that would mean that the diagonal is still in progress or something more bullish is developing.

Taking out the wave [4] low of the diagonal at 5597.46 would mean that the diagonal is complete on this labelleing, though it won't seal the bear case since even on the bullish count, a pullback (in wave [ii] of 3) is called for. As mentioned above, we'd really have to drop below 5070.94 to start thinking that the bullish case may not be viable.

So, taking out 5770.92 would suggest more potential upside and the bullish case might then be the focus. However, the bear case isn't invalidated unless we take out 5833.73. Taking out 5833.1 invalidates the diagonal from the 5070.94 low and would increase the likelihood that the bullish count is playing out. Dropping below 5597.46 would suggest we could see more downside, but it may only be a corrective wave [ii] on the bullish count. We'd have to drop below 5070.94 to rule that out. Dropping below today's low at 5680.43 would be a the first step in a larger down move.

21:07 BST - SPX End of Day Update

Today's move was a good start if we've completed 5 waves up from the August low at the high of 1185.53. You'll see from the 60 min counts page that 5 waves up from that low is required on all three Options shown, from the very bearish through to the very bullish, so what 5 waves up from that low means will depend on which of those Options is playing out. To determine that, we'll have to wait and see how far the decline from 1185.53 goes.

In the meantime, here's the 60 min chart (labelled as if Option 1 is playing out) showing the count for a top:

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

Obviously, we can't now move above the high at 1185.53 if the main labelling  is correct. 

Here's a close up from the wave (iv) low at 1131.87:

Chart 2: SPX 1 min - 5 waves up from August low close up:

Taking out the 1163.87 wave i of (v) high ruled out the possibility that we might still be in wave iv of (v). So, the count for a top seems OK.

If the alternate labelling is playing out, we have to stay below 1177.49 in wave 2 of (3). If we don't, then, provided the high at 1185.53 holds, the main labelling stands.

However, there remains a bullish count which can't be dismissed until we drop below the low at 1155.71. Its a variation of the count shown in Chart 1 in yesterday's end of day update - I've just streamlined it by removing one set of  the ones and twos into the 1184.38 high.  Again, its a close up from the wave (iv) low at 1131.87:

Chart 3: SPX 1 min - wave (v) up from August low still in progress:

On the labelling shown, a drop below 1155.71 would invalidate this count since wave [2] of iii can't drop below the start of wave [1] of iii. As long as we remain above that low, however, the risk of further upside remains.

So, the levels I'm watching on the counts that I've labelled are 1185.53 (which has to hold if a top for the rally from the August low is in), 1177.49 (moving above which would rule out the alternate count on Chart 1 above) and 1155.71 (taking that out would rule out the bullish count shown in Chart 3).

 

17:07 BST - SPX Update on the count for a possible top at 1185.53

If the main labelling on the chart below is correct, we have to take out the B wave low at 1171.84. Doing so won't be conclusive that the main labelling is playing out. We'd really have to take out today's low to gain more confidence in it, followed by the low at 1155.71:

SPX 1 min - possible top at 1185.53:

If the alternate labelling is playing out, we have to stay above 1163.87.

15:09 BST - SPX Update - Possible top for the rally from the August low?

The chances may be increasing that this count, from Chart 2 in yesterday's end of day update, may be what we have seen playing out from the August low:

SPX 60 min - 5 waves up from August low possibly complete at 1185.53:

This shows the count as if Option 3 from the 60 min counts page is playing out, so this would be a temporary high. If Options 1 or 2 on the 60 min counts page is playing out, its a more bearish top.

Here's a close up:

SPX 1 min - possible end of 5 waves up from August low:

To be honest, however, with the market having been so strong recently, I think we need to be wary that this drop today may be wave [C] of an expanded flat wave iv. The argument against this would be that on my labelling, we had a running flat for wave ii, so if this is an expanded flat for wave iv, there's no alternation. However, alternation is only a guideline, so I think this risk is something to keep in mind.

Clearly, if we've seen a top at 1185.53, we have to stay below that high in any retracement, so that's the level to watch to the upside.

If this is still part of wave iv, then it has to stay above the wave i high at 1163.87, so that's the level to watch to the downside.

21:17 BST - SPX End of Day Update

With no significant level to the downside being breached, the trend remains up. 

 

Here's a close up of the most bullish count, the bigger picture for which you can see on Chart 3 on the 60 min counts page: 

 

Chart 1: SPX 1 min - bullish count:

Here, I'm assuming we've started wave [3] of v up. I've put us in wave (3) of [3]. If this labelling is correct, the next decline will be wave 4 of (3) of [3] and will have to stay above the wave 1 high at 1177.32. If it takes that out, then the count will need to be reviewed.

Here's the other bullish count I mentioned on Friday:

Chart 2 - SPX 60 min moderately bullish count:

As I said on Friday, I think I'm starting to prefer this count over the one shown in Chart 1 above simply because its more likely to produce a wave (v) that's in proportion to wave (i). As mentioned, because wave iii is shorter than wave i on this alternate count, wave v would be limited by the size of wave iii, which is 28.67 points. So, if wave iv ended at the low of 1171.17, for example, wave v couldn't exceed 1199.84. If wave iv ended where I've labelled at at 1172.38 then the limit for wave v is 1201.05 (I mentioned in my post earlier today that either of those lows could be counted as the wave iv low).

Here's the close up:

Chart 3: SPX 1 min - close up of moderately bullish count:

If we drop below the wave [1] high at 1181.80 on the next decline, I'd start to think that we may have topped on this count at today's high. However, better confirmation would, in my view, come if we drop below the wave iv low either at 1172.38 or 1171.17.

Here's a revised 60 min chart for an ending diagonal from the August low:

Chart 4: SPX 60 min ending diagonal from August low:

And here's a close up:

Chart 5 : SPX 1 min - ending diagonal from the August low close up:

This shows a potentially complete count for the diagonal, but be aware that wave (v) could go higher as long as it doesn't exceed 1219.22.

Taking out the low at 1171.17, where I have labelled wave b of (v), would suggest that we'd seen a top, but I'd rather see the wave (iv) low at 1166.71 get taken out.

So, following today's action the main levels I'm watching are: 1181.80, 1177.32, 1172.38, 1171.17 and 1166.71.

15:51 BST - SPX Update on the bullish, moderately bullish and bearish counts

Here's the bullish count from Chart 1 in Friday's end of day update:

SPX 1 min - bullish count:

If the labelling is right and we're in wave iii of 3 of (3), we first have to stay above 1176.12 which is the wave i high.  Take that out in an assumed wave iv and this count will look unlikely. Even if we stay above it and make a new high, subsequently taking out 1171.17 will invalidate this count.

Here's the moderatley bullish count mentioned in that Friday update:

SPX 1 min - moderately bullish count:

Here, we have to stay above the wave iv low at 1172.38. However, that low may be at 1171.17, depending on how you label the triangle, so really, I'd like to see that low taken out before I'd think this count may no longer be viable.

Here's the bearish count from Chart 2 in Friday's end of day update:

SPX 1 min - bearish count:

Pretty straightwforward here - we have to stay below 1184.38 and take out the low of wave [1] which is at 1166.71, but taking out 1171.17 would be a start.

13:05 BST - Dollar Update

On the daily chart of the dollar you can see how stretched the bullish count is becoming, with intermediate wave (2) now having retraced nearly 88.6% of the intermediate wave (1) rally:

Dollar Daily:

You can see from the indicators that there are bullish signs appearing - bullish divergence in the RSI which is failing to make lower lows with price; bullish divergence in the MACD histogram; the MACD itself starting to show signs of turning up; and the stochastic turning up. However, this is the type of thing we've seen before, but we now need price to confirm that something bullish may be afoot.

Well, we saw something along those lines yesterday. The bar yesterday was a nice reversal bar with potentially bullish implications since it took out the prior bar's low only to then close above the high of the prior bar. Its a start, but its not conclusive of a meaningful turn - the close was right at the bottom of an area of congestion (see the yellow highlighted area). If the dollar can get above that area and turn it into support, then there might be a more solid basis for thinking that a potentially significant turn has been made.

As mentioned above, we've nearly reached the 88.6% retracement level. I calculate that level to be 75.827, so there's still a little more room to go to reach it, though yesterday's low at 76.144 may be close enough. Just an observation: wave [2] on this bullish count was a 78.6% retracement of wave [1] and .886 is the square root of .786. It would be interesting if wave (2) of [3] stopped at the 88.6% retracement level.

The case for a turn would be reinforced if there were a a potentially complete wave count.

Well, there may be, but the most obvious count to me suggests that we may still need to see another low. Here's a 90 min chart showing the move down from the June high at 88.708:

Dollar 90 min:

The count places us currently in wave (iv) of [v] of C. If this is correct, Friday's rally will be limited and we should see a further decline next week to complete wave [v]. 

Here's a closer look from the B wave high at 83.522:

Dollar 70 min:

This provides a bit more detail for wave C of (2). Within wave [v] of C, I've got an extended wave (iii). This should mean that wave (v) of [v] is unlikely to extend and, in theory, should tend towards equality with wave (i) of [v]. Wave (i) of [v] was 1.071 points on my labelling, so if we start dropping again, without taking out Friday's high at 77.131, I'd be looking for signs of a turn in the 76.060 region.

Having said all of that, with Friday's action, its very possible that wave C completed at Friday's low. You can see the alternate count I've labelled for wave [v], shown in italics.

I'd start to think that this alternate labelling is playing out if we were to break above the area between the red horizontal lines, which is the yellow area of congestion marked on the daily chart above. This is, of course, provided that that area then becomes support.

Such a move would also get us above the 200 period moving average, which would also be supportive of a possible turn.

Still, looking at the 5 min chart, this is what I see from the low at 76.144:

Dollar 5 min:

Close up, the move from the low doesn't seem to be as impulsive as it may have felt if you were only watching price action and not the charts. It counts more naturally as a corrective move in my view, consistent with the main labelling in the 70 min chart above. However, I've sketched in a possible leading diagonal from the low that may have played out for the first wave of something more bullish. There's no overlap between what I see as the 1st and 4th waves, (they'd be where I have waves (1) and (4) of wave [C] on the corrective count) so I'd consider it doubtful. Still, if price breaks above the congestion I've referred to above and turns it into support, this leading diagonal count would start to look much more convincing.

So, as I've been emphasising over the last few weeks, the key remains price behaviour. Until we see price action that is undoubtedly impulsive to the upside, the safest course continues to be to assume more downside to come.

This is especially important because there remain more bearish counts in play. One of those is mentioned as item 2 on the Dollar page - that page is considerably out of date now, but the count mentioned in item 2 remains on the table (see the numbered items under the 75 min chart - item 1 in that list warned of much further downside than we had seen at that time in the count shown in the above charts).

A less bearish alternative, but one which, nevertheless, implies possibly more significant declines to come is shown in the following chart:

Dollar Daily - Alternate overall bullish count:

This puts us still in primary wave [2] of cycle c. The low of wave b is at 70.698. If this labelling is correct, and we're seeing an expanded flat wave [2], we could easily take out the low that's considered on the counts above to be wave [2] and which is wave (A) of [2] on this count, at 74.170. 

This count would likely be ruled out by a move above the low I've labelled as wave 1 of (C) at 80.085, assuming we move above that level in the next rally, since, on this labelling, the next rally would be wave 4 of (C).

So, in summary, I'm thinking we're likely to see more downside some time next week before we complete wave [v] of C of intermediate wave (2) on the main bullish count. If we move above the 77.931 level in an impulsive manner, I'll start to think that we may have bottomed at Friday's low of 76.144. However, we'd have to see that area turned into support to gain more confidence in this possibility. Bear in mind that on the more bearish counts, its possible that a rally from around these levels may only be a 4th wave in a larger 5 wave decline from the June high. Taking out the low at 80.085 would make that less likely on the alternate bullish count shown above, but we'd have to take out the high at 83.522 before I would start to think that the even more bearish count referred to above (that has the June high as a C wave and puts us now in a very large 5 wave move down) may not be viable.

21:36 BST - SPX End of Day Update

The counts shown in yesterday's end of day update anticipated that we would see some upside today, which would be the start of the next leg up on the bullish count or a corrective 2nd wave on the bearish count.

Today's action took us up, down and then sideways, but up  a little overall. So, the action hasn't doesn't anything to tell us whether we are in the bullish or bearish count.

The following charts are close ups of the action from the 1131.87 low. You can see the larger context of the following charts on the 60 min counts page.

Here's the bullish count which I've labelled as if Option 3 on the 60 min counts page is playing out:

Chart 1: SPX 1 min - bullish count:

Here, I'm assuming we've started wave [3] of v up. I've put us in wave (3) of [3], but it may be that wave (2) is still playing out, so we have some further downside to come. That's fine as long as we stay above 1155.71 in wave (2) of [3]. If we were to take out that low,  it would look like the bearish count is playing out, making 1184.38 the end of the rally from the August low. 

As I showed earlier, there is another bullish count that may be playing out and which would have less upside than the one shown above. You can see that count by clicking here.

I think I'm starting to prefer that count over the one shown in Chart 1 above simply because its more likely to produce a wave (v) that's in proportion to wave (i). As mentioned in that earlier post, because wave iii is shorter than wave i on this alternate count, wave v would be limited by the size of wave iii, which is 28.67 points. So, if wave iv ended at the low of 1171.17, for example, wave v couldn't exceed 1199.84. This count would be invalidated if we slip below 1163.87 (the wave i high) before we make a new high.

Here's the bearish count which is labelled as if Option 1 on the 60 min counts page is playing out:

Chart 2 : SPX 1 min - ending diagonal from the August low complete at 1184.38:

As you can see, I've shown a [1]-[2]-(1)-(2) down from the high at 1184.38. It may be that we're actually still in wave [2], and this will certainly be the count to follow if we take out 1181.20. In that event, wave [2] would have to stay below 1184.38 in order to keep the bear count intact. If that's taken out, I'll turn my attention to the bullish count. 

So, following today's action the levels I'm watching are: 1184.38 (to keep the bear count alive), 1163.87 (to keep the alternate bullish count alive) and 1155.71 (to keep the bullish count shown in Chart 1 above alive). 

Have a great weekend!

19:42 BST - SPX Update: alternate 60 min bullish count which implies less upside than the main bullish count

Here's an alternative on the bullish count shown on Chart 3 on the 60 min counts page:

SPX 60 min - Option 3:

This count makes the 1184.38 high wave iii of (v) and the action since would be wave iv, possibly as a triangle. It would limit the size of wave v of (v) to 28.67 points, which is the length of wave iii, since wave iii is shorter than wave i.

This count would be invalidated if we take out the wave i high in an assumed wave iv. That high is 1163.87.

19:02 BST - SPX Update - Various possibilities on both bullish and bearish counts

What a mess! A couple of possibilities on both bullish and bearish counts:

Bullish:

SPX 1 min - bullish count:

Perhaps we've started wave (3) up or wave X of (2) may have formed a triangle and we may have another drop to come in wave (2) before we start wave (3) up.

We have to stay above 1155.71 for this count to remain valid.

Bearish:

SPX 1 min - bearish count:

We may have started wave [3] down. If so, we have to stay below 1181.20. Alternatively, we may still be in wave [2] - in that case, we have to stay below 1184.38. 

Taking out today's low would help confidence in this count, but while we remain above 1155.71, the bullish count remains.

15:36 BST - SPX Update on the bullish and bearish counts

Despite the decline today, the bullish count remains intact, though I find it difficult to describe today's action as bullish. Still, here is what I think may be happening on this count:

SPX 1 min - bullish count:

Until we take out 1155.71, this remains on the table. It has room to drop further, therefore, but may be complete at today's low.

Here's the bearish count:

SPX 1 min - bearish count:

It does look like a nice impulse in the making. I've labelled a partially complete impulse for wave (1) of [3], so a new low below 1167.12 may result in a bounce in wave [2], but I'll have to see what it looks like if it happens. It may be that we've already completed 5 waves down - its difficult to tell. I'll just have to watch the how we retrace.

21:07 BST - SPX End of Day Update

The counts shown in yesterday's end of day update anticipated a continuation of the decline from 1184.38 that had started in the latter part of yesterday's session, whether on the bullish or bearish count. On the bullish count it was wave [4] of v and on the bearish count it was part of an impulse wave down.

Today's action fulfilled that expectation and, in the process, the main bullish count was invalidated with the move below 1168.68. However, the alternative bullish count that I had mentioned remains.

The following charts are close ups of the action from the 1131.87 low. You can see the larger context of the following charts on the 60 min counts page.

Here's the surviving bullish count which I've labelled as if Option 3 on the 60 min counts page is playing out:

Chart 1: SPX 1 min - bullish count:

On this labelling, taking out 1155.71 would invalidate the count, since wave (2) of [3] can't drop below that low. If we were to take out that low,  the bearish count would become the focus, making 1184.38 the end of the rally from the August low. 

Of course, what that means depends on which Option shown on the 60 min counts page is playing out, because it could just be a temporary top prior to more significant upside.

Here's the bearish count which is labelled as if Option 1 on the 60 min counts page is playing out:

Chart 2 : SPX 1 min - ending diagonal from the August low complete at 1184.38:

I've switched back to the impulse wave off the high at 1184.38 since we didn't see a retracement deep enough to be considered as wave [2] following the diagonal I had labelled earlier.

As you can see, I've shown a complete wave [1] down, meaning we'd now be in wave [2] up. A likely retracement level might be the 61.8% area at about 1178, but watch also the 78.6% level at about 1180 and the 50% level at about 1175.

The critical level for this count is the high at 1184.38. If we take that out then I'd have to assume that the bullish count is playing out.

So, I'm watching two levels after today's action: 1184.38 and 1155.71. Taking out the former eliminates the bearish count while taking out the latter eliminates the bullish count.

19:07 BST - SPX Update : main bullish count invalidated, but the alternative stands. Diagonal from the high on the bearish count?

The main bullish count shown in the last post has been invalidated by the move below 1168.68. That focuses attention on the more bullish count I've mentioned but not previously charted in detail (I've been describing it in end of day updates). You can see it on Chart 3 on the 60 min counts page and here's a close up from the wave (iv) low:

SPX 1 min - bullish count:

It shows wave (v) subdividing. This labelling will be invalidated if we take out 1155.71.

On the bearish count, I'm starting to favour the diagonal down from the high rather than a straight impulse, though it still could be either. I've labelled a complete diagonal on the following chart:

SPX 1 min - bearish count:

If we continue to fall without a meaningful retracement for what would be wave [2] on the diagonal count, the impulse wave down will start to look better again. Obviously, for this bearish count, the high at 1184.38 has to remain intact.

17:53 BST - SPX Update on the bullish and bearish counts

On the bullish count posted earlier, the wave [4] drop is getting a bit deep, but the count remains valid so far. It now looks better as a (W)-(X)-(Y):

SPX 1 min - bullish count:

Remember, this count is invalidated below 1168.68 (in which case, my attention will turn to the more bullish count referred to over the last several days - see yesterday's end of day update and Chart 3 on the 60 min counts page).

On the bearish count, we could be getting an extending wave (5) or a diagonal (as to which, see the blue lines I've drawn in):

 
Its also possible, as mentioned in the last post, that where I have wave (3) of [1] is actually the whole of [1] down and we're now in wave [3] down. If this decline starts to extend, I'll certainly be thinking more closely about that possibility.

15:48 BST - SPX Update on the bullish and bearish counts

Here's how what I'm seeing at the moment:

First, the bullish count: looks like a possible complete wave [4] of v:

SPX 1 min - bullish count:

It would be fine for wave [4] to drop more, but it has to stay above 1168.68 for this count to remain valid.

Second, the bearish count: a possible (1)-(2)-(3) down so far:

This will be invalidated if wave (4) ends above the wave (1) low at 1179.46. In that case, we might then have a (1)-(2)-1-2 down, but I wouldn't place too much confidence in that. However, if that were the count, wave 2 would have to stay below 1182.47 for the count to remain valid. 

If we take that out, its possible that we could say that today's low was wave (5) and, therefore, wave [1] down and if we don't take out the high at 1184.38, that would be how I'd count it. At the moment however, the close up of the move down from 1182.47 to 1174.04 (which would be wave (3) on this way of counting the move) isn't the best looking 5 waves I've seen.

21:20 BST - SPX End of Day Update

We got the new highs for the rally from the August low as envisaged by the counts shown in yesterday's end of day update. The main bearish count remains the diagonal from the August low. Here it is on the 60 min chart:

Chart 1: SPX 60 min - diagonal from August low:

This would be an ending or leading diagonal, depending on which of the bigger picture options is in play (as to which, see the 60 min counts page - the chart above assumes its Option 3).

Here's a close up of Chart 1 from the wave (ii) low (its labelled as if Option 1 is playing out):

Chart 2: SPX 1 min - close up of diagonal from August low:

As mentioned yesterday, the limit for wave (v) is 1192.52 because wave (v) must be shorter than wave (iii). We managed to stay below that level so the diagonal is still a valid possibility.

On this labelling, taking out 1155.71 would suggest that the diagonal is complete, but an earlier indication might be taking out the b wave low at 1162.55. However, an impulsive move that takes out the wave [4] of c low at 1173.14 would make me start to consider that a top might be in.

I've labelled the decline from today's high as the start of an impulse wave down, but we have to see alot more price action before we can have any confidence in this. The first test would be staying below the high I've labelled as wave (2) at 1182.47. If we take that out before making a clear 5 waves down, I'd start to think that the high at 1184.38 may only have been wave [3] of c, not wave [5].

Here's the more bullish count which has us in a subdividing wave v of (v) in an impulse wave up from the August low. This chart is labelled as if Option 3 is playing out:

Chart 3: SPX 1 min - impulse up from the August low:

Taking out 1168.68 in what I'm assuming is now wave [4] of v  would invalidate the labelling and would start to suggest that the diagonal in Charts 1 and 2 above is playing out. However, I'd feel more confident of this if we were to take out the 1155.71 level mentioned under Chart 2 above and then 1151.41.

In addition to the two counts above, there's still  the much more bullish possibility I have been mentioning over the last several days, that the high at 1163.87 was wave i of (v) and the low at 1151.41 is wave ii, which puts us now in wave iii of (v). We'd really have to take out 1131.87 to eliminate this, but taking out 1168.68 at this stage would probably render this count less likely.

So, the levels I'm watching are 1182.47, 1173.14, 1168.68, 1162.55, 1155.71 and 1151.41. The four that I've underlined are, in my view, the most important levels to watch on the counts that I've labelled.

19:32 BST - SPX Update

The market keeps grinding higher, as you'd expect when no significant level to the downside is taken out. Here's what I'm seeing at the moment. first for the bearish count:

SPX 1 min - ending diagonal from August low:

I've labelled it as complete, but there's no price action yet to support this. I'd like to see 5 clear waves down to start with and then a drop below that wave (4) low at 1173.14

Here's the bullish count:

SPX 1 min - impulse up from August low:

Here, if the labels are correct, we have to stay above 1168.68 in wave [4]. If we drop below that, I'll start to prefer the ending diagonal count above.

 

15:32 BST - SPX Update on the bullish and bearish counts

Here's the second chart from yesterday's end of day update:

SPX 1 min - ending diagional from August low:

Bottom line: if this labelling is correct, we have to take out 1155.71, though taking out that low labelled b at 1162.55, as mentioned yesterday, would help.

Here's the bullish count from the third chart in yesterday's end of day update:

SPX 1 min - impulse from August low:

If this is playing out, we have to stay above the wave (1) of [3] high at 1165.06 in wave (4).

So, essentially, while we're above 1165.06, I'd favour the upside. If we take that out now, I'd start to think a top for the rally from the August low may be in, but I'd want to see  1162.55 and then 1155.71 get taken out very quickly and impulsively.