21:25 BST - SPX End of Day Update

With the high above 1129.24 today, the [i]-[ii]-i-ii count was finally invalidated. That leaves the following counts from the 60 min counts page intact:

1) the [i]-[ii] and 1-2 counts on the potentially very bearish side - currently Options 2 and 3 on the 60 min counts page. 

As mentioned over the last few weeks, in respect of the [i]-[ii] count (currently Option 2 on the 60 min counts page), where wave [i] was on 25 May, I was starting to dislike the count because of the time taken for wave [ii] (now that the [i]-[ii]-i-ii is off the table). On that basis alone, I'm going to drop that count in favour of the 1-2 shown currently as Option 3 on the 60 min counts page.

Here's the updated 60 min chart for that count:

You can see I've labelled a complete wave 2 at today's high, though noted that the rally from the August low could just be (i) of [c] of 2. We'll just have to wait and see how we decline, assuming we've completed 5 waves up (or an ending diagonal) from the August low.

Going forward, I'll be referring to this potentially very bearish count as Option 1.

2) a W-X down from the 1219.80 high, which has a Y wave down to come on the moderately bearish side (currently Option 5 on the 60 min counts page).

Here's the updated 60 min chart for this count:

You can see that here, I've adopted the alternate labelling  shown on the chart on the 60 min counts page, that makes the latest high (assuming we've topped) wave X  in the decline from 1219.80. 

I've also related the labelling to long term count 5 (see the long term counts page), which would make the move down from 1219.80 intermediate wave (2). You can see the count for intermediate wave (1) up from the March low on the "Impulse from March 2009" page. The chart on that page shows a target area for wave (2) around the 875-950 level.

Going forward, I'l be referring to this moderately bearish count as Option 2.

Since the count currently referred to as Option 4 on the 60 min counts page has pretty much the same effect as this one, but looks less attractive in my view, I'll be leaving that aside from now and just using this one.

3) for the bullish side, a complete (X) wave low in July followed by a leading diagonal wave A (or [i] of A) up followed by wave B (or [ii] of A) and, from the August low, the start of wave C (or wave [iii] of A) (see charts 2 and 3 in the update on the bullish counts posted on 9 August).

Here's the updated 60 min chart:

For this count, from the 9 August update on the bullish counts, I've used only the count shown on chart 3 since I much prefer that to the count shown on chart 2 in that update, so I'll leave that to one side from now. 

You can see that the labelling used relates to long term count 2 on the long term counts page (which has us in primary wave [2] up from the March 2009 low). So, the (Y) and (X) waves labelled would be part of an on-going primary wave [2] up which can't exceed the October 2007 high.

However, as noted on the chart, the count can also be applied to the more bullish long term counts, such as long term count 3 where these waves would be part of (D) of an expanding triangle that must exceed the October 2007 high.

Going forward, I'll be referring to this bullish count as Option 3.

Now, the question is whether or not we've topped in wave 2 (or [i] of (c) of 2) under Option 1 above,  or in wave X under Option 2 above or in wave [i] of C (or (i) of [iii] of A) under option 3 above.

Well, we need either a 5 wave impulse or a diagonal (ending diagonal for Options 1 and 2 above, or leading for Option 3) up from the August low.  Either can be counted in the move up from August and both can potentially be counted as complete at today's high.

Here's the diagonal shown on the bearish count under Option 1 above:

SPX 1 min - diagonal up from August low:

I've labelled it as complete at today's high, but without a significant decline following the assumed end of a diagonal, it gives rise to suspicion that it may not yet be done. I can see that we may have one more up leg to come as shown on this chart:

SPX 1 min - diagonal close up:

I've labelled the count for another leg up as an alternate on the above chart. It shows today's high as wave [A] of y and the move from there as wave [B], potentially a triangle shown by the blue dotted lines.

If we take out 1118.88 to the downside, then that would rule out this alternate since wave y must be a zig zag and so wave [B] can't move below the low of wave [A].

While we are above that level, the risk of further upside is high in my view. That further upside would be limited to 1150.84, assuming the labels are all in the right place, since above that, wave (v) would be longer than wave (iii), which would break the rules. If we were to move above there then we'd most likely be counting the rally as a 5 wave move up from the August low.

Here's the 5 wave impulse up from the August low. Again, I've shown it on the count for Option 1 above (though on this chart I've labelled it as if we will only have completed wave (i) of [c] today rather than the whole of [c]):

SPX 1 min - 5 waves up from August low:

I've labelled the 5 waves complete at today's high, with the decline from there being the start of a potentially significant move down. However, even here, there is scope for more upside if today's high was only wave (1) of [5]. However, with wave v on this labelling falling just short of a 1.236 extension of wave i, and wave iii having been a 2.618 extension, it may seem less probable that wave [5] of v is going to extend.

Additionally, while I can label the initial decline to 1122.43 as a zig zag for wave (2) of [5],  its difficult to label the rest of the move as the start of an impulse up in wave (3) of [5]. So, we'd have to still be in wave (2) of [5] down. That's possible, but we have to stay above the low at 1118.88 on the labelling that I have for this move. If we take out that low, then the labelling suggests we will have completed 5 waves up from the August low at today's high. However, it would be more certain if we take out the low from which wave v started, at 1101.53.

Here's a close up of the count which assumes we have seen a top today:

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

So, this is what I'm watching:

1) If we topped today, we obviously have to stay below 1131.47;

2) confidence that a top of some sort is in at today's high would be increased if we could see some decisive follow through to the downside. Until then, the risk of further upside or sideways action remains;

3) an impulsive move below 1118.88 would begin to increase confidence that a top is in. However, I would also then be looking for a quick move below 1110.53 (the low I have labelled as the start of wave v) as further evidence of a top;

4) what the nature of that top is will have to be assessed as price action develops since both the bullish and bearish counts call for a decline once a top for the rally from August is in. For the bullish count in Option 3 above we need to stay above 1039.70, but the low at 1010.91 is the critical level for that count. For the bearish and moderately bearish counts, we need to see a swift decline below 1010.91, but taking out 1039.70 would be a good start.

Have a great weekend!

18:08 BST - SPX Update on the ending diagonal - risk of further upside here too

If I apply the ending diagonal count to to the move up from 1039.70, again, until we take out 1118.88, there seems to be some risk of further upside if today's high was only wave [A] of y, with the move from today's high being wave [B] (perhaps in the form of a triangle as shown by the dotted line in the following chart):

SPX 1 min - ending diagonal complete or further leg up required:

Since I have wave (iii) of the diagonal starting at 1091.15 and ending at 1127.36, if wave (v) isn't yet over, its upside is limited by the length of wave (iii) - it has to be shorter. I have wave (v) starting at 1114.63, so that gives a maximum level for wave (v) at 1150.84.

So, as with the count for 5 waves up from 1039.70, until we start to see follow through to these downward moves (which takes out meaningful levels), the risk remains to the upside.

17:51 BST - SPX Update: (1)-(2)-1-2 - if so, it had better get moving down

This really needs to get going to the downside if we have seen a top at 1131.47, otherwise, the risk, as in previous days, is that without the downside follow through, further upside remains and perhaps today's high was only wave (1) of [5], not the whole of [5]. For the moment, I'm labelling a (1)-(2)-1-2 from the high:

SPX 1 min - close up:

Still looking for it to take out that 1118.88 level.

16:36 BST _ SPX Update - (1)-(2) down following a top?

We  had what looks like 5 down from today's high and what looks like 3 up into the 61.8% retracement level from today's high to today's low - could be a (1)-(2) down:

SPX 1 min - close up:

However, we need to take out 1118.88 to improve the odds of the bear case and a top at today's high, assuming wave [4] is in the right place.

14:57 BST - SPX Update - top in?

Referring to chart 4 in yesterday's end of day update, if I place wave [4] of v at the low at 1118.88, I can count 5 waves up at today's high:

SPX 1 min - close up:

 

Taking out 1118.88 would given reason to have some confidence int his count.

14:04 BST Dollar Update

The dollar failed to make 5 waves up following my last post (which you can read here) and continued its decline which, on the bullish count, is wave (ii) within an intermediate wave (3) up. 

I mentioned in that last post the risk that the low I had labelled as wave (ii) could be only wave [A] of y of (ii), which would mean that following a rally for [B], there would be a further decline in wave [C] to nearer the 78.6% retracement level of wave (i). Well we got the further decline and it did just about reach the 78.6% retracement level at today's low of 80.865. 

Here's how I'm labelling it for the bullish count:

Dollar 60 min:

We've now rallied from that low in what looks more like an impulse than the rally we were seeing at the time of my last post. However, that's no guarantee of a bottom since if the bearish counts are playing out, such a rally could simply be part of a corrective move.

So, what we need to see is a 3 wave pullback once this move up completes. (assuming it does so in 5 clear waves). The pullback must stay above the low at 80.865, otherwise the labelling is wrong.

Assuming that happens, we then need to see an even more decisive push up in 5 waves followed by a 3 wave pullback that stays above the high of the first rally leg and then another 5 wave rally. In other words, of course, we need to see a 5-3-5-3-5 larger degree rally. It would be preferable if we could take out the high at 82.987 in this rally, but really we can only take things one step at a time and monitor each rally for 5 waves and each pullback for 3 waves.

So, I'd be looking at a 3 wave move down that stays above 80.865 and a good reversal signal as a sign of another leg up to come, but I'd want to be out if we then drop below either the low of the pullback, or the low at 80.865. Given that continuing downside in wave (ii), or in one of the more bearish counts (see the dollar page) remains possible, its no time to assume that an impulsive looking rally means a bottom has been put in.

13:59 BST - SPX Time Symmetry Suggesting a Potential turn?

Some time symmetry in calendar days and traded days might be suggesting a top today:

SPX Daily:

In calendar days and traded days from the lowest low (and lowest close) in July to the highest high in August and from that high to the lowest low in August, there's a cluster of days within this time symmetry period. With the larger, March 2000 cycle that I showed on Wednesday (see this post)  coming in next week, we would seem to be in a zone where there ought to be a good chance of a market turn.

Obviously, as I made clear in that post, we have to see price action that confirms this - something we haven't yet seen.

Still, it'll be interesting to see how or if this plays out.

21:20 BST - SPX End of Day Update

Today, like yesterday, we saw an early sell-off but then no follow through which means that the risk of further upside remains. Based on the wave counts, it may be fairly limited upside since I'm looking for a 5th wave or a diagonal to complete a 5 wave move from the August lows, (on both the bullish and bearish counts) assuming it didn't complete at the 1127.36 high. 

For the bigger picture on the bullish and the bearish counts please see the 60 min counts page.

Here are the charts:

Chart 1: SPX 1 min - ending diagonal from 1040.88:

The labelling on this chart relates to Option 2 (and 1 but that would be at one lesser degree) on the 60 min counts page. It shows the whole of the move up from 1040.88 as an ending diagonal for wave [C] of ii. Wave (4) didn't overlap wave (1), but the EWP book suggests that that can happen and since it otherwise looks like a diagonal, with the overlapping waves, it would seem to be OK to label it as such.

I've retained the labelling of a complete diagonal, but, since we still haven't declined significantly it remains possible that the high at 1127.36 was only wave (3) and that we saw wave (4) yesterday (this is the alternative shown on the above chart). This would mean a further high to come, above 1127.36 to complete it.  If that's the case, wave (5) has to stay below 1129.24, otherwise the [i]-[ii]-i-ii count is invalidated.

On the bullish counts, this diagonal would be a leading diagonal for a wave (i) or [i] up (see Options 3, 4 and 5 on the 60 min counts page - for Option 3, it could be an ending diagonal for the whole of the [c] wave, so that Option may no longer be so bullish).

Here's a closer look:

Chart 2: SPX 1 min - ending diagonal from 1040.88:

As you can see, I've labelled a series of ones and twos down if we assume a top at 1127.63. The invalidation point for this count is 1126.57, although a 1-2 down isn't entirely ruled out until we take out the high at 1127.36 (we'd be looking at a very ugly expanded flat/combination for wave 2).

However, as long as we don't see clear and unmistakable impulsive action to the downside,  a top at 1127.36 has to remain questionable.

For the alternate, that we are still in wave (5) of the diagonal, we have to take out the high at 1127.63, since wave (5) has to move beyond the end of wave (3) in a diagonal. However, on this bearish [i]-[ii]-i-ii count, we also have to stay below 1129.24, so there would be upside, but it would be limited for this bear count.

If there is more upside to come and we take out the high at 1129.24, then that will invalidate the overall [i]-[ii]-i-ii count. As explained on the 60 min counts page, that would still leave a [i]-[ii] count (so we'd be in wave [ii], not wave ii). However, taking out that high would, in my view, make the count for a zig zag from 1010.91 the best bearish option (which it probably is anyway given the time issue I've mentioned over the last few weeks on the 60 min counts page).

Here's the count for a complete 5 waves up from 1039.70 which would be  all or part of wave [c] of the zig zag up from 1010.91 under Option 3 (and it would be wave (i) or [i] on the bullish alternate counts shown under Option 4 on the 60 min counts page):

Chart 3: SPX 1 min - 5 waves up from 1039.70:

For the moment this count for 5 waves up from the August low could be complete at 1127.36 - we need to stay below that high and drop in a manner consistent with that high being a top. So far, the declines we've seen have had no follow through, so upside risk remains.

That arises from the alternative, that we only completed wave [3] of v at the 1127.36 high. That remains valid since we didn't dropped  below 1110.27 in wave [4] (the wave [1] of v high) as shown in this chart:

Chart 4: 1 min - 5 waves up from 1039.70 still in progress:

I've removed the (1)-(2) up labelling from earlier since I much prefer the wave [4] triangle count. That triangle could be complete as shown but we may just be in the (D) wave, with (E) down yet to come before we start wave [5] up. 

If we've started wave [5] up, we have to stay above the low at 1119.77, which I'm counting as the (E) wave of the triangle. If we have wave [E] to come, that must stay above the low at 1114.63 since in a contracting triangle such as this, wave (E) can't move beyond the end of wave (A).

Here's a close up of both possibilities on one chart:

Chart 5: SPX - 1 min close up of 5 waves up from 1039.70:

So, here's what I'm watching:

1) for the [i]-[ii]-i-ii count, we need to stay below 1127.36 if wave ii completed at that high. If not, we have to stay below 1129.24. If we take that out, this count is invalidated;

2) if we completed wave ii (shown in charts 1 and 2 above) or minor wave 2 (shown in chart 3 above) at the high of 1127.36, we need to see price action to confirm. As yet, we still haven't seen this. Taking out 1114.63 in an impulsive move might help to increase confidence that a top of some sort has been seen, but, in my view, it would have to be followed swiftly by a move below 1101.53 and then 1091.15;

3) if we take out 1129.24, that will focus attention on the zig zag from 1010.91 count and on the bullish counts under Option 4. That zig zag would be minor 2 up, as shown in the update posted last Thursday,  and its bearish once wave [c] of 2 completes. As you can see from charts, 3, 4 and 5, we could have completed it at the 1127.36 high or be on the verge of doing so, or the move up from 1039.70 could just be wave (i) of [c]  of 2.

18:38 BST - SPX : Update on the near term bullish and the bearish counts

Still no answer to the question of whether or not we're going to see a high above 1127.36 or whether that was a top of some sort. Here's the labelling from the earlier chart updated with the action since:

SPX 1 min - close up of the move from 1127.36:

For the near term bullish count which requires a further rally in wave [5], I still prefer the continuing wave [4] over the (1)-(2) up (ie wave [5] already in progress).

Assuming wave [4] is continuing as a triangle, we could be near completion although if 1118.88 was the (C) wave, the move up from there for (D) was rather short. So, it may be that we're still in (C).

For the bearish case shown as the main labelling, wave ii may be a running correction, where the C wave fails to get above the high of the A wave. Alternatively, it might be a W-X-Y and we'd have another leg up in Y to come. Whichever it is, we still need to see some decisively bearish action if this count is playing out.

The levels I'm watching remain as set out in the earlier post: 1127.36, 1114.63 and 1110.27 (see the charts in this post).

16:28 BST - SPX Update on the near term bullish and the bear counts

Following on from my earlier post, here's how both the near-term bullish and the bearish counts look at the moment:

SPX 1 min - close up of the move from 1127.36:

We took out 1120.59, so confirmed that, if we have another high to come, we hadn't started wave (3) up. Though I've put the wave (2) low on the near-term bullish count at today's initial low, a wave (2) expanded flat after a leading diagonal is probably low odds. However, until we take out 1114.63, its a possibility. 

I've drawn in a possible triangle, which may be wave [4] still in progress for the near-term bullish count as an alternative to the (1)-(2) up. However, looking at the wider view (see the second chart in the earlier post), wave [4] is getting rather large. That doesn't invalidate it so its a possibility that has to be considered.

These issues with the near-term bullish case would tend to favour the bearish count shown as the main labelling on this chart - at least you would think so. It does look reasonable on the chart. However, until we get downside follow through, we have to accept the risk of further upside.

Remember, if we take out 1114.36, the near-term bullish (1)-(2) up is negated. If we take out 1110.27, the continuing wave [4] on the near-term bullish count is negated. If we take out the high at 1127.36, the bear count is negated. So, those are the levels I'm watching on my labelling.

 

14:17 BST - SPX Update: Wave relationship support a top at 1127.36, but in case, not, levels to watch

On the count for 5 waves up from the August low at 1039.70, we're probably going to find out today whether or not we topped at 1127.36. It would be nice if we did since there's a good fibonacci relationship between waves a i and iii and waves i and v at the 1127.36 high (in addition, to  those relationships shown on the chart,  wave v is 0.382 x wave iii):

SPX 1 min - 5 waves up from 1039.70 complete at 1127.36:

However, with yesterday's deep retracement of the initial decline, the risk of further upside remains and can be accommodated in the wave count as shown in the end of day update yesterday. Here are some levels to watch as potential targets if we have more upside to come and levels to watch to the downside which might confirm a top:

SPX 1 min - 5 waves up from 1039.70 still in progress:

21:19 BST - SPX End of Day Update

There was no new high for the rally from the August lows, so on the bearish [i]-[ii]-i-ii count it remains possible that wave ii completed at yesterday's high with wave [C] of wave ii as an ending diagonal which started at 1040.88. 

However, we didn't take out 1110.27, so the possibility of a further high above 1127.36 remains on the near term bullish count (the zig zag from 1010.91 - Option 3) and the more bullish counts (the bullish alternatives under Option 4)

For the bigger picture on the bullish and the bearish counts  and the Options referred to, please go to the 60 min counts page.

Today's initial decline appeared to be a good start for the immediately bearish case. However, so far, there's been no downside follow through so  there remains doubt that an immediately bearish count is playing out.

Here are the charts:

Chart 1: SPX 1 min - ending diagonal from 1040.88:

This shows the whole of the move up from 1040.88 as an ending diagonal for wave [C] of ii. Wave (4) didn't overlap wave (1), but the EWP book suggests that that can happen and since it otherwise looks like a diagonal, with the overlapping waves, it would seem to be OK to label it as such.

I've retained the labelling of a complete diagonal, but, given that we haven't declined significantly its possible that the high at 1127.36 was only wave (3) and that we saw wave (4) today. I've shown this as an alternative on the above chart. This would mean a further high to come, above 1127.36 to complete it.  If that's the case, wave (5) has to stay below 1129.24, otherwise the [i]-[ii]-i-ii count is invalidated.

On the bullish counts, this diagonal would be a leading diagonal for a wave (i) or [i] up.

Here's a closer look:

Chart 2: SPX 1 min - ending diagonal from 1040.88:

As you can see, I've labelled a series of ones and twos down if we assume a top at 1127.63. The invalidation point for this count is 1126.57, although a 1-2 down isn't entirely ruled out until we take out the high at 1127.36 (we'd be looking at an expanded flat for wave 2).

However, if we did top at 1127.36, we really need to start seeing more decisive downward moves without the deep and immediate retracements. It may be we're on the verge of seeing that if these ones and twos start to play out as they should. Until then, the jury's out on an immediately bearish case.

For the alternate shown, we have to take out the high at 1127.63, since wave (5) has to move beyond the end of wave (3) in a diagonal. However, on this bearish [i]-[ii]-i-ii count, we also have to stay below 1129.24. 

If there is more upside to come and we take out the high at 1129.24, then that will invalidate the overall [i]-[ii]-i-ii count. As explained on the 60 min counts page, that would still leave a [i]-[ii] count (so we'd be in wave [ii], not wave ii). However, taking out that high would, in my view, make the count for a zig zag from 1010.91 the best bearish option.

Here's the count for 5 waves up from 1039.70 which would be all or part of wave [c] of the zig zag up from 1010.91 under Option 3 (and it would also apply to the bullish alternate counts shown under Option 4 on the 60 min counts page):


Chart 3: SPX 1 min - 5 waves up from 1039.70:

For the moment this count for 5 waves up from the August low could be complete at 1127.36. However, the alternative labelling suggesting that we only completed wave [3] of v at the 1127.36 high remains valid since we haven't dropped  below 1110.27 (the wave [1] of v high).

If that alternate is playing out, I'd count the move up from today's low as a wave (1) leading diagonal and we'd now be in wave (3) (you can see the leading diagonal on chart 2 above where its labelled as a wave A).

So, after today's action, here's what I'm watching:

1) for the [i]-[ii]-i-ii count, we need to stay below 1127.36 if wave ii completed at that high. If not, we have to stay below 1129.24. If we take that out, this count is invalidated;

2) if we completed wave ii (shown in charts 1 and 2 above) or minor wave 2 (shown in chart 3 above) at the high of 1127.36, we need to see price action to confirm: we need to stay below that high, but we also need to see decisive and clear downside action consistent with a 3rd wave down. As yet, we still haven't seen this. Taking out 1101.53 in an impulsive move might help to increase confidence that a top of some sort has been seen, but, in my view, it would have to be followed swiftly by a move below 1091.15;

3) if we take out 1129.24, that will focus attention on the zig zag from 1010.91 count and the bullish counts under Option 4. That zig zag would be minor 2 up, as shown in the update posted last Thursday,  and its bearish once wave [c] of 2 completes. As you can see from the charts, we could have completed it at the 1127.36 high or be on the verge of doing so, or the move up from 1039.70 could just be wave (i) of [c]  of 2;

4) if we take out 1039.70 on the next move down, that would confirm the completion of wave 2 as a zig zag. It would also eliminate the two bullish counts under Option 4 (although they remain potentially in play in some other form until 1010.91 is taken out).

18:37 BST - SPX Update: Possible leading diagonal alternative on the bullish count

Addendum to my last post - possible leading diagonal for wave (1) of [5] on the near term bullish count - see the blue dotted line:


SPX 1 min - bullish and bearish counts - leading diagonal possibility:

 

18:22 BST - SPX Update: Bullish and bearish counts from 1127.36

Here's a close up of the move from the high of 1127.36 showing both bullish and bearish counts:

SPX 1 min - bullish and bearish counts for the move from 1127.36:

The initial move down today looks impulsive; the rally from there looks overall corrective but that doesn't rule out an impulse in development as shown by the alternative labelling.

Basically, we could go either way at the moment - the levels to watch for both counts are on the chart.

17:48 BST - SPX Update: Bearish count still valid

The bearish possibility remains valid with some label adjustments, provided we don't take out 1126.57:

SPX 1 min - bearish count:

Taking out the low at 1119.02 would be an indication that this count has a reasonable chance of playing out. At the moment we only have 3 waves up from today's low, but if its an impulse up it could be doing a series of ones and twos, so taking out that low would exclude that, as things currently stand.

Once again, though, the character of any decline is important - we need something clearly impulsive to the downside if there's any chance that we topped yesterday. Without that, the risk of further upside remains (see the alternative labelling on chart 3 in yesterday's end of day update for the possibility of another leg up to come).

16:06 BST - SPX Update: ones and twos down?

This is how I'd count today's move on the bearish case at the moment:

SPX 1 min - 1-2-i-ii down from 1127.36?:

If we take out the high at 1122.39 this is probably wrong, though the labelled count isn't invalidated unless we take out 1126.57. However, unless we see some decisive downward movement, that moves quickly and signifcantly below today's low, its more likely to be wrong. So, watch  price levels and the manner of any downward move. 

As shown on chart 3 in yesterday's end of day update, we could just be in wave [4] of v up. If today's low is that wave [4], we'd be on our way to a further high above 1127.36.

In favour of the bear case - 1122.39 was a 61.8% retrace of wave i and it was also a nice back test of the lower line of the ending diagonal shown  on chart 1 of yesterday's end of day update.

14:23 BST - SPX Update: Cycles from March 2000 high suggest a turn is close

Here's a chart of two cycles that start from the March 2000 high and which have clearly continued to influence the market, marking some signifcant turns, including the 6 March 2009 low and the April 2010 high (the red cycle also caught the October 2007 top):

SPX Daily: Cycles from March 2000 high - larger view:

The grey lines mark the larger cycle while the red lines mark the smaller cycle. Between them they've done a pretty accurate job of catching turning points, although I've marked with red boxes three occassions where a turn didn't occur on the grey cycle.

So, its not perfect, but using a good trading system, which includes stop losses, with these cycles would limit any losses at times when the cycles don't mark turns. Essentially, it boils down to waiting for price action that suggests a turn and not just trading on the basis of a move into a cycle line.

Here's a zoomed in look:

SPX Daily Cycles from March 2000 high:

You can see that the August lows came at a point where the grey and red cycles coincided.

We're now at a red cycle line, but no signal has been given by price action as yet. It may well be that we continue up or sideways (see, for example, the sideways moves into the grey cycle in early and late August, each of which were followed by big moves) into the next grey cycle line where a red cycle line is also located only a day apart. Those two lines come in on 22 and 23 September.

However, the daily chart showing the cycle I've been following from the April 2010 high  (see the last post on that here) suggested a turn due on 10 September. We're still within that time frame. Interestingly, that cycle's next date is 22 September.

So, timewise, there's reason to be on the look out for a turn. Looking at the elliott waves, there are reasons to be looking for a turn, even on the bullish counts (see yesterday's end of day update). On the 60 min technicals, there are reasons to be looking for a turn (see the divergences on the chart in this post from yesterday).

Its a good recipe for a turn. However, the missing ingredient is price - we just have to await price action that suggests a turn (and then assess the action to see how significant any turn may be - the cycles can't tell us that).

10:28 BST - Dollar Update

The risk of further downside referred to in my last update on the dollar (which you can read here) in the absence of impulsive upward movement to confirm a low, played out once again, negating the count that assumed the start of wave (iii).

Here's the 120 min chart showing the labelling for the decline from the June high:

Dollar 120 min:

The bearish count is that the June high was intermediate wave (1) up, and the August low was intermediate wave (2). The rally since is the start of intermediate wave (3) up,

However, note the bearish alternative, which is one of the bearish possibilities outlined on the dollar page.

I've relabelled the 60 min chart to reflect the move since Monday. The bullish count therefore, is that a wave (ii) correction of the rally from the August low at 80.085 is continuing:

Dollar 60 min:

The retracement in wave (ii) has now reached the 70.7% level. You can see on this chart and on the 120 min chart above, that the decline looks like 3 waves. If it did bottom at 80.997, then wave y is about a 1.236 extension of wave w. The move off the low at 80.997, which I've tentatively labelled as wave (ii), is starting to look impulsive. 

However, there remains the risk that the decline from 82.987 is 5 waves and would be only wave [A] of y and we would now be in wave [B] before a further decline in wave [C], perhaps to the 78.6% retracement level.

This risk would only be ruled out if we take out the high at 82.987 in 5 waves. If it happens in only a 3 wave move, there's a risk that even if  the decline from that high is only 3 waves as labelled, all we're seeing is an expanded flat for wave y, where wave [B] takes out the start of wave [A] and then a decline in wave [C] follows just when it seems that the decline is over.

As I've said above, the move up from the 80.997 low is starting to look impulsive, but at present it counts best as 3 waves as labelled. If this labelling is correct, the next decline would be wave (4) so it would have to stay above the wave (1) high at 81.094 for this labelling to remain valid. Taking out that high on the next decline would be a good sign that further downside may be on the cards. It would certainly look best if this assumed wave (4) retraced only to the area of wave 4 of (3) at about 81.466 on this labelling. That's at about the 38.2% retracement level assuming a wave (3) high at 81.767 (I haven't labelled this yet). If we decline much below that in wave (4), I'd start to get suspicious of this move up as an impulse in the making.

If we get a wave (4) and (5) to complete 5 waves up from the low at 80.997, the next thing to watch for is a 3 wave decline that stays above that low. A move below that low will negate the assumption made for this labelling that wave (ii) bottomed there.

So, the three levels I'm watching for now are 81.446, 81.094 and 80.997.

22:43 BST - SPX Update: 60 min bearish divergences - but more is required for the bearish outlook

The divergences which were apparent on the 60 min chart yesterday (see here) persisted today against the new high for the rally from the August low and we're starting to see the indicators rolling over:

SPX 60 min:

The weakness suggested by the failure of price to get back above  the median line of the fork last week and its failure to even reach it yesterday seems to have been confirmed by the additional failure today. We may now be seeing a breakdown out of the fork, although its too early to tell if this is going to be of any significance.

Still, this all provides a reasonable foundation for a down move (we can't say what it will be in terms of elliott wave counts until we see how it behaves). 

However, for the bearish case, we do need to see more confirmatory moves in the indicators on the next decline. 

The RSI needs to get below 50 and  then move quickly to oversold, with price also moving down (if it gets to oversold without any real downward price action, that's potentially bullish, as is not getting to oversold on a down move). The CCI needs to move swiftly below the zero line and fail on any re-test from below, before falling below the -100 line. The MACD needs to cross below zero. The stochastic needs to get down to oversold and preferably stay below the 50 line on rallies. The -DI line needs to start moving up and must cross above the +DI line and be confirmed by a rising ADX line.

So, the divergences we're seeing between the indicators and price is only half the story. To have any confidence that we've seen a significant top today, we now need to see movement in these indicators that confirms. Until they move to bearish levels (along with price dropping, of course), the risk remains that any price decline we see is only corrective and that more upside will follow once the bearish divergences have been worked off.

21:18 BST - SPX End of Day Update

Although another new high for the rally from the August lows was put in today, we remain below the 1129.24 level on SPX, so the bearish [i]-[ii]-i-ii count has survived another day.

Its possible that its finally complete at today's high with wave [C] of wave ii as an ending diagonal which started at 1040.88. It really doesn't have a great deal of room left if it didn't end today. Still, if we do take out 1129.24, the bear case will survive with the count that has us in a zig zag up from the July low. That could be counted as complete at today's high, with 5 waves up from 1039.70. 

However, on both of these counts, we have to see some really impulsive downside movement to confirm because, the diagonal or 5 waves up that can be counted as complete would represent the next impulse up in larger rallies on the bullish counts under Option 4 (see charts 2 and 3 in the update on the bullish counts posted last Thursday).

For the bigger picture on the bullish and the bearish counts please refer to the 60 min counts page.

Price action continues in such a way that both bullish and bearish counts remain open. I'll show the wave counts on the charts of the bearish case but keep in mind, as I've said above, that a complete diagonal or impulse up from the August lows could be part of the larger rallies anticipated if the bullish counts are actually playing out.

Chart 1: SPX 1 min - ending diagonal from 1040.88:

This shows the whole of the move up from 1040.88 as an ending diagonal for wave [C] of ii. Wave (4) didn't overlap wave (1), but the EWP book suggests that that can happen and since it otherwise looks like a diagonal, with the overlapping waves, it would seem to be OK to label it as such.

As you can see, its possible to count it as complete today. If its not complete and wave (5) is still playing out, it has to stay below 1129.24, otherwise the [i]-[ii]-i-ii count is invalidated.

On the bullish counts, this diagonal would be a leading diagonal for a wave (i) or [i] up.

Here's a close up showing the count from the 1101.53 low:

Chart 2: SPX 1 min - ending diagonal from 1040.88:

As you can see, I've tentatively labelled a wave 1 down complete from today's high. This would be the start of wave iii of (iii) down on this count. Obviously, the invalidation point for this count is today's high.

I think that if we can take out the low at 1115.58, that will improve the odds for this count. Taking out that low would avert the possibility that the alternative labelling that has us still in wave (5) is playing out. That's  because wave (5) has to be a zig zag and taking out that low would mean the move up from 1115.58 is not a zig zag.

If there is more upside to come and we take out the high at 1129.24, then that will invalidate the overall [i]-[ii]-i-ii count. As explained on the 60 min counts page, that would still leave a [i]-[ii] count (so we'd be in wave [ii], not wave ii). However, as I've said over the last few weeks in the updates to the 60 min counts page, if that happens, I would certainly favour the count that has us in minor 2 in the form of a zig zag up from 1010.91. (Option 3 on the 60 min counts page). As mentioned a couple of weeks ago, that count is probably looking better anyway, even if we don't exceed the 1129.24 high.

Here's the count for 5 waves up from 1039.70 which would apply to the zig zag up from 1010.91 (and also to the bullish alternate counts shown under Option 4 on the 60 min counts page):


Chart 3: SPX 1 min - 5 waves up from 1039.70:

As you can see, this count for 5 waves up from the August low could be complete at today's high. However, the alternative labelling suggests we only completed wave [3] of v at today's high, so still have another high to come.  If we take out 1110.27 (the wave [1] of v high) without making a new high, that possibility will be eliminated. 

So, after today's action, here's what I'm watching:

1) for the [i]-[ii]-i-ii count, we need to stay below today's high if wave ii completed today. If not, we have to stay below 1129.24. If we take that out, this count is invalidated;

2) if we completed wave ii (shown in charts 1 and 2 above) or wave 2 (shown in chart 3 above) today, we need to see price action to confirm: we need to stay below today's high, but we also need to see decisive and clear downside action consistent with a 3rd wave down. As yet, we haven't seen this, though the late sell-off today may be the start of it. Taking out 1101.53 in an impulsive move might help to increase confidence in this possibility, but I think it would have to be followed swiftly by a move below 1091.15;

3) if we take out 1129.24, that will focus attention on the zig zag from 1010.91 count and the bullish counts under Option 4. That zig zag would be minor 2 up, as shown in the update posted on Thursday,  and its bearish once wave [c] of 2 completes. As you can see from the charts, we could have completed it today or be on the verge of doing so, or the move up from 1039.70 could just be wave (i) of [c]  of 2. If we take out 1039.70 on the next move down, that would confirm the completion of wave 2 as a zig zag. It would also eliminate the two bullish counts under Option 4 (although they remain potentially in play in some other form until 1010.91 is taken out).