9:45 BST - Equity Options Put/Call Ratio and Percent of S&P 500 Stocks Above the 50ma

Here's an update of these two charts which I last posted on 12 August (you can read that post here):

CPCE Daily:

On 12 August, the moving averages of this ratio we stuck below the blue dotted line in a similar configuration to what we saw during the grind up in the market in August to October 2009 (see the green highlighted areas). The risk was that we would see the same thing happen again unless the moving averages started to get above the blue dotted line. A good sign for the bear case at that stage was a possible triple bottom in the 5ma and higher lows being formed in the 10ma.

Finally, as you can see from the chart above, we have seen the moving averages break above the dotted blue line and also above the mid-line of the red dotted upward channel. An upward channel in these moving averages is bearish for the market.

We're now headed towards the overbought zone, but you can see from the peaks in these moving averages during 2008, that they can get to the top end of the zone before the market bottoms. Obviously, that's not to say they will - market lows have occurred with these averages about where we are now. So, as ever, we need to be on alert for a possible market bottom. If you were looking at this chart alone for trading, it would take the form of a turn down in the 5ma and a flattening out in the 10ma which might be a warning that the 5ma is about to cross back below the 10ma, which is potentially bullish (but as with any signal, whipsaws occur).

Ideally, I would like to see the moving averages get to the top end of the red channel. If we're in 3rd waves down at multiple degrees as some of my counts suggest, this shouldn't be difficult to attain and we could well exceed the upper line of the channel.

The McClellan Oscillator in the bottom pane couldn't break the downtrend line on the recent rally in price. That rally enabled it to backtest the zero line from below and it was firmly rejected.

The only potential worry from this Oscillator is that while price moved below the 12 Aug low yesterday, the Oscillator did not - its still hgher than it was on 12 August. Having said that, the lows in price of 12 Aug and yesterday are not that far apart, so this possible bullish divergence may not be too great a concern. and may work itself off  if we push down further today. Also, other technical indicators don't show the same divergence at the moment. Just looking at two, the RSI is below its 12 August level and the MACD histogram bar for yesterday is lower then the bar formed on 12 August so these don't confirm the possible bullish sign showing in the McClellan Oscillator.

Still, this is something to keep an eye on, especially if this divergence starts to get confirmation from other technical indicators.

Percent of S&P 50 stocks above the 50ma:

As explained in the previous post, when this line crosses below its 13ma, its usually a good bearish signal. On this occassion, its worked pretty well again, with the cross occurring on 10 August, which was the day before the steep decline on 11 August.

With the rally into 17 August, we saw the line turn up, which was a potentially bullish sign - see the previous occassions when this happened above the buy zone, as marked on the chart. But you'll notice that in those cases, the low that gave the final bullish signal was a second low above the buy zone, not the first low.

So, we probably now have to be more on alert for a possible turn around in this line given that we did, yesterday, make a lower low than the low on 12 August. For the bear case, we don't want to see the line turn up from here. However, generally, while we're below the 13ma, the risk is weighted to the downside, so I wouldn't take a turn up in this line below the 13ma as a buy signal (without other indicators confirming) unless we actually cross back above the 13ma. Perhaps it would be a sign to tighten stops on shorts and/or to take a little bit of profit.

21:23 BST - SPX End of Day Update

From my previous posts you'll see that on the bearish counts, I'm looking at a 5 wave decline from the high at 1129.24, representing a 1st wave down, followed by a 3 wave pullback for a 2nd wave retracement, whether the 1st wave ended at 1176.69 or at 1069.49. You can see the earlier post here.

To put these counts in context, please see the 60 min counts page which explains the counts I'm following and what the labelling in the shorter term charts I look at day to day means in the context of each of those counts.

So, for those bearish counts, here's how we ended up today:

SPX 1 min from the high at 1129.24:

This chart uses the labels and degrees relating to Option 2, but relates to the bearish counts for all the Options referred to on the 60 min counts page.

So, from the 1129.24 high, I'm counting a i down and ii up. The alternate labels on the chart relate to the chart I posted earlier which allows for one more push up to complete wave ii - see the post here.

Obviously, we can't know whether or not that further push up is going to happen. We can only watch the rallies we get and monitor them for clues as to whether or not they will turn into something impulsive looking enough to be a [C] wave. For the immediately bearish case, we're looking for a 3 wave rally that ends somewhere in the region of a 50% retracement once we've completed 5 waves down from the wave ii high.

For the moment, I have us still needing a wave (5) to complete wave [1] down. Here's the count close up (I've changed the degrees from the charts posted earlier today to match the degrees in the first chart above):

SPX 1 min close up:

If that's the correct labelling, we need to stay below the wave (1) low on this wave (4) retracement. That low is 1094.37. However, it really wouldn't look like a 4th wave if it got that high. I think if we retrace much more than above the 50% level at about 1083, I'd start thinking that we had already seen 5 waves down to complete wave [1] at the low of 1070.66 (I mentioned this as a possibility in earlier posts today) and that we were now in a wave [2] retracement. If its wave (4) then the retracement we've seen this afternoon to about the 38.2% level would be a perfect place for this wave (4) to end.

If its a wave [2] retracement, ideally it won't get too much above a 50% retracement (that would be at about 1085), but as we know 2nd waves can retrace more. Ultimately, the level to watch would be the high of wave ii at 1099.77 since taking that out would invalidate this labelling. 

However, the alternate labelling would still be in play, which would make the rally from the low at 1070.66 wave [C] of ii. We would then look for an impulsive decline to take out the 1077.66 low to gain some confidence that the alternate bearish count on the above chart was playing out and not something more bullish.

Speaking of the bullish counts, the first one shown in last night's update (see here) has been pretty much invalidated. However, because we haven't taken out the low at 1069.49, technically, the labelling on the chart of the second bullish alternate shown in that update is still valid. I've left that labelling on the chart of the second bullish alternate below, but shown a revised labelling on the chart of the first bullish alternate:

SPX 1 min - first bullish alternate under option 4 - impulse up from 1010.91:

As shown on the chart, this count remains in play as long as we stay above 1056.88 on this alternate. That's the low of wave [ii] of the impulse up from 1010.91. You can see it on the 1 min chart of this alternate under Option 4 on the 60 min counts page. 

SPX 60 min - second bullish alternate under Option 4 - leading diagonal up from 1010.91:

Given the depth of the retracement in wave [ii] of C, this count seems unlikely, but if that 1069.49 low holds, its valid. If we take out that low, we could still be in wave B and that will apply until we take out the low of 1010.91.

So, for the bearish count, if we had a wave (4) retracement this afternoon, we want to see a move to new lows below 1070.66 and, of course, 1069.49. If we're in a wave [2] retracement up from 1070.66, ideally, we won't get much above 1085. If we take out the 1099.77 high, focus would switch to the alternate count shown  for the bear case and we would look  for a 5 wave rally from 1070.66 to be followed by impulsive declines that take out the 1070.66 low soon after that.

If we take out 1056.88 to the downside, the first bullish alternate will be invalidated. However, the second bullish alternate will remain in play until we take out 1010.91.

18:47 BST - SPX Update: 15 and 60 min charts

Here's an update of the 15 min chart I posted earlier (see here):

SPX 15 min pitchforks:

Price has moved straight down to the lower line of the pink fork and the median line of the red fork, without much hesitation. It looks like the action we saw within the blue fork after the 1127.16 high.

You can see that price has bounced a bit from the lower line of the pink fork. The bounce may find resistance at the median line of that old blue fork which still seems to be in play. 

Ideally, for the bearish case, I'd like to see any bounce stopped at the area of the median line of the pink fork. 

You'll see that I've drawn in a new upward green fork - this will have to be watched. Price may at some point, try to get to its median line, this could certainly happen if we have completed the 1st wave down and get a 2nd wave retracement.  If its only a 2nd wave retracement and not something more bullish, this attempt ought to fail - remember that's what I pointed out happened in relation to the upward black fork in the earlier post (see here) and its also what we seem to have seen with an upward fork on the 60 min chart (see below).

What would be very worrying for the bear case is if we start breaking above the median line of the upward green fork. That would be bullish action unless it resulted in an immediate drop back down.

Finally, here's the 60 min chart updated from last night (see here):

SPX 60 min pitchforks:

The reason I'm posting this is to show the upward grey  fork that I've drawn on from the 1 July low which has been broken by today's move. You'll also see that price failed to get up to the median line of that fork, which was bearish. Its possible that we'll see price rally back up to test the grey fork from below. If the bearish counts are playing out, the rally should be rejected by the lower line of the grey fork. 

18:17 BST - SPX Update: More upside in this 2nd wave?

Here are three charts on which I've marked three different ways to count the decline from 1129.24 and/or the move from the low at 1069.49:

SPX 1 min - expanded flat 2nd wave correction:

On this count I think it unlikely that we will see more upside in the 2nd wave. If its correctly labelled with wave (C) at the 1099.77 high, its possible that could have ended a wave (W) in a double three correction from the wave [1] low, but that would mean we'd have waves (X) and (Y) still to come. Supposedly, double threes occur to extend the time taken by a correction, but when you look at the time taken for wave [1], it doesn't seem to be necessary for wave [2] to take any more time than it has on this labelling.

So, if this labelling is correct, I'd consider further upside in wave [2] unlikely.

SPX 1 min - zig zag 2nd wave:

On this count too, its possible that we've only seen wave [W] within wave ii, but again, the time issue mentioned above would suggest its unlikely.

SPX 1 min - (A) and (B) of a flat for [2] complete, wave (C) to come:

On this labelleing I think its very possible that the market has one more move up to complete the 2nd wave correction. This labelling assumes it would be a quick move up in wave (C), so would not take up too much more time. It could even start today.

So, while things looks very good for the bears at the moment, I think that one more launch up on the third count shown above can't be ruled out. 

If we've completed the (B) wave on this count at today's current low at 1070.66, then after the next rally up forms 3 wave from there, we'll have to watch closely what happens next - the low of 1070.66 would have to hold. Obviously, if we haven't yet completed wave (B), we'd have to do this following the next 3 wave move up from wherever wave (B) ends.

17:12 BST - SPX Update: 1 min close up

Here's my favoured count for today's move down, updated from earlier:

SPX 1 min close up:

Again, it could be counted as a complete wave (1) down to the latest low at 1070.66, in which case, instead of a wave 4 of (1) bounce, we'd get something deeper for wave (2). Also, although I've put in the wave 3 label, it may still have more to go. It looks like 5 waves rally close up, but it might just be the 1st wave of wave 5. I think it would look best if wave 3 did end at the curent low, but I'm not in control!

 

15:12 BST - SPX Update: 1min close up

We'll have to wait and see how this develops, but here's a provisional count for this early sell off:

SPX 1 min close up:

This may turn out to be too bearish and we may now have completed wave (1) down from yesterday's high. On this labelling, if we are in iv of 3 of (1), we need to stay below 1087.77 in this wave iv. If we don't, I'll probably consider wave (1) complete at today's low and so we would then be in wave (2), with an invalidation point at yesterday's high.

12:19 BST - SPX Update: 15 min pitchforks and technical indicators

I've update the 15 min chart from yesterday to adjust the red down fork (the original was pretty much invalidated with yesterday's rally) and to add in the new upward fork I mentioned at the end of my last posting of this chart (see here), plus a smaller downward fork. Its cluttered, but it shouldn't be too difficult to see the various forks.

SPX 15 min pitchforks:

The upward black fork doesn't look like it is going to have a real influence on price since the rally into it failed to get to the median line, which is not bullish, and then broke down out of the fork late yesterday.

Yesterday's rally seems to have been a back test of the green fork which we broke down out of with the early decline. Again, the pullback from there doesn't inspire bullish feelings.

Yesterday's high is now the pivot which I'm using for the adjusted red down fork. We'll just have to wait and see once again whether or not this fork gets validated. If we just drop down into it towards the median line of if we drop a bit and then rally to the upper line and then drop back down, I would consider it to be valid and would expect it to have some further influence on price.

You'll see I've also sketched in a smaller downward fork in pink which, if we are going to drop, may be the fork that exerts the most influence on price initially. Its pretty much contained within the upper half of the red fork.

So, those are the forks to watch for the moment.

Looking at the indicators, you can see that they confirm what I mentioned in relation to the 60 min chart which I posted last night (see here), that the rally yesterday was somewhat weaker than the rally on 17 August. As I said in relation to the 60 min chart, there was no bearish divergence as such since price wasn't making a higher high while these indicators made lower highs. However, it does seem to highlight some underlying weakness. 

Of course, if we rally hard again, that may all work itself off, but for the moment, the chart suggests that if we do rally to a higher high (I discussed the possibility of this in relation to the 60 min chart) it may just be providing the opportunity for these indicators to set in actual bearish divergence against a new price high.

If we do rally, the bearish case will want to see price fail at the lowerline of the black fork and the upper lines of the pink and red forks, or thereabouts. Otherwise, as I'm sure you can see, there is another upward fork we can draw that may take prices higher. I haven't drawn it in, but it is based on the low made early yesterday, the high of the day and the low made at the end of the day.

 

9:36 BST - Dollar Update: 25 min chart

Yesterday I showed a potential head and shoulders pattern on the dollar, which gave rise to the possibility of invalidating the main count on the chart which has us in wave iv of the first impules wave up from the low at 80.085. You can see yesterday's post here.

In the absence of an impulsive move up, the risk of further downside remained, in my view. Well, we may have had a 5 wave move up (it could still be incomplete even though I've put the 5th wave label in) with the dollar bouncing right at the neckline of the head and shoulders instead of breaking below it. Here's the updated chart:

Dollar 25 min chart:

If its right that we have completed, or are in the process of completing, 5 waves up from the low at 81.192, which I'm labelling wave [1] of v up, we'll have to expect a wave [2] retracement. The critical level to watch for this will be the low at 81.192. That must not be taken out, otherwise, something else is going on with the count.

If things are very bullish, this move up may just extend and if it does, it may be that it ends up being the whole of wave v, not just part of it as I'm currently labelling the move. That's something to look at if it happens, but the level to watch would still be 81.192.

I'm continuing to count the decline from 83.016 as wave iv of (i) up from the 80.085 low. Its possible that that high was actually wave (i) and this retracement to 81.192 has been wave (ii) and I may have to make this the main labelling at some point, for example, if the next rally starts to look like a 3rd wave up rather than a 5th wave of one lesser degree. For the moment, however, the retracement didn't do anything to invalidate the wave iv count, so I'll stick with it.

I've left the pitchforks that I've been following on the chart for anyone interested. 

You can see how the drop to the neckline of the head and shoulders was also the median line of the red fork. That low enabled the drawing of the green fork. The wave I've labelled as wave (1) of [1] hit the upper line of the red fork, fell back from there but was unable to get down to the median line of the red fork, which was bullish. It then rallied up above the red fork, paused at the median line of the green fork, then bust up through it to the upper line. All good stuff.

 

23:43 BST - SPX Update: 60 min chart

Here's an update of the 60 min chart. When I posted it earlier today, I said I thought it seemed to be set up for yesterday's high to be taken out since at yesterday's high, we had not seen any of the usual divergences between these indicators and price - see that post here.

SPX 60 min pitchforks:

As mentioned in one of my earlier posts (click here) although on the SPX (and the Dow), we didn't see higher highs made, we did get higher highs on the Transports, the Russell, and the two Nasdaq indices and, if you look at their 60 min charts, the indicators diverged bearishly against those new price highs.

If SPX and/or the Dow continue  to fail to make a high above the high of 17 August, that should be a good sign for the bearish case since such divergences, if they stand, are rarely a good sign for the markets. That would certainly be one thing I like to see at a top of any degree.

Anyway, you can see from the 60 min chart of SPX, that while we didn't get the higher high in price, it was very close and there are marked lower highs in the indicators, as noted on the chart. This isn't bearish divergence as such, but it does illustrate that the push higher today was weaker than the push up we had yesterday. This doesn't mean that we've definitely made a top - its feasible that SPX and Dow play catch up to the other indices and make new highs tomorrow, with more divergences showing up in these indicators on this time frame and only then do we roll over.

There are various counts that would accommodate a further high on the bearish case. One is the double zig zag I showed on the 1 min close up posted during the day, which you can see in the end of day update. 

Another would be if (5) of [C] on the main count shown on that chart (or on the expanded flat 2nd wave count shown on the first chart in today's end of day update) is still in progress - today's high may only be wave (3) of [C] and the late day sell off would be wave (4). This would be invalidated below 1091.03.

So, signs that we are at or near a top for the rally from 1069.49 are showing up on the 60 min chart. What we need now is impulsive action to the downside to confirm it if the bearish counts are playing out. Watch the 1091.03 level mentioned above and then the 1085.76 level referred to in the end of day update to eliminate some of the near term bullish possibilities (though, as explained in the end of day update, other more bullish possibilities will remain in play even if those levels are taken out).

21:19 BST SPX End of Day Update

The Options referred to below are different ways to count the move down from 1219.80 to 1010.91 and you can see them on the 60 min counts page.

To see the various ways to count the rally from the 1010.91 low on 1 July, see the 10 min charts in last night's end of day update. 

So, today's action continues to leave us guessing whether its the bullish or bearish counts that are in play.

Here are two 1 min charts showing the bearish counts  for the move down from 1129.24 (these are shown on the charts of Options 1 and 2 - to see those Options in context, please see the 60 min counts page - but they apply to the bearish counts on all the Options):

SPX 1 min chart: expanded flat 2nd wave correction:

SPX 1 min chart: zig zag 2nd wave correction:

And here's a close up of the second chart focusing on the action from the 1069.49 low and showing a possible alternate count that would involve more upside (I've labelled the start of an impulse wave down from today's high, but it could just as easily be part of the (B) wave of [Y] on the alternate double zig zag count):

SPX 1 min close up:

The difference between the two counts is that in the first chart we bottomed in the 1st wave at 1076.69 and in the second chart we bottomed at 1069.49.

On the first chart, if we take out the low at 1085.76, we can probably conclude that the correction is over. On the second chart, taking out that level would negate the alternate count of a double zig zag, but would not preclude the possibility of a second zig zag if we have only seen one zig zag so far, as the main count suggests.

However, for both bearish counts, with the bullish counts still in play (see below), we really can't have great confidence in them until we take out 1069.49. 

Here are the two bullish counts, which arise under the bullish alternate for Option 4 (you can see the bigger picture of the bullish alternate  on the second chart under the Zig Zag from March 2009 page, where it is shown as the alternate count and a further explanation and context can be found on the 60 min counts page):

SPX 1 min chart: bullish alternate under option 4 - impulse up from 1010.91:

If we've started wave (3) of [3] up on this labelling, we can't take out the low at 1085.76. 

SPX 60 min chart: bullish alternate under Option 4 - leading diagonal from 1010.91:

On this count, a truncated wave (v) of [i] of C isn't ideal, but its not against the rules. The count as labelled would, however, be invalidated below 1069.49. However, it would only be invalidated altogether if we take out 1010.91 - until then, we could still be in a B wave correction.

So, if we're in a 2nd wave retracement, if there is any further upside to come, the high of 1129.24 cannot be taken out. If it is, the bearish counts, as labelled, will be invalidated.

It wouldn't mean that all bearish counts would be off the table, it would just mean a delay in the resumption of the bear case - see the explanation of what a high above 1129.24 (and 1131.23) could be on each Option on the 60 min counts page.

The first level to watch to the downside is now 1085.76. If we take that out, the first bullish count shown above would be invalidated as labelled. However, that would still leave the second bullish count and that won't be invalidated until we take out 1010.91. 

Until then, there is probably going to remain uncertainty as to whether the bullish or bearish counts are in play, so we  just have to monitor the wave counts and continue to identify the levels that might provide an early signal of the market's intentions.

19:50 BST - SPX Update: 1 min - Possible bearish alternate count

Here's another possible bearish count to consider - if we count 5 waves up from the 1069.49 low, that could be wave [C] of an expanded flat wave ii correction. This means placing the wave i low at 1076.69. Here it is on the chart of Option 1 (so the degrees of the labels used are one less than the degrees I've mentioned and which appear in the previous 1 min charts):

SPX 1 min - expanded flat for 2nd wave:

So, further hope for the bear case, but obviously, until we see an impulsive decline and take out the low at 1069.49, the risk of further upside, whether in the double zig zag referred to in my last post or from the bullish counts, can't be ruled out.

19:37 BST - SPX Update: 1 min close up - revised bearish count

The bullish counts are looking very good at the moment - see earlier post here - but for the bear case, there's still hope. 

Although we haven't so far taken out yesterday's high, this can only be said of SPX and the Dow; the Nasdaq Comp, NDX, RUT and TRAN have taken out those highs. It may be the case that SPX and the Dow are leading the way down in a (1)-(2), but since they got so close to taking out that high, if we are at a corrective top, it may be better to treat their failure to take it out as a bearish divergence against this other indices that have done so. 

So, with a re-adjustment of the labels, here's a single zig zag count for SPX which shows the rally today as wave [C] of the zig zag, with a possible truncation, in that it is failing to get above the high of wave [A]:

SPX 1 min close up:

I've shown a top at today's current high, but it may be premature and we may still be in wave 4 of (5), with a new high on SPX (and/or in the Dow) to come.

I've left on the possible double zig zag labels because if we're in a double zig zag, I'd have to count today's rally as wave (A) of [Y], in which case, we'd have a further high to come once we've had a (B) wave pullback.

 

17:27 BST - SPX Update: 15 min pitchforks

Here's the 15 min chart updated from last night:

SPX 15 min pitchforks:

You can see that we did drop out of the green fork. We're now testing the upper red line of the red fork I drew on last night. If we're in the bearish count, we should see this hold back price. As pointed out in last night's update, price may get further above it as it did on the rally to 1127.16. If that happens, the bearish case will require a quick drop back within it (you can see how the market fell following the false break above the blue fork).

Note, its possible to draw a new upward fork using the low on 16 August, yesterday's high and today's low - I haven't drawn it in because it would make the chart really cluttered (well, more cluttered), but that's another reason why we need to see the red fork hold for the bear case.

16:45 BST - SPX Update; 1 min close up

If we're in the bearish count, we're either still trying to complete wave (1) down from the 1100.14 high, or we have completed it and we're currently in wave (2). Given the width of the retracement up from today's low compared to what I've labelled wave 2 of (1), I think I prefer the latter even though the 5th wave would be very elongated (it was the count I showed last night and this morning, but I've labelled the former on the following chart):

SPX 1 min close up:

If its wave 4 of (1), we need to stay below the wave 1 low at 1097.51. If its wave (2), we can't take out the 1100.14 high (if its wave (2), there may be further upside to come since its only about a 38.2% retrace (50% would be at about 1093).

15:19 BST - SPX Update; 1 min chart bullish count

This is one to watch out for on the bullish count. Although we haven't invalidated the [1]-[2]-[3]-[4] count I showed last might (see here), with a supposed 4th wave retracing  about 61.8%, thoughts have to turn to something more bullish: a [1]-[2]-(1)-(2):

SPX 1 min bullish alternate under Option 4:

Still, watch both the invalidation points since both counts remain in play - the wave [4] count is invalidated below 1082.62. The more bullish count in the chart is invalidated below 1075.16.

14:40 BST - SPX Update - 1 min close up

The possibility that we were in wave (4) of [C] of ii, with wave (5) still to come has been eliminated with the drop below 1089.05. However, there is still the double zig zag possibility I mentioned earlier and the bullish counts - see last night's end of day update and my earlier post of the 60 min chart for levels to watch to invalidate these:

SPX 1 min close up:

13:54 BST - Dollar Update; 20 min chart - possible head and shoulders

I've re-labelled the move in the dollar since the high at 83.016 to remove the triangle that appeared to have formed yesterday. With subsequent price action, this may be a better alternative (you can see the bigger picture on the dollar page):

Dollar 20 min:

If we don't see a turn up soon, we'll be in danger of taking out the 81.534 level I've been mentioning as the invalidation point for the main count as labelled. That would mean that the most likely bearish alternative would put us in a wave (ii) correction.

This might fit with the head and shoulders pattern I've marked on the chart which has a target to about 81.000 if it follows through. This would be about a 70.7% retracement if we are in wave (ii) not iv.

Of course, a failed head and shoulders would be bullish for the dollar. However, until it starts pushing up impulsively again, we have to assume that more downside may be on the cards.

12:16 BST - SPX Update: 60 min pitchforks and technical indicators

You'll remember from the 15 min chart I posted yesterday (see the last post here - it has links to the earlier posts) that we saw some nice bearish divergences in the standard technical analysis indicators against price as we moved into yesterday's highs. Coupled with the potential resistance from the upper lines of the blue and green forks and a possible complete elliott wave count, the signs were that we would get a turn down in price.

The position with the indicators is not so clear on the 60 min chart:

SPX 60 min pitchforks:

The RSI and stochastic are turning down, but there hasn't been any obvious bearish divergence against price at the peaks that these indicators  made yesterday. The same applies to the MACD histogram. That formed a substantially higher peak yesterday than the peak it made in what I've labelled as wave [A] of ii. Within that higher peak, the bars did start to print lower highs, but that was consistent with the price action, not diverging from it.

The turn down in these indicators on this time frame may be sufficient in the context of a 2nd wave within a 3rd , to mark the end of the 2nd wave correction. However, I think it sensible to be aware of the potential risk that the end of the correction won't come until these indicators print divergences against price, which means that we may see a higher high in price than yesterday before this 2nd wave is over.

This would fit with the alternative count I have, suggesting that the drop off from the high yesterday may only be wave (4) of [C] of ii (you can see this on the 1 min close ups I posted during the day and also in the charts posted in the end of day update). There is a further alternative that could lead to new highs - we did complete a single zig zag yesterday, but the drop from the high is all or part of an [X] wave before a second zig zag higher.

What we're seeing in the indicators on this time frame (or rather, what we're not seeing) could also fit with the bullish counts (see the last two charts in yesterday's end of day update), where we are in the 4th wave of an impulse up from 1069.49 and which is part of a larger impulse up from the low of 1010.91.

As I said in the end of day update, for the bearish count, to preclude the alternative of a further high to come, based on the way I've labelled the [C] wave of ii, we need to drop below 1089.05. However, to preclude yesterday's late sell off from being a 4th wave on the bullish counts, with a further high still to come, we need to drop below 1082.62. The next level down is 1075.16 - taking that out would certainly enhance the bearish case and would make the second zig zag possibility less likely (though we'd need to take out 1069.49 to be sure it wasn't playing out).

This is just something to be aware of given that the 60 min indicators don't seem to have shown the usual divergences we would expect when a top is made.

22:07 BST - SPX Update: 15 min pitchforks

Here's an update of the 15 min chart I posted earlier today (you can see the the earlier posts here and here):

SPX 15 min pitchforks:

 

The resistance at the intersection of the upper lines of the green and blue forks held well and with the 200ma, pushed prices down, almost back to the lower line of the green fork. That's not bullish action and may be confirming that we have seen the end of the rally from the 1069.49 low.

However, we really need to see price fall out of the green fork, perhaps re-test the lower line from below and for it to fall away from there before we can get too confident of this. Obviously, we need a confirming wave count too!

I've drawn in a new downward red fork, which may provide some guidance as to a possible path for price to take if we are now in a 3rd wave down, as the bearish wave count suggests. It may be that we see an attempt to break up above this fork first, as we saw with the blue fork when price rallied up to 1127.16.  However, this doesn't have to happen and if things get really bearish, we may just head straight for the median line of the red fork. We'll have to wait and see.

For the moment, the first aim is to break out of the green fork. If we had 5 waves down from today's high for the start of a new impulse wave lower, as provisionally labelled in tonight's end of day update, this shouldn't be too difficult to achieve very quickly.

If we're still in wave [c] of ii, then we may not break the green fork's lower line (or if we do it may only be briefly) and we may just head back up towards its upper line, which will likely result in the upper line of the blue and red forks being broken above also.

So, these forks may be worth monitoring along with the wave count as price action develops.

21:17 BST - SPX End of Day Update

The Options referred to below are different ways to count the move down from 1219.80 to 1010.91 and you can see them on the 60 min counts page.

To see the various ways to count the rally from the 1010.91 low on 1 July, see the 10 min charts in last night's end of day update.

In tonight's update I'm concentrating on the move from the 1129.24 high and the rally we have seen since the low at 1069.49.

Here is the 1 min chart of the decline from 1129.24. This is the bearish count for all of the Options shown on the 10 min charts in last night's update, although the labels, including the degrees of those labels, relate to Option 2:

SPX 1 min - decline from 1129.24:

We appear to have seen a nice 5 waves down from the 1129.24 high to the low at 1069.49. This would be wave i down on the bearish count.  The rally from the low at 1069.49  would be wave ii. It has to stay below the high of 1129.24 in order for this bearish count to remain valid.

The move up from 1069.49 could be counted as a double zig zag, but I've labelled a single zig zag which consists of 5 waves up for wave [A], a 3 wave pullback in wave [B] and 5 waves up for wave [C].

The question is whether or not we've completed wave [C]. You can see the alternate labels I've put on the chart which suggest we may have another leg up in wave (5) of [C] still to come. We may have had 5 waves down from today's high, as you can see from the second chart above. However, this could be a c wave in an expanded flat correction or an a wave of a correction. or it could count as a zig zag. For the moment, I've labelled it as wave (1) down.

Here's a closer look:

SPX 1 min close up:

If we take out the high at 1089.05 which is the alternate wave (1) of [C] high, without a new high first, then we can eliminate the alternate count. Taking out that level would also increase the likelihood that this single zig zag has topped. Today's high would certainly be a good place for a wave ii top. Its at the 50% retracement level which is where I said in last night's update I would ideally like to see wave ii end.

However, until we start dropping in a manner consistent with having completed a 2nd wave corrective retracement and we see important levels to the downside taken out, the risk of more upside remains. 

Any further upside could be within the context of the overall bearish counts shown on the 10 min charts in last night's update and in the 1 min charts above, provided we stay below 1129.24. However, as long as no significant level to the downside is breached, the risk of further upside in the bullish counts remains and these could take us substantially higher.

The two bullish counts I've been posting are under the bullish alternate for Option 4. You can see the bigger picture of the bullish alternate  on the second chart under the Zig Zag from March 2009 page, where it is shown as the alternate count and a further explanation and context can be found on the 60 min counts page.

Here are two possible ways to count this bullish alternate:

SPX 1 min - bullish alternate under Option 4, impulse up from 1010.91:

This count won't be eliminated until we drop below 1056.88. (see the chart of this count on the 60 min counts page which shows that level). 

However, if the labels shown are correct, and we are in wave [4], we would have to stay above 1082.62 otherwise this labelling would be invalid. 

If we take out that level, it might still be a [1]-[2]-(1)-(2) up from 1069.49. To avoid that, we'd need to take out the low at 1075.16. If we take out that level it would be unlikely that we were seeing an impulse wave up from 1069.49. 

Still, until we take out 1056.88, this count remains a possibility, since until then, we could still be in wave (ii).

SPX 60 min - bullish alternate under Option 4, leading diagonal from 1010.91:

This count will only be invalidated if we drop below 1010.91. The levels to watch referred to in relation to the first alternate for the bullish count apply here too.

However, if we take them out, the possibility remains that we are still in wave B. So, really, we need to take out the low at 1010.91 in order to invalidate this count.

So, if we're in a wave ii retracement, if there is any further upside to come, the high of 1129.24 cannot be taken out. If it is, the bearish counts, as labelled, will be invalidated.

It wouldn't mean that all bearish counts would be off the table, it would just mean a delay in the resumption of the bear case - see the explanation of what a high above 1129.24 (and 1131.23) could be on each Option on the 60 min counts page.

For a step by step elimination of the bullish possibilities, the  levels to watch to the downside which I've referred to above are 1089.05, 1082.62 and 1075.16. After that, we have 1069.49, 1056.88 and finally 1010.91.

18:59 BST - SPX Update; 15 min ptichfork resistance and TA divergences

On this 15 min chart, we've reached the fork resistance I mentioned may be a possible target earlier and we have divergences on the indicators to accompany it, along with a potentially complete elliott wave count:

SPX 15 min pitchforks:

Whether or not this plays out, however, remains to be seen - we have to start taking out important levels to the downside. The 1089.05 level mentioned in my last post is the first one we need to go for the bear case.

18:52 BST - SPX Update; 1 min close up with alt count

Following on from my last post, we'll have to see how we pull back now. If we don't drop as if we've started a 3rd wave down, here's another possibility we'll have to bear in mind for more upside on the bearish count - see the alternative labels on this chart:

SPX 1 min close up:

If we take out the high at 1089.05 in the next pullback, which would be wave (4) on this alternative count, this alternative will be invalidated.

18:42 BST - SPX Update: 1 min chart close up

The further new high possibility in the last post is playing out. It could now be about done, based on this labelling:

SPX 1 min close up:

However, as before, if we've completed a corrective rally, we need to start dropping as we would expect once a correction is over. If we don't, the risk of more upside remains.

17:34 BST - SPX Update: 1 min chart close up

Here's the close up of the bearish count, but I've noted on it the possibility for another high to come to complete wave (5) of [C] - this arises if wave (4) wasn't a triangle:

SPX 1 min close up:

Unless we start dropping like we've completed a corrective move up from yesterday's low, this possibility remains.