9:04 BST - SPX Update: 15 and 60 min charts and more on the near term bullish potential and what would help eliminate it

I mentioned in last night's end of day update the risk of near term bullish potential if a) we haven't yet completed wave [2] in the i-ii-[1]-[2] sequence from the high at 1129.24; or b) we only bottomed in wave i at the 1063.91 low and wave ii is still in progress. You can read the end of day update here.

The reason I mention this, aside from the wave count, is the behaviour of the technical indicators on the intra day timframes. I noted at the weekend (see the post here) when I had labelled the late Friday rally as wave (A) of [2], that I expected we'd see some negative divergence occur with price making a new high in wave (C) and the indicators, which should make lower lows against that high. Yesterday, we saw the high labelled (A) taken out but there was no negative divergence in the indicators, as mentioned in my posts during the day.

Now, its not compulsory to have such divergences between price and the indicators, but it does go some way towards confirming that a top of some sort has been made. So, I think its sensible to stay alert to the two near term bullish possibilities I mention above. Having said that, the intra day charts do look bearish.

Here's the picture I'm looking at:

SPX 15 min:

You can see from my comments on this chart that the indicators paint a bearish picture so support more downside to come (we'll just have to wait and see whether any such downside turns out to be a (B) wave decline or if is a 3rd of a 3rd wave down).

Its also nice how the rally into 1081.58 stopped right at the intersection between the rising lower line of the bullish green fork and the falling upper line of the bearish red fork. This seems to confirm the validity of the red fork and that the green fork is unlikely to have any influence on price (at least not bullish influence).

There was further confirmation of the red fork with the second rally into its upper line later on yesterday. You can see how price quickly turned back down from there.

I've drawn in a new downward fork in black. If we're in wave [3] of iii down, this may contain that move, with price at least moving to its median line and perhaps following it down.

SPX 60 min:

The same lack of bearish divergence between the indicators and price into the high at 1081.58 is highlighted here, but again, the indicators are bearish, both in their curent configuration and/or in their behaviour into that 1081.58 high despite the lack of bearish divergence, as noted on the chart.

In both of these charts, the current 3 wave look to the decline from 1081.58 is apparent and with one decent sized gap up or rally, the bearish picture can change quickly, which is why we have to stay alert to the possibility that this is only a (B) wave in wave [2] or a [B] wave in wave ii depending on which of the near term bullish possibilities mentioned above may be playing out. 

As mentioned in yesterday's end of day update, what I would like to see to reduce the risk of the decline from 1081.58 being a (B) wave is a clear 5 wave decline from 1081.58 (taking out 1063.91 won't be enough if we only do it in 3 waves since the decline could still be a (B) wave in an expanded flat). 

I think we've seen too many potential ones and twos forming to the downside in recent action that we now just want a straightforward impulse down without any further messing about. This would help eliminate the near term bullish potential mentioned above, though not the longer term bullish potential mentioned in the end of day update (which remain valid until we take out 1010.91).

If we're in wave [3] of iii as my labelling suggests, then ideally, we should see it extend to at least 1.236 x wave [1] of iii That would take it to about 1035. In my view, this is what the bearish counts call for, so if it doesn't happen, those near term bullish counts have to remain on the radar.

21:14 BST - SPX End of Day Update

Today's action has done little to resolve the question of what the move down from 1129.24 represents.

You'll see on the 60 min counts page that on the bearish counts shown on each of the 5 Options I'm following (each of those represent different ways to count the decline from the April high at 1219.80 - that page puts these shorter term charts in context), I'm looking at that move as 5 waves down. 

For Options 1 to 3, it would be 5 waves down within a larger 5 wave decline in a potentially long term bear market move. For Options 4 and 5, it would be 5 waves down within a  [c] wave which would likely be the final wave in an intermediate wave (X) correction down from the 1219.80 high prior to a rally to new highs, so, near term bearish, but longer term bullish.

However, for Options 1 to 3, its possible to count the decline from 1129.24 as the [b] wave within  single zig zag from 1010.91 and we would now likely be in the [c] wave up which would take us above the high at 1129.24. Also, under Option 4, its possible that we already completed intermediate wave (X) down and have started minor wave A of (Z) up. 

Both the bearish and bullish counts mentioned above all remain in play after today.

Here's the 1 min chart showing the move down from 1129.24:

SPX 1 min - from the 1129.24 high:

The labelling and degrees on this chart relate to option 2 but applies to the bearish counts on all the Options.

Essentially, the i-ii-[1]-[2] count remains intact. The move up from the 1063.91 low does look OK as a 3 wave zig zag complete at 1081.58, where wave (C) is 1.236 x wave (A) and wave [2] as labelled came up to the 50% retracement level and is just at the lower end of the resistance areas highlighted in the charts I showed at the weekend.  If this count is correct, we're now in wave [3] of iii down. The problem is that we need to see some price action that is consistent with this bearish count. So far, we haven't. 

This does raise the possibility that 5 waves down for wave i from 1129.24 only ended at the 1063.91 low - a possibility I mentioned in my post at the weekend when I looked at the MACD histogram on the 60 min chart - see that post here.

If this is what is playing out, we could have another substantial rally to come for wave ii, probably above the high at 1081.58 and probably nearer to the 1100 level. 

Taking out the low of 1063.91 would help to reduce the likelihood of this count, but wouldn't rule it out in my view unless we have a substantial decline that clearly marks it out as a 3rd of a 3rd as we are expecting on the bearish count. This is because, referring to the above chart from the high at 1100.14,  without such a decline to well below 1063.91, I could label the low at 1085.76 as wave (1) of [5] of i, the high at 1099.77 as wave (2), the low at 1063.91 as wave (3), the high at 1081.58 as wave (4) and any new low below 1063.91 as wave (5) of [5] of i, unless we drop in such a  bearish manner that it has to be wave [3] of iii. So, this is something I'll certainly be keeping in mind.

For the moment, here's a close up of the count from today's high at 1081.58. It shows the bearish count assuming we've completed a i-ii-[1]-[2] and we're now in wave [3] of iii down. I'm showing a (1)-(2) down from 1081.58 and we're now in wave (3) of [3] down (I've dropped the (1)-(2)-1-2 given the size of wave 2 compared to wave (2) as mentioned in  my earlier post). It also shows the possibility that wave [2] isn't yet complete and the high at 1081.58 was only wave (A) of [2]. So, we still have a rally in (C) of [2] to come. This  latter count could also apply if we only completed 5 waves down for wave i at 1063.91 as discussed above, in which case, 1081.58 would be wave [A] of ii:

SPX 1 min close up from 1081.58:

If the bearish counts are playing out, then we really need to see some price action that confirms it  quite soon given that in elliott wave terms, a 3rd of a 3rd wave down at any degree is very bearish and should produce clearly impulsive action (I explained the need for us to see this type of action  soon in the context of the 60 min charts also on the 60 min counts page).

As long as we don't see this type of action, the bullish counts have to be very much on our minds.

As well as the bullish possibility discussed above of more upside to come in wave ii if we only bottomed in wave i at 1063.91, the other bullish counts that I showed in the end of day update on Friday remain in play as mentioned above. They will continue to be possibiities until such time as the low at 1010.91 is taken out as explained in that update.

So, for the bearish counts, the first step would be to take out the 1063.91 low in a manner that is consistent with the bearishness of the count and  that gives us a clear 5 wave move down from 1081.58. The decline we saw towards the end of the session may be more encouraging to the bear case, but it really does have to follow through without much more hesitation. If we don't see this the near term  bullish counts continue to remain in play and, of course, the longer term ones will also stand until the 1010.91 low gets taken out.

19:45 BST - SPX Update: 1 min very close up

With that move up, four out of 5 possibilities remain from the chart I posted earlier (with some slight adjustment here and there). Here it is updated:

SPX 1 min very close up:

Two bearish counts assuming we had a wave [2] top at 1081.58:

1) we're in a (1)-(2)-1-2 down from 1081.58 within wave [3] down - not looking like the best count given the size of wave 2 compared to wave (2). It will be invalidated if we move above 1076.67;

2) we had a truncated wave 5 within wave (1) which completed at 1069.63 and the sideways action since then is wave (2). The high at 1081.58 must hold.

Two near term bullish counts within the bear count - wave [2] still in progress, with wave (A) of [2] being the high at 1081.58:

1) wave (B) bottomed at 1069.43. Not looking likely since the move up from 1069.43 doesn't look too impulsive. However, if we label the 1081.58 high as wave (W), and 1069.43 as wave (X), we don't need an impulse for wave (Y), just a 3 wave move up. That could be workable;

2) wave A of (B) bottomed at 1069.43 or 1069.63 and we're now in wave B of (B) before another decline in wave C of (B) and then a rally above 1081.58 in wave (C) to complete wave [2]. This is definitely viable. We could even take out the low at 1063.91 and this would still be valid since we could be seeing a wave [2] explanded flat. Its only invalidated if we see a very clear 5 waves down from 1081.58 develop to below 1063.91 since wave (B) can't be 5 waves (but we'd have to watch for that 5 waves being only part of wave (B).

17:22BST - SPX Update: 1 min very close up with various potential counts and levels to watch

There are various ways to count the move down from today's high as you can see from this close up:

SPX 1 min very close up:

I've shown a very bearish possibility as the main count - we're currently in a sub-dividing wave (3) of [3] down. On the labelling shown, we're in  wave 2 of (3). That would be eliminated if we take out the high at 1076.67.

Alternatively, I may have the degrees wrong and we have yet to complete wave (1) of [3] down - we'd currently be in wave 4 of (1)  - taking out the wave 1 of (1) low at 1074.33 would eliminate this count.

Another alternative - the low at 1069.63 may be 5 waves down from today's high (with a slight truncation) for wave (1) or wave A of (B). If its wave (1) down, we can't take out today's high.

The more near-term bullish possibility is that today's high was only wave (A) of [2] and we completed wave (B), at today's low so we're now in wave (C), possibly to that 61.8% retracement level mentioned earlier.

14:50 BST - SPX Update: 1 min very close up

Here's a very close up view of the count for a top that I posted earlier, with what looks like 5 waves down from today's high:

SPX 1 min very close up:

Still, until we see a larger 5 waves down, this may still be wave (B). Taking out the low of Friday at 1063.91 will make that look less probable.

15:25 BST: SPX Update: 15 min chart

You can see that we've hit a nice spot for the end of wave [2] if my previous 1 min close up chart is correct. I think though that if shorting, you need to be aware of the risk of further upside due to the lack of divergences in the indicators as shown on this 15 min chart:

SPX 15 min pitchforks:

15:02 BST - SPX Update: 1 min close up

Here's a possible count into a wave [2] corrective high, with wave (C) being about 1.236 x wave (A). However, I'm not really seeing any divergences between price and the technical indicators at the moment, so this could well turn out to be wrong:

SPX 1 min close up:

Its possible that the rally from Friday's low could be wave (A) of [2] only so we'll eventually see more upside, perhaps to the 61.8% retracement level, so be prepared (also, we may still be in wave 4 of (C) if my labelling is otherwise correct)

14:03 BST - ES Update: 60 min chart

Futures are starting to look like they may be running out of steam. You can see on this 60 min chart of ES that its traded to the upper line of the red fork. Its a specultaive fork since the lower line isn't drawn off a price pivot. However, it does seem to have done a good job of capturing the action since the low on 19 August that touches its lower line:

EX 60 min:

You can see how the rally in price since Friday afternoon took price above the median line of the red fork. Overnight, it had a brief spike down to the daily pivot, bounced back up again and headed to the upper line of the red fork.

It just tried to break above but came back in as it met with the ichimoku cloud resistance.

Now, we're seeing bearish divergence between price and the MACD histogram and the slow stochastic looks like its double topping. If we stay like this into the cash open, the current level of ES suggests a cash price of about 1077 which is about the 38.2% retracement of the decline that I have labelled as wave [1] of iii down (see Friday's end of day update).

If that's where we get to at the open, its  possible that that level will mark the end of wave (A) of [2] and not where I currently have it, so I'd still be alert to the possibility that there is still more upside to come before wave [2] ends. Obviously, this could change if we gap up then just drop below Friday's low. Let's see how the cash opens and what the action in price and the indicators tell us. 

12:09 BST - Dollar Update: 25 min chart

Just a quick note on the dollar to update the position since my last post on it which you can see here.

Dollar 25 min:

I've labelled Friday's high and the subsequent pullback as waves (3) and (4) of wave [3] (wave (4) may still have more downside to go even though I've put the label in). If this is correct, then wave (4) musn't end within the territory of wave (1). The high of wave (1) is at 82.610.

At the moment the count looks good, but we need to watch that level in this pullback.

If the count is correct, we need a wave (5) up to complete wave [3]. I would expect wave (5) to try to get back to the median line of the green fork (which it did in wave (3)), but potentially fail to get there, which would be bearish near term and consistent with a wave [4] retracement. On a wave [4] retracement we'd then need to watch the high of wave [1] at 82.717 since wave [4] must not end below that high.

11:49 BST - SPX Update: 5, 15 and 60 min charts (and the risk of a potentially higher retracement than currently expected)

Following on from my post on the weekly and daily charts, here's a look at the 5, 15 and 60 min charts:

SPX 5 min pitchforks:

This is a close up for the 5 min chart I posted here when I noted that a break above the blue fork that wasn't quickly reversed could mark the end of wave [1] down. I've also added the technical indicators I was watching on this chart on my esignal version of it.

You can see that after that post we slipped further down into the blue fork, but this created bullish divergences in the indicators and a double bottom in the stochastic. We then saw a large white candle break up above the upper line of the bule fork - I've circled it in green.

That's when I posted a 1 min chart suggesting we may well have seen the wave [1] low that we had been waiting for - click here.

For me, with the bullish divergences bewteen the technical indicators and price on this timeframe and the potentially complete elliott wave count, the buy signal was the break by the white candle I've marked with the blue arrow above the prior red candle which had closed very near its low. The inability of that red candle to follow through to the downside and the trade above its high on the very next candle, was a good low risk buying opportunity.

Now, as you can see from Friday's end of day update, we may have finished the first leg up of wave [2]. The sideways action that took place at the end of the day could be all or part of wave (B) of [2], assuming that what I've labelled wave (A) of [2] is correct. Its possible that it was all of wave [2], but it doesn't seem likely at the moment, with no bearish divergences showing up in the technical indicators, as you can see from this chart:

SPX 5 min pitchforks:

If the wave count for the move up from the 1063.91 low is right, and we still have a wave (C) up to come, I've marked on the chart the ideal area for the end of wave (C) of [2], as identified in Friday's end of day update . I would prefer it to end at the lower part of this area and what would be even more bearish is if it failed to hit the lower end of this area at all, perhaps stopping at the upper line of the pink fork.

If we were to take out the low of 1063.91 without making a new high, we'd have to assume that the high I have labelled as wave (A) of [2] was actually all of wave [2]. I'd then be looking for suitable short entries.

Here's the 15 min chart:

SPX 15 min pitchforks:

For the moment, what I'm seeing on this timeframe in the CCI and the RSI is consistent with a countertrend rally. Again, however, you can see, we haven't yet seen any bearish divergences between the indicators and price on this rally from 1063.91. That would be consistent with the elliott wave count calling for another rally high before the correction is over, which would be accompanied by the usual divergences in the indicators.

Here's the picture on the 60 min:

SPX 60 min pitchforks:

There are signs here too that we may have more upside to come. The MACD histogram is forming higher lows within the trough its in and the MACD itself looks like it could make a bullish cross. At the moment however, the RSI and the stochastics, while having moved off their lows, are consistent with a countertrend move up.

One thing to watch for, which I've noted on this chart is the possibility that the low at 1063.91 on Friday may actually have marked the end of 5 waves down from 1129.24, rather than the low at 1069.49.  It would have a large 4th wave if this is correct, but its perfectly valid. 

The reason I think its something to keep in mind is the profile of the MACD histogram. The lowest trough would line up with the 3rd wave, followed by a clear higher trough on the 5th wave. On the current count which has the 5th wave at the low of 1069.49, there was no lower trough - the MACD was positive at the time of this low. Obviously, that's still a divergence against the price low we currently have as the 3rd wave, but my ideal picture would have been to see a lower trough in the 5th wave rather than the histogram not going negative at all.

If we did only see the end of 5 waves down on Friday's low, the implication is for a deeper retracement in wave [2] than we are currrently expecting, maybe back to the 1100 area. I think its just something to keep an eye on for the moment.

16:44 BST - SPX Update: Weekly and Daily Charts

For the moment, there is still probably more for the bears than the bulls on the weekly chart in my view:

SPX Weekly:

You can see that price action is bearish in conventional and in pitchfork terms. 

In conventional techincal analysis terms, last week was a big down candle that completely retraced the prior week's gains as well as getting deep into the large up candle two weeks before that. Last week's reversal took place right at the 20ma and at prior pivot resistance. This week, price initially rallied up to the 50ma and simply collapsed back down again. That's not bullish behaviour.

In pitchfork terms, last week's reversal was at the upper line of the large downward black fork and could represent a confirmation of the potential validity of that fork meaning that it could well have future influence over the direction of price (you can see how large this fork is for yourself). We also closed below the median line of the red fork and this week confirmed that bearishness with an attempt and failure to get back above it.

What is required now for the bear case is a continuation of the move down, below the lower line of the upward green fork and towards the lower line of the red fork and the median line of the pink fork. If things are really getting bearish, the pink fork looks like it could provide a guide to the general path that price will follow as it moves down.

Looking at the technical indicators, the CCI still has not been able to get above the zero line and the RSI remains stuck around the 50 area and more generally below it than above it.

Last week, it looked like the MACD might get a bearish hook down around the zero line. It still continues to develop in this way.

The stochastic hasn't moved up as I would expect if this were a new uptrend and now looks like its stalling out at a not very bullish level. You can see the way it moved up from oversold/near oversold in the uptrend from March 2009. (see the two areas I've highlighted in green). The move up from oversold from July 2010 is distinctly muted by comparison. That suggests to me a counter trend move.

I don't think the daily chart offers much more encouragement for the bullish counts at the moment either:

SPX Daily:

Again, looking at the price action, you can see how this week's rally tried to get price back up to the 13ma and 20ma. It didn't even get to those levels before the downturn we saw on Thursday and Friday. In addition, with that downturn, the 13ma has crossed below the 20ma. Both are still above the 50ma, but they fell quickly this week and it may not take too much to drop them below the 50ma.

As regards pitchforks, my comments in relation to the red, pink and green pitchforks on the weekly chart apply here since they are the same. The lower line of the purple one (I had this as green on last week's chart but I've changed it so its clear its not the same as the green one on the weekly) provided reistance to the rally in the early part of the week and the failure to get back within it, following as it does, the failure of the third peak in the rally from the July low to reach its median line, is bearish.

As to the technical indicators, the CCI's lower peak on this week's rally confirmed the weakness in the rally in price. It looks like its headed for the -100 line which would be bearish.

The MACD histogram started to print higher low bars within the trough its formed with the decline since 9 August. However, the lows started dropping again with the delcine late in the week.

The rally in price took the RSI towards the 50 line, but it didn't quite reach it and turned down hard again.

The MACD shows no sign of turning up and looks more likely to accelerate to the downside if anything.

The weakness of the price rally is also reflected in the action in the stochastic which couldn't get anywhere near its 50 line before turning back down again. This is the type of action I'd expect to see during rallies in an overall downtrend.

So, for the moment, on these timeframes, the bear case appears to be in decent shape as far as price action and technicals are concerned. However, there's still alot more we need to see from price in order to feel more confident in the bearish counts (I've discussed this to a degree on the updated 60 min counts page), even those that are only bearish relatively near term, let alone the longer term bearish ones. Because those bullish counts are still on the table, its important to keep monitoring the action in price (obviously!) and in the technicals for any signs that momentum may be shifting from (currently) the bear case to the bullish case.

11:08 BST - SPX Update: 60 min counts page updated

I've updated the 60 min counts page - please us the menu tab above or click here.

For the really bearish counts in Options 1, 2 and 3, I've given some potential targets for the very next leg down, once what I'm assuming on these counts is a correction up from the 1063.91 low is complete. 

I've also explained why on Options 1 and 2 we really need to seeing these bear counts playing out now as we would expect, with deep, impulsive down moves. Ideally, I also want to see this under the count in Option 3, but its less pressing on that count  looking solely in terms of time (though it could start to become pressing soon).

On both the bullish and bearish counts, I've shown the channel that I'm watching to try to get an early warning of which of these might be playing out.

21:09 BST - SPX End of Day Update

I'm still for the moment concentrating on the move down from the high at 1129.24. I'm looking at a 5 wave decline from that high. 

On the bearish counts, shown on the charts of Options 1 - 5, this would be  a 1st wave down in a larger impulse (either a 3rd wave or a [c] wave, depending on  which Option you're looking at - you can see them all to get some context on the charts below on the 60 min counts page.) ending at either 1076.69 or 1069.49 ( see this post for an explanation of this). On the bearish counts, I've then labelled a 2nd wave retracement either complete at 1099.77, or with a [C] wave back up to that area (and possibly higher) to come.

On the bullish counts, the move down from 1129.24 to 1063.91  would be a wave (ii), B or [b] correction (depending on the Option) before what could be a significant rally higher. 

As you'll see from the charts below, both bullish and bearish possibilities remain very much alive. Here's the bearish count for the move since 1129.24:

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, followed by wave [1] of iii down which can be counted as complete at the low of 1063.91. The alternate labels show the moderately bullish count that still has us in wave ii, which would now be forming an expanded or running flat, with the [C] wave up still to come. 

For the immediately bearish case, we're looking for a 3 wave rally that ends somewhere in the region of a 50% retracement. Assuming wave [1] of iii bottomed at 1063.91, the 50% retracement level would be at about 1082. Of course, it could go higher. The 61.8% retracement level is at about 1086. Much higher than that at this stage of the bearish count and we'd have to watch carefully for signs that something more bullish is happening. Technically however, elliott wave theory allows a 2nd wave to retrace the whole of the 1st, so this count wouldn't be invalidated unless we take out the 1099.77 high.

Here's the count close up:

SPX 1 min close up:

If this is the correct labelling, we have to stay below the start of wave [1] at 1099.77

If that high is taken out, the alternate labelling would still be in play, which would make the rally from the low at 1063.91 wave [C] of ii. We would then look for an impulsive decline to take out the 1063.91 low to gain some confidence that the alternate bearish count on the above chart was playing out and not something more bullish.

And these are the bullish counts (two are bullish alternates under Option 4 on the 60 min counts page while one relates to all of the bearish counts on the 60 min counts page):

SPX 60 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. If we take out that level, we could make a case for wave [ii] still being in progress as an expanded flat and that would remain a valid count as long as the low at 1010.91 holds.

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

I've re-labelled this count following today's move below the 1069.49 low. It too remains valid unless we take out the 1010.91 low.

SPX 60 min - Moderately bullish count - zig zag still in progress from 1010.91:

If the labelling on this chart is correct, we shouldn't now move below 1063.91 without a new high above 1129.24.  If that low gets taken out, it may mean that wave [b] is on-going, with some re-labelling, since this count is really only invalidated below 1010.91.

So, for the bearish count, if we're in a wave [2] retracement up from 1063.91, we're looking for a three wave move up into the 1082-1086 area. A lesser retracement would suit the bearishness of the count, but shouldn't be expected. 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 1063.91 to be followed by impulsive declines that take out that low soon after that.

If we take out 1056.88 to the downside before we make new highs, the first bullish alternate under Option 4 will be invalidated. on the labelling shown. However, it could just be that we are still in wave [ii] of the impulse up from the 1010.91 low. That and the second bullish alternate under Option 4 as well as the bullish alternate applicable within the context of the overall bearish Options will remain in play until we take out 1010.91.

Have a great weekend!

19:50 BST - SPX Update: 1 min close up

Here's how I'm provisionally counting the move off the 1063.93 low today as far as the bear count goes:

SPX 1 min close up:

17:26 BST - SPX Update: 1 min - Possible wave [1] low and levels to watch to comfirm

Here's an explanation as to why we may now have a low and a couple of levels to watch which might confirm:

SPX 1 min:

16:38 BST - SPX Update: 1 min chart: possible wave 4 triangle within (5) of [1] down suggesting a low soon?

With the sideways action we've seen since the initial decline, this possible count suggests itself (whether wave (1) of [1] is where I have it or at the 1085.76 low as suggested in my earlier post):

SPX 1 min:

15:59 BST - SPX Update: 5 min pitchforks

If wave (5) of [1] of iii is going to extend (I suggested this possibility in my ealrier post), this blue fork on the 5 min chart may well tell us. If its broken to the upside and we don't reverse quickly back down into it, chances are we saw the wave [1] low at 1066.48. If we're extending down in wave (5), we're likely to stay in the fork and at least head towards its median line again:

SPX 5 min pitchforks:

15:49 BST - SPX Update: 15 min pitchforks

This pink fork has been doing a good job, holding back the bounce yesterday at its median line and now providing support to the market at what may be the completion of wave [1] of iii down:

SPX 15 min pitchforks:

If we have completed wave [1] of iii, we could see a move back up towards the upper line of this fork and the upper line of the larger red fork - this is certainly possible bearing in mind the retracement levels shown on the chart I posted earlier.

Obviously, that would also take price back into that upward green fork, which is potentially bullish. If that happens, what we would want to see for the bear case would be a failure to get to the median line of that fork, preferably followed by a collapse back down out of it and back to the lower part of the pink fork - that would be bearish. Its what happened with the black fork shown in this post - and look what happened to the market when that fork failed.

 

15:24 BST - SPX Update: 1 min chart - Possibly more downside for wave (5) of [1]?

Here's something to consider - if I use the original labelling I had with wave (1) at the low of 1085.76, it could mean more to come in wave (5):

SPX 1 min:

At the moment, wave (5) is just about .886 x wave (1) if I put wave (1) at the 1085.76 low.  If it were to equal wave (1) it would take us to 1065. If it were to extend to 1.236 x wave (1), we'd get to about 1061 and a 1.382 extension of wave (1) would be about 1059.

Of course we can't know if this should be the correct count but if we take out today's low without a retracement sufficient to call wave [2], its certainly something that could be playing out.

15:05 BST SPX Update: 1 min chart - Retracement levels in case we've hit a low for wave [1]

As you can see from my previous chart, I think there are enough squiggles between waves (4) and (5) on my labelling to mark a wave [1] low. Taking out today's low will invalidate that labelling, but just in case, here are the retracement levels to watch:

SPX 1 min from 1129.24 high:

14:56 BST - SPX Update: 1 min close up

Look out for a possible wave [1] low:

SPX 1 min close up:

Taking out today's low woud invalidate this labelling of course!
 

12:56 BST - SPX Update: Are we still in a zig zag from 1010.91 with a big C wave rally still to come?

Here is something to watch out for because  even for the bearish Options, it would mean some potentially significant upside to come first, likely above the highs of 1129.24 and 1131.23. I've put it on the chart of Option 3 because I think it looks best on that chart, but it could also apply to all of the bearish Options (see the 60 min counts page for those Options):

SPX 60 min - still in a single zig zag from 1010.91:

As you can see, it takes the leading diagonal count for the move up from 1010.91 which I've been showing on the second bullish alternate count under Option 4 and labels it as wave [a] of a zig zag up from 1010.91. The decline from there would be wave [b], leaving a 5 wave rally in wave [c] yet to come.

With this count looking not unreasonable, once we've had a 5-3-5 down from 1129.24, we'll have to be alert to the possibility that the next move up could be wave [c] of this zig zag, taking us to new highs for this move up from 1010.91.

On the labelling I've shown, we only need one more low, preferably below 1070.66, to complete a 5-3-5 move. So, we'll then need to watch the retracement from there carefully for any clues that this count may be playing out.

The problem we have is that even on the bearish counts, we are expecting a new low below 1070.66 and then a rally in a 2nd wave. If that's correct, the high at 1099.77 must hold (that's the start of the 1st wave that we would be retracing on those bearish counts). After seeing 3 waves up from any new low, we'd want to see an immediate impulse wave back down.

However, as the third chart in this post from yesterday shows, even on the bearish counts, we could be in a flat for a 2nd wave of one higher degree so would be expecting a c wave up, probably to above 1099.77 and 1100.14. And, that wave will have to be a 5 wave impulse. So, it won't be easy to tell whether this or the potentially more bullish count in the 60 min chart above is playing out - the more bullish count could see the [c] wave take us to the 78.6% retracement level for the decline from 1219.80, which is at about 1175.

Obviously, there are other tools we can use apart from elliott wave analysis that may help. 

I've drawn in a down channel which would be the base channel on the bearish count. If we are in the immediately bearish count, we should accelerate down out of this channel to form a steeper one for wave (iii) on the bearish count. So, a significant break down out of this channel without an immediate recovery should be bearish.

If we stay within this channel for this decline, as a guide, its more likely that the move down within it is corrective. A break above the channel might be a warning that the more bullish count above is playing out. However, if the flat referred to above is in play, we could break above the channel in its c wave, only to fall back within it. So, we'd look for a significant break above and a failure to drop back within it pretty much immediately as an indication that the more bullish count could be playing out.

I also make alot of use of pitchforks to try to identify trends and turning points for trends. You can see my last post showing the pitchforks I'm watching and what I'd want to see for the bearish case here.

So, as ever, there are no certainties in trading - we just have to be prepared for all eventualities.

11:51 BST - Dollar Update: 25 min chart

The dollar held the 81.192 low in what looks like a wave [2] pullback (it was deep - about 88.6%), which is what I was expecting to see after the apparent 5 waves up from 81.192 for wave [1]. You can see the last post here.

Here's the updated chart:

Dollar 25 min:

You can see how wave [2] came right back down to the lower line of the pale green pitchfork and close to the upper line of the red one (both from yesterday's chart). Coinciding as they did with the 88.6% retracement level, it was a good place to get long the dollar - I've said before, that retracement level is one of my favourites since it gives a low risk entry point for positions.

I've drawn in two more upward forks which reflect the acceleration we've seen in the move up today. If this is wave [3] up, the steeper one will ideally be the fork that has the greatest influence on price.

We're above the median lines of both of those new forks, which is bullish action in pitchfork land. What I'd like to see now is any retracement hold at or above the upper line of the pale green fork from yesterday and/or the median line of the new dark blue fork (the less steep one) and head towards the upper line of the new dark green fork which should also take it above the upper line of the dark blue fork.

In elliott wave terms, if my labelling is correct, we are in wave (3) of [3], so the next pullback in wave (4) must stay above the wave (1) of [3] high at 82.610. If it doesn't, the labelling is wrong. I'd then look to the wave (2) of [3] low at 82.416 - as long as that holds, we could be in a (1)-(2)-1-2 up within wave [3].  If it doesn't hold, then I think a re-assessment will be needed.

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.