21:14 BST - SPX End of Day Update

In my post earlier today I summarised the bullish counts I'm following and which remain valid until we take out the low at 1010.91. You can see that post by clicking here.

So, I'll concentrate this post on the bearish counts. You should refer to the 60 min counts page to see the context of the shorter term charts I'm showing here and to understand what the Options referred to below mean.

On all of the following counts, I'm assuming that we will get 5 waves down from the high of 1081.58.

The main count is that, from the high at 1129.24, we've seen a i-ii-[1]-[2] down (using the degree labels applicable to Option 2), as illustrated on this chart:

SPX 1 min - from 1129.24, a i-ii-[1]-[2]:

At the moment, the count has us in wave [3] of iii. I would hope to see wave iii end somewhere in the region of 1003 where it would be a 1.618 extension of wave i. However, more modest targets might be the 1.236 extension at about 1026 or the 1.382 extension at about 1017. Wave iii should, ideally, break down well below the channel I've drawn on the chart.

In the meantime, once we get 5 waves down from 1081.58, that will mark the end of wave [3] of iii. We would then be in wave [4] of iii up. We'd have to stay below the wave [1] of iii low at 1063.91 in such a retracement, otherwise the count would be invalidated. So, on this count, the retracement following the completion of 5 waves down from 1081.58 would be relatively modest.

If the 1063.91 level were to be violated in an assumed wave [4] retracement, that does not mean the end of the bear case. There remain other ways to count the decline from 1129.24 on the overall bearish counts. It may be important to be aware of them in case we do invalidate the above count as described and also because if they are in fact the correct counts for the decline from 1129.24, they could determine the level to which retracements may get once we get 5 waves down from 1081.58.

Here are the other counts I'm following:

1) SPX 1 min - from the 1129.24 high, a i-ii, with [1] in progress, or still in wave i:

There are two possibilities shown on this chart as you can see. 

If the first one is playing out, once we make 5 waves down from 1081.58, that will complete wave [1] in a i-ii-[1] sequence. We would then be retracing the decline from 1100.14 in wave [2].  It could go all the way back up to 1100.14 without invalidating the count, but maybe more likely we'd see a 50%-61.8% retracement which would be the  1074 to 1080 area, depending one where we bottom.

If we invalidate this count by moving above 1100.14 in an assumed wave [2], it may be that the second count shown is playing out. On that count, once we have 5 waves down from 1081.58, we'll have completed wave i down from 1129.24. This means we'd be looking at a retracement back up in wave ii. That could go all the way back up to 1129.24 without invalidating the count. However, we'd probably expect a wave ii rally to end in the 50%-61.8% level which would be about 1085 to 1097, depending on where we bottom. 

2) SPX 60 min - from 1129.24, a leading diagonal for wave (i):

The labelling on this chart uses the degrees from Option 3.

I posted this chart earlier today. So far, it remains valid since we haven't moved below 1045.35 in what I've labelled as wave v of the diagonal.

However, as I mentioned in the earlier post, if the decline from the wave ii high at 1100.14 is still part of wave iii, the level that would invalidate the diagonal would be 1040.39 because that would make wave iii longer than wave i. So, really, to invalidate this possibility altogether, we need to take out 1040.49 in the decline we seem to have resumed at the end of today.

For the moment, it seems possibly more likely that we may still be in wave iii given that we haven't seen much of a retracement up since the low at 1046.68 and a retracement following the completion of a diagonal is meant to be sharp. However, it may be too early to draw this conclusion. If we take out the low labelled v and (i) then we can switch over to that.

Once we complete the diagonal, assuming we haven't already done so, as mentioned, a sharp retracement should follow. A level of 78.6% is considered normal after a diagonal. If we did end the diagonal at 1046.88, such a retracement would take us up to about 1112, so if this count is playing out, a wave (ii) retracement up to that level is certainly something that could cause doubt to creep into the bear count.

For now, going back to the main count shown in the first chart above, here's a close up:

SPX 1 min close up:

Sorry - that's the best I can do with that wave (4) at the moment! Still, I think it works. If its correct, we should now be in wave (5) of [3] of iii down if you refer back to the slightly bigger picture shown on the first chart above. We could see a low to this somewhere between 1045 and 1040 (the 1.236 to 1.618 extension of wave (1) of [3]). It could extend further, in which case a possible target might be the 2.618 extension of wave (1) at around 1029. Let's just hope it doesn't truncate instead of giving us a nice 5 waves down from 1081.58, since that would only cause (more) confusion.

18:54 BST - SPX Update: 1 min close up

Possibly into wave 3 of (5) down to complete wave [3] of iii:

SPX 1 min close up:

There's a risk we're still in wave (4), but it does look like its had enough time and retraced high enough to be complete at 1060.07.

18:37 BST - SPX Update: A look at the bullish counts still in play

Just a quick post to show that the three larger bullish counts I'm following which are summarised on the 60 min counts page all remain intact even after today's initial sell-off. Here they are updated:

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

This count applies to all of the Options mentioned on the 60 min counts page. Today's decline would be the (c) wave of [b] before we rally in wave [c] to complete the zig zag. We seem to need one more leg down to complete 5 waves for (c).

SPX 60 min - first bullish alternate under Option 4: impulse up from 1010.91:

This count has been relabelled since the decline below 1056.88 invalidated the [i]-[ii]-(i)-(ii) count shown on the 60 min counts page. It simply means we have only completed wave [i] of minor A up and wave [ii] is in progress in the form of an expanded flat. Its not a great count, but looks valid to me.

Again, we seem to need another leg down to complete the 5th wave  of wave v of (c).

SPX 60 min - second bullish alternate under Option 4: leading diagonal for wave A of (Z):

As with the above counts, it looks like we need another leg down to complete 5 waves for wave [c] of B before we see a rally in wave C.

Assuming we make a 5th wave down (which is also what I'm expecting to see on the bearish counts) I'll be watching the rally up from there closely. 

On those bearish counts, the rally will be wave [4] of iii (using the Option 2 degrees) and will have to stay below the low of wave [1] of iii which is at 1063.91. If we take that out in an assumed wave [4], the labelled count would be invalidated and it would be a warning that the bearish counts (as currently labelled) are not playing out and that one of these bullish counts could be in play.

Its possible that (with some re-labelling) a new low today would be the end of wave [1] down from 1100.14 instead of where it is currently placed. If that's correct, then it could retrace all the way back up to 1100.14 and we'd still be in the bearish count. However, my first reference point for the purpose of guarding against these bullish counts would be that 1063.91 low mentioned above.

The invalidation point for all of these bullish counts is the low at 1010.91, so they could remain valid for a while yet unless we start to see more significant declines.

16:15 BST - SPX Update: 1 min chart close up

If this labelling is correct, we've retraced 38.2% of wave (3) in this wave (4) of [3]. Combined with the median line of the black pitchfork on the 15 min chart in my previous post, this would be a really nice place for this rally to end:

SPX 1 min close up:

Let's see if it plays out or not or if we have to start giving some thought to the other counts.

16:06 BST - SPX Update: 15 min pitchforks

I mentioned this morning how price action yesterday seemed to be confirming the validity of the red fork on the 15 min chart (see here). Well, what we've seen today also seems to be validating it as an important fork to watch:

SPX 15 min pitchforks:

You can see that we bottomed (so far) right at the median line of this fork. If things are truly bearish we ought to see this get broken to the downside at some point.

In the meantime, I've added a turquoise fork given the breakdown out of the black one. I would hope to see the current rally from the low get pushed back from around where we are now, at the median line of the black fork, but certainly by the upper line of the black fork at most. A rally much higher would start to raise questions about the immediately bearish case of a i-ii-[1]-[2] down which now has us in [3] of iii.

On my labelling, the count shown in the 1 min chart in my last post won't be invalidated unless this current rally which I would label as wave (4) of [3] ends above the wave (1) of [3] low at 1063.63 [EDIT: SORRY - should have said 1069.63!]. However, I'll be keeping a close eye on these forks for any earlier signs that that low might get taken out.

15:30 BST - SPX Update: 1 min chart: bouncing from lower channel line support

Although the 60 min chart I just posted shows that we're in an area of very little real price support, here's a 1 min chart I've posted before showing the base channel I've had drawn in for several days - we're right at the lower line and price has bounced from there:

SPX 1 min from 1129.24 high:

If we're in wave [3] of iii as the count suggests, we certainly shouldn't get back to the top of the channel. If we do, then something else is obviously going on - perhaps only one of the near term bullish counts I mentioned earlier or the leading diagonal 1st wave down shown in my last post. I'd like to see a break down out of the channel and perhaps a backtest from below that is pushed straight back down if the bear case is in play.

15:17 BST - SPX Update: 60 min chart - possible leading diagonal from 1129.24

This is more like the action I've been describing as being necessary for us to see in order to increase confidence in the bear case. We still only have 3 waves down from 1081.58, so the two near term bullish possibilities I mentioned yesterday and this morning (see this morning's post here) are still viable, even if perhaps less likely. Hopefully we can get a clear 5 waves down from 1081.58 to pretty much rule them out.

Something else to keep an eye on is a possible leading diagonal for wave (i) - I'm showing this one using the degrees relating to Option 3 (see the 60 min counts page).

SPX 60 min - leading diagonal from 1129.24:

As noted on the chart, if its a leading diagonal and we're in wave v, wave v can't get below 1045.35 since that would make it longer than wave iii. If we don't get below that level on this decline, this count may be something to watch out for since a retracement of this diagonal for wave (ii) could be sharp.

I'd prefer to see the count that has us in wave iii of (iii) down (using the Option 3 degrees) play out since it would probably mean more downside now. As I said at the weekend and in the updates since, I really think we need to see these 3rd of 3rd waves get going to the downside if we are actually in the bear counts - a wave (ii) retracement after a leading diagonal at this stage would just mean further delay in seeing that kind of action. Hopefully we can rule this one out soon (although we'd also have to take out 1040.39 to preclude counting the decline from 1100.14 as wave iii of a slightly larger leading diagonal).

In the meantime, you can see from the chart that we are now into an area of price void with little or no price support down to 1010. It doesn't mean that the market can't just stop falling, but in theory, there's nothing really to stop it.

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: