10:33 BST SPX - 60 min counts page updated

I've updated the 60 min counts page.

You can see even on the 60 min charts that if we're in an impulse wave down from 1129.24, it would certainly look better and be a more obvious 5 waves if we could get one more leg down to below 1176.69.

Getting 5 waves down is crucial to the bear case. Without it, the bear case is likely to be off the table for at least a short time, because 3 waves would mean a correction only (that is, a correction of the prior move which was up) and imply more upside to come. 

If we don't drop below 1176.69 on Monday and instead move up, we've only got 3 legs down visible on the 60 min timeframe. Now, if this happens, it may be we're still in the 4th wave of an impulse down, or it may be we have a [1]-[2]-(1) down and a move up on Monday would be wave (2) (see Friday's end of day update for the levels to watch that would invalidated those possibilities). 

So a move up on Monday wouldn't necessarily mean that the bear case is out for the time being. However, it would be sensible to have this possibility in mind and just keep an eye on those levels that I mentioned yesterday that would eliminate the bearish counts for the move down from 1129.24.

22:37 BST - Dollar Page Updated

Obviously, I didn't spend all of my time this afternoon making a silly list. To prove it, I've posted an update to the dollar page.

There are encouraging signs that we've started minor wave 3 up, but I've listed some bearish possibilities that could delay it or, worse, could mean its not happening (after reading the update, you might conclude that I did  spend all my time making silly lists).

21:12 BST - SPX Update

With today's action not really having changed the picture on the 10 min charts a great deal, I won't post those charts tonight. I'll just post the charts showing the move since the 1129.24 high which I've posted during the course of today.

If you want to see the slightly bigger picture, have a look at the 10 min charts in last night's update (and for the even bigger picture, click on the buttons in the menu above. The 60 min counts page describes the Options referred to below).

The count from the 1129.24 high is the same for all of the Options I'm following:

SPX 1 min - from the high at 1129.24:

The main count labelled suggests that we've started wave [5] down (the degrees of the labels on this chart relate to the count shown under Option 2, by the way). For this to remain valid we need to stay below the high of wave [4] at 1086.72.

Wave [4] is still labelled with a question mark at the moment since its not certain that we have ended wave [4]. It could be forming a larger correction which will push us up to the 23.6% or 38.2% retracement levels between about 1108 and 1096. Or, as the dotted green lines suggest, we might be forming a triangle with the low at 1079.10 being the (D) wave.

At the moment, based on the character of the move since the 1176.69 low, I'd rate the possibility that that low was wave [5] and wave i down as not very high. It could change with one big impulsive move up, but as things stand, its the least likely of the alternatives mentioned, in my view.

Here's a closer look at what we've seen today:

SPX 1 min - close up:

I've changed the alternative count from earlier to show it as a possible (W)-(X)-(Y) instead of (A)-(B)-(C). The significance is that the (Y) wave will only be 3 waves rather than the 5 that would be required if it is a (C) wave. Its possible that it will end up as a 5 wave rally from the low currently labelled as wave (1) of [5] down, but looking at the correction so far, a 3 wave move off that low to complete wave [4] looks more in keeping. However, either would be acceptable as long as wave [4] does not end above the low of wave [1] at 1111.58.

So, the invalidation point for the count, if there is more upside to come in wave [4] remains as yesterday, 1111.58. If that gets taken out in what we're currently assuming is a wave [4] correction,  an alternative that I've mentioned before but which is not on the chart, is that the low at 1176.69 was wave (1) of [3]. That possibility would be invalidated if we took out the start of what would be wave (1), at 1127.16.

In that case,  it may well be that the count mentioned on the first chart above is playing out, with waves [5] and i having bottomed at the 1176.69 low.

If that alternate is playing out, we'd need to stay below the high at 1129.24 for it to remain valid. If that high is taken out, then obviously, something more bullish is going on. Possibly, that may be the bullish alternates  under Option 4, which you can see charts for in last night's update - both remain valid at this point. Or, any of the Options can accommodate further upside, even above 1131.23, as you can see from the commentary on each Option on the 60 min counts page.

So, those are the levels to continue to watch for signs of cracks in the bearish count. 

For signs that the bearish count may be playing out, we need to make 5 waves down from the 1129.24 high (I'm assuming that we haven't already done so). Taking out the low at 1056.88 would also be favourable for the bear case, but ultimately, we want to see the low at 1010.91 get taken out. As explained last night, this wouldn't exclude any further upside or even new highs in the forseeable future.  So it wouldn't be proof that the bear case is playing out, but without it, there is no bear case.

Have a great weekend!

19:14 BST- PPT Friday Checklist

Reasons to send the market down:

1) moving average resistance;

2) ichimoku cloud resistance;

3) pitchfork resistance;

4) incomplete elliott wave count.

Reasons to pump the market up:

1) to piss off the bears for another weekend?

Sorry  - did I mention I was bored?

18:56 BST - SPX Update: 1 min chart

If this corrective count is correct there shouldn't be much more upside to go - partly because there isn't much room left if this count is to remain valid (I've shown it as needing one more push up, but its quite possible its already complete:

SPX 1 min close up:

If the 1086.72 high gets taken out, then I'll look to the alternative marked on the chart as possibly playing out.

18:32 BST - ES Update: 60 min chart

Since its Friday and I'm bored with this price action, here's an update of the 60 min ES chart I posted before the open, showing the continuing struggle going on against fork, cloud and moving average resistance:

ES 60 min:

It all suggests we should move down again, but the market is always ready to surprise.

18:13 BST - SPX Update: 60 min chart

On the 60 min chart, there are signs of the indicators turning up, but they're not necessarily telling us we should be long. They're moves seem to be consistent with a possible 4th wave still in progress. The MACD histogram in particular suggests we should be due another leg down to get a higher trough low than the last trough low. That would be the signature of a 5th wave, at least that's the theory:

SPX 60 min chart:

So, the downtrend has lost some momentum, but there's no real signal to buy just yet. Well, that's my interpretation at the moment, but I'm keeping my eye on it for developments that might suggest rather more bullishness may be in store.

17:49 BST - SPX Update: 1 min chart

The count for the start of wave (5) down that I posted earlier is looking a bit unlikely at the moment without any impulsive follow through down. However, wave [5] may still be underway with this count:

SPX 1 min close up:

It shows a leading diagonal wave (1) and the rally from today's low is wave (2). The high at 1086.72 remains the invalidation point for this count.

You'll see on the chart a possible alternative where the leading diagonal is, in fact, an ending diagonal wave C within wave (B) of an on-going wave [4] correction. If that's correct, maybe we will get nearer to the 23.6% or 38.2% retracement levels at 1088 and 1095-ish.

At the moment, it doesn't look like the alternative that we had a wave [5] and i bottom yesterday (see note on the first chart in the post to which I linked above) is playing out since we haven't seen any action consistent with a 2nd wave retracement - yet. But there's still time, of course, so I wouldn't rule it out.

15:49 BST - SPX Update - 5 min ptichforks

Here's some more pitchfork action. If this stuff doesn't interest you, don't worry - just click the link at the top of this blog that says "Next blog". I have no idea where it'll take you, but I hope you'll be very happy!

Price is trying to stay within the new upward green fork, but is getting resistance from the upper lines of the downward pink and red forks and the lower line of the blue fork that it broke below yesterday:

SPX 5 min Pitchforks:

If we need a wave [5] down to complete this move off the 1129.24 high (see my earlier post), we're going to break down again below that green fork and probably head towards the median line of the pink one. If its a wave [5], we may not get all the way there, which would be a potential sign of an end of wave [5] and i and the start of a wave ii up - obviously a stronger sign if we see 5 waves down from today's high also.

15:25 BST - SPX Update: 1 min charts

Its possible we just saw a high for wave (2) of [5] if the main count labelled is correct:

SPX 1 min from 1129.24:

Here's a close up:

SPX 1 min close up:

The high at 1086.72 has to hold. If it doesn't, we may be in the (W)-(X)-(Y) suggested or the more bullish alternative of a wave [5] and i low yesterday (or something even more bullish).

13:20 BST - Dollar update

I'm not sure if this count is right, but it behaved like a 4th wave would be expected to behave, so I'll stick with it for the moment:

Dollar 20 min:

If its correct, we should be starting wave v up. Of course, its possible that the 3 wave move labelled iv is only part of an expanded flat correction being formed, in which case we might come right back down again. Wave iv only retraced 23.6% of wave ii, so this can't be ruled out.

Its also possible that the high labelled iii is actually wave i or wave (i), in which case, we probably would see an expanded flat for wave ii or (ii), with the [C] or c wave likely to take out the low that I've labelled iv on the above chart.

We've just ticked above the high of wave iii, with what what could be 5 a  wave move,  so if the chart is correctly labelled, in elliott wave terms, we've done enough to complete wave v, so this rally may be short-lived.  

However, if we're going to get a decent sized wave v, we might expect at least a .618 extension of wave i, which would take it to about 83.076., but if the rally from the low labelled iv is only wave  [1] of 5, we're probably headed higher than that, maybe to where [5] would equal [1] at about 83.630.

For the moment, I have my eye on that wave iv low at 82.182. Taking it out might suggest more downside before we can head higher.

11:31 BST - ES Update: A confluence of resistance

Here's something you might find interesting (or not!). Some interaction between pitchforks, conventional technical analysis of lines of resistance and moving averages and the ichimoku cloud resistance on a 60 min chart of the emini S&P futures:

ES 60 min:

The red downard fork has been on the chart since 10 August. It was only speculative because the lower line isn't drawn off a pivot, I just drew it so that the median line cut through the price action that preceded the pivot which formed the start of the upperline of the fork.

It wasn't perfect in containing price, but it did a reasonable job. The median line did provide resistance yesterday for a while, and when price broke above it, it came back briefly to test that median line.

As we would expect when price gets above the median line of a fork, it went up to the upper line and broke through it this morning.

You can see that an upward green fork was drawn from pivots that occurred yesterday and price seemed to be following the median line of thaat fork up.

However, it hit an area which represents a confluence of resistance as identified by various groups of traders - those using pitchforks, (price was re-testing the median line of the green fork having backed off it earlier) those using ichimoku clouds (price was hitting the underside of the cloud) and those using conventional technical analysis of resistance lines (see the blue horizontal line) and moving averages (price came to the 50ma).

With price hitting an area of resistance being looked at by all those groups of traders, you can see the reaction that just occurred.

I've now drawn in another fork (purple) using the pivot high we hit today. If this down move is to continue, we should see price move down to the median line and, possibly below (like it did in the red fork). Let's see.

21:22 BST - SPX 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, which will put the charts below into context.

The 10 min charts below show various ways to count the rally from the 1010.91 low on 1 July in the context of the larger picture shown on those 60 min charts.

On the charts of Options 1 and 2, I'm showing a single zig zag. On the chart of Option 3, there is a triple zig zag,  on the chart of Option 4 there's a double zig zag and on the chart of Option 5, there is a single zig zag with an ending diagonal for wave (c).

Here are the 10 min charts of each Option:

Options 1 and 2 - from 1010.91, a double zig zag:

The chart relates to the count for Option 2, but the count for Option 1 is pretty much the same into the high, just one degree lower, namely, a single zig zag which is complete at 1129.24. 

Option 3 - from 1010.91, a triple zig zag:

On this Option, I've shown the rally from the July low as a triple zig zag, also complete at the 1129.24 high.

Option 4 - from 1010.91, a double zig zag:

A double zig zag count also complete at the 1129.24 high, is shown on the chart of this Option.

Option 5 - from 1010.91, a single zig zag with an ending diagonal for wave (c):

On the chart of this Option I've shown a single zig zag count, with an ending diagonal wave (c).

On all of the above bearish (Options 4 and 5 are only  near term bearish) counts, we can count a corrective wave high at 1129.24. If that's correct, it doesn't really matter whether its a single, double or triple zig zag. The important thing now is what has happened since the high at 1129.24.

Here is the 1 min chart of the decline from 1129.24. This count applies to all of the Options shown above, although the labels, including the degrees of those labels, relate to Option 2:

SPX 1 min:

As anticipated in last night's update, we did take out the 1088.01 low, so that precludes a further extension of the zig zags shown on the charts of Options 1, 2, 3 and 4 (it was precluded on Option 5 when we dropped below 1107.17 yesterday), at least on the labelling shown on those charts.

You can see from the 1 min chart that the decline from 1129.24 does look like its forming an impulse wave. On the main count I have on the 1 min chart, we haven't quite completed 5 waves down from that high, though I've noted on the chart the possibility that we may have. The main count has us in wave [4] of i down.

If the main count is correct, a 38.2% retracement would take us to about the 1095 area. Its possible that its complete today. It would be a shallow retracement, falling short of even the 23.6% level at 1088.60, but that would still be acceptable for a 4th wave. If there is more upside to come, then wave [4] would have to stay below the wave [1] low of 1111.58.

If we take that out, then, for the bearish case, we would have to switch to the alternate count mentioned on the chart, that today's low was wave [5] and wave i, so we would now be retracing back up in a wave ii. For the bearish count to then remain valid, wave ii must not, of course, exceed the high of 1129.24.

If we were to exceed that high, then, obviously, something potentially more bullish is playing out. One possibility would be the bullish alternates I have been posting under 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.

I have two possible ways to count this bullish alternate:

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

This count has altered since last night with the break of the low at 1088.01. It was a [i]-[ii]-(i)-(ii)-i-ii. Now its just a [i]-[ii]-(i)-(ii), with wave (ii) being an expanded flat. It may not be pretty, but it looks valid. It won't be eliminated until we drop below 1056.88.

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. However, you'll see from the Zig Zag page referred to above and from the Impulse from March 2009 page, that even taking out that low does not mean that we are headed down in the out and out bearish counts (you can see the longer term perspective for these and the extremely bullish count on the Long Term Dow Counts page). Those counts can accommodate a decline to well below that level (especially in the case of the impulse count from March 2009) and yet still lead to higher all time highs in the not too distant future.

So, with bullish counts still on the table, looking at where we are now, the warning signs for a potential problem for the bearish case will be if we take out 1111.58 in this assumed wave [4] that I have shown as the main labelling on the 1 min chart above. 

Doing that will potentially leave only a 3 wave decline from 1129.24.

It could still be that we are in a very bearish count, if today's low was only wave (1) of [3] - a possibility I showed might be playing out in last night's update. That would be invalidated if we take out the high at 1127.16 and would be the second warning of something amiss with the bearish count.

The final warning would come if we take out 1129.24 since that would preclude the alternate count shown on the 1 min chart above, that we had completed a 5 wave impulse down from 1129.24.

So, those are the levels to watch for signs that thie bearish count shown on the 1 min chart above is wrong and that we may be seeing something more bullish occuring.

To the downside,  the level we need to take out to provide further encouragement for the bear case is 1010.91, although, for the reasons mentioned above, it still won't be conclusive.

19:00 BST - SPX Update - 60 min chart

Here's an update of the 60 min chart (last posted here):

SPX 60 min:

I could be wrong, but it seems to be suggesting the risk  for more downside - see the notes on the chart. Maybe we get nearer to the lower line of the orange fork before a more significant rally. Of course, the picture is always changing, so its worth keeping an eye on these 60 min indicators in case they start turning around.

17:03 BST - SPX Update - 1 min chart

Its starting to look like we may have had a wave [3] (or [5]) low today. The retracement up from that low looks too big to be a wave iv of 3 or a wave 4 of (5) (see my earlier post), though of course, they break no rules so the count shown earlier could still be correct. However, here's an alternate to consider:

SPX 1 min:

Making wave (4) a triangle ending at 1091.02, means that today's opening drop was wave (5) and wave [3], so we'd now be in wave [4] up, with, possibly, a leading diagonal for wave (A) of [4].

Its possible that today's drop was only wave 1 of (5) - taking out today's low at 1076.69 without a deeper upward retracement first would bring in that possibility.

If we're in wave [4], ideally it won't get too much above a 38.2% retracement level at about 1096 - the congestion formed by the triangle may well provide resistance to a wave [4] advance. Wave [4] can't end above the low of wave [1] at 1111.58. If we exceed that level  then we are likely in the alternate count mentioned on the chart.

If we're in the alternate count, making the low wave [5] and wave i, we'd expect a higher retracement in wave ii,  perhaps to 61.8% of the decline from 1129.24, which is at about 1109.

If we've formed a wave [3] or [5] bottom today, we should get a decent retracement before we take out today's low. If we don't and we just drop again,  the count shown in the earlier post or the possibility of an extending wave (5) mentioned above will arise.

16:09 BST - SPX UPdate - 5 min pitchorks

Some interesting fork action going on on the 5 minute chart:

SPX 5 min pitchforks:

You can see price broke down out of the green fork on Tuesday's gap down and the rally later on Tuesday was a back test of the broken lower line of that fork. It also created a high from which the downward blue and red forks could be drawn.

Yesterday's decline took price quickly down to the lowerline of the blue fork and it pretty much chopped around there for most of the day, which was bearish.

This morning's gap was a bearish break of the blue fork and took price to the median line of the steeper red fork. Its bounced from there but, so far, it looks like a backtest of the broken blue fork.

If things are really bearish we should fail here and drop back to the median line of the steeper red fork and then below that too.

Obviously, in elliott wave terms, if we completed three or five waves down from 1129.24, we might expect more of a bounce back up. In that case, I'd look to the upper line of the red fork and the median line of the blue fork to provide some resistance. They're not guaranteed to hold price back, but its a place where you might be on the look out for a possible reversal back down.

14:57 BST - SPX Update: 1 min chart

If this were to play out as we would expect on this labelling, we need a  another drop to complete 3 of (5) of [3] , then a 4 and 5 to complete (5) of [3]. We'd then see a wave [4] rally before a decline in wave [5] to complete wave i down:

SPX 1 min:

Once we see a complete wave 3 of (5) down (assuming it hasn't yet completed - it doesn't look complete, but squiggles are difficult to count sometimes and/or can be misleading), the wave 4 rally must not end above the wave 1 of (5) low at 1088.62. If it does, then we'd have to assume we'd seen the end of wave [3] and would be retracing up in wave [4]. In fact, any move above that level without a new low first is going to make me think a short term bottom (on the bearish count) is in.

Note also the alternative count, that the drop today will be wave [5] and i, not wave [3]. If that's the case, the retracement would be wave ii and is likely to be deeper than if its only a wave [4] retracement.

14:20 BST Dollar Update

Here's an updated 20 min chart of the dollar zooming in on the rally from the 6 August low at 80.085 (see the last update here):

Dollar 20 min:

I'm inclined to count the rally from the low as waves i, ii and iii up. On the bullish case, this would be the very initial stages of minor wave 3.

I'm not sure that wave iii is complete, but it looks like it could be there or thereabouts. Having said that, if we're in wave [5] of iii, it could extend higher, as 5th waves seem to be prone to do sometimes in currencies.

If the count is correct, then we should be about starting wave iv. We'll know its wrong if we take out the wave i high at 81.534, so that's the level to watch for the moment on this count. Preferably, if its wave iv, I'd like to see it bottom around the 38.2% retracement level, about 81.968. Anything  too much lower might start to raise suspicions that something else is happening.

If we do drop below 81.534, its possible that the high at 82.786 is actually wave i (or wave (i)) and that we would be in a wave ii (or (ii)) downward retracement. In that case, we'd need to see the low at 80.085 hold, otherwise, the count would be invalidated as far as it puts us at the start of minor 3 up. If its a wave ii (or (ii)) retracement, the 61.8% retracement level  at about 81.115 may be an area to look at for signs of a reversal back up.

On the bearish side, its possible to count 5 waves down from the 7 June high to the 6 August low, as you can see from the alternative count I've shown on this 60 min chart:

I would count that as wave A, with the rally from there being wave B, assuming the decline from 7 June is wave (2) down, so an overall bullish count. If we're now in wave B on this alternative count, with 5 waves up, it looks like its forming a zig zag, so after a 3 wave pullback, we'd expect another 5 waves up before we get the wave C decline.

Five waves down from 7 June, however, could, of course, also be something much more bearish, which is why the low of 80.085 is extremely important to the bullish case.

12:46 BST - Equity Options Put/Call Ratio and Percent of S&P stocks above the 50ma

Here's how the daily CPCE chart looks after yesterday's decline (updated from 7 August):

CPCE Daily:

You can see that we're still stuck just below the blue dotted line. The 5ma has crossed above the 10ma, which is good for the bearish case, but we need more. We need to clear the blue dotted line and get above the red dotted midline of that upward channel (which I first sketched in on 25 June). 

At the moment, the moving averages of the CPCE remain in a similar configuration as when we saw the grind up in the markets in August/October 2009 (the green highlighted area). That's why I think its important that we get above and away from the blue dotted line. Otherwise, the risk is that price just does what it did then.

Though the CPCE chart isn't yet confirming the bearish case, the failure of the Mcclellan Oscillator when re-testing the upward red line and its failure to get above the downward blue line, plus yesterday's drop below  zero should provide encouragement for the bear case. 

And here's something else that may be supporting that case:

Percent of S&P 500 stocks above the 50ma:

I use a 13ma with this because I've found that when the line crosses above or below, its usually a decent signal to buy or sell. Of course, its not 100% reliable, nothing is. But, it has caught some major moves at a reasonably early stage, as you can see from most of the red (sell signals) and green (buy signals) lines.

Currently, the line has crossed below the 13ma (it actually crossed marginally on Tuesday, prior to yesterday's steep decline). Generally, staying short while the line has been below the 13ma has been a good trade. Obviously, at such an early stage, there is the risk of being whipsawed, but that's trading.

If we see the 13ma really get going to the downside with price staying below it,  past behaviour suggests that it ought to be reasonably  safe to look to price action, elliott wave counts or whatever technical analysis you use, to enter or add to shorts. Worth keeping an eye on.

11:50 BST - SPX Daily Chart Update

Yesterday I posted a 60 min chart of SPX which showed that the bearish signs that had been appearing on it since around the end of July (click here to see how it looked at the end of July) based on standard technical analysis had finally manifested themselves in price action.

Here's the daily version of that chart:

SPX Daily pitchforks:

You can find the last posting of this chart on 7 August by clicking here. I've left most of the comments on the chart as they were at the time I last posted it since they set out the issues that there seemed to be against the bullish case and which may now be playing out in price action with yesterday's decline.

Since I last posted it, those bearish signs have got worse, so the bearish case seems to be asserting itslef against the bulish signs that were mentioned in my 7 August post:

1) the CCI has made a definite turn down from the zero line (the failure to get above it despite the undoubted extent of the rally in July seems very bearish);

2) price, which had resumed its crawl up the lower line of the blue fork and appeared to be trying to make it to the midline of the upward dark green fork, has now completely backed off both. The failure of price to get to the midline of the dark green fork during the last push up which resulted in the choppy sideways action we saw earlier this month was a sign of weakness (I mentioned this in the 7 August post). Price is now coming down to the lower line of the dark green fork and the midline of the downward red fork. If we're going to get follow through to the bearish case, those will be broken to the downside. Otherwise, we could be in for more choppy action;

3) the MACD histogram, which had been diverging bearishly against price  for some time, went negative yesterday signifying a bearish cross in the MACD itself. The similarity between the behaviour of these two indicators now and what they did prior to the April top remains: the histogram diverging against price while the MACD itself rose, suggesting underlying weakness despite the rising MACD line;

4) the RSI, having continued to fail to get to the bullish level of 66.67, has now fallen back below 50, possibly confirming that the July rally was countertrend. Really though, we want to see the RSI get to the bearish level of 33.33 and stay down there if the bearish case is to play out;

5) the stochastic has a triple top in place.

Despite yesterday's large decline, the indicators suggest there is alot more room to the downside - this may well be confirmation that its the bearish counts that we should see play out over the next few weeks. 

However,  remember that bullish counts remain on the table. The main one I have isn't invalidated until we drop below 1010.91 - see last night's update for more detail and the links to which it refers.  So really, for the bearish case, we're going to want to see price take out that level before the indicators start to show bottoming signs or even bullish signs ( I should also mention that the bear case is not sealed even if we drop below 1010.91 - you can see from the chart on the "Impulse from March 2009" page and the alternative counts on the charts on the "Zig zag from March 2009" page that those ultimately bullish counts are not eliminated by taking out that level).

Of course, it may be too much to expect a straight line drop even if the bearish case is playing out. As mentioned in my post of the 60 min version of this chart yesterday, there are signs that we should at least be prepared to see a bounce of some sort. The current elliott wave counts would tend to support this as you can see from last night's update, though its feasible that we decline more before a proper retracement. As mentioned in one of my 1 min chart updates yesterday, if yesterday's drop is wave [3], it would be a 2.618 extension of wave [1] at about 1081. At the moment that wave is somewhere between the 1.618 and 2.618 extension levels. It would be nice and neat of we could get to the latter. 

When we do get a bounce, we'll need to monitor it to see if we can get an early warning that it might be something more bullish than a normal retracement in a downtrend. I identified some levels to watch in last night's update which might help on this, assuming the count shown is correct.

So, we had a nice decline yesterday which has given some credence to the bearish case. However, with bullish possibilities still very much alive, this is no time for complacency on the bearish side (not that there is ever a time for complacency in the market). Trading is a process of continually monitoring and adjusting as price action develops and not taking anything for granted.