16:11 BST - SPX Update: Weekly, daily and 60 min charts

Looking at the weekly chart (the last post of this is here), not a great deal changed with last week's action. I think it still looks more encouraging for the bear case than for the bullish case:

SPX weekly:

I won't go into any detail here since its all set out in the notes on the chart. The only thing to add is that the moving averages are getting into almost complete bearish alignment - at the moment, the 20ma is still just above the 50ma (and I do mean "just") and they're all pointing down. In addition, the 13ma halted the rallies we saw this week (price having spiked above it last week but closed below). That seems like bearish action.

However, despite this bearish alignment of the moving averages being almost complete and the indicators behaving in a manner which is consistent with a bearish outlook, we still haven't seen real confirmation in price action. That's what I'm waiting for to gain more confidence in the bearish case because, until we see price action confirm, there's always the risk of price moving suddenly in the opposite direction suggested and turning these moving averages and indicators around.

The daily chart hasn't changed a great deal either, but the indicators are positioned to move up from current levels, suggesting that there is scope for more follow through to the rally we saw on Friday:

SPX Daily:

The notes on the chart should be self explanatory. 

Again, the moving averages are configured bearishly and should provide resistance, along with gap resistance (see the 60 min chart below) and fork resistance, suggesting that we ought to see any further rally fairly well contained. 

However, with the indicators poised to move up, we're just going to have to see how they behave on any further upward move in price.  Just because they are positioned to move up or have already started doing so doesn't mean that the bear case is over. I've noted on the chart what I would like to see if any further rally we get is only countertrend and not the start of a major move up. It would be good for the bear case to repeat  what we saw from the indicators in May after the 25 May low, although for the bear case, I don't think we'd necessarily want to see a rally of that magnitude!

SPX 60 min:

Before the open yesterday I showed the 60 and 15 min charts which looked poised to put in bullish divergences against any new price low, which would likely lead to a rally whether on the bullish or bearish case. That's indeed what we saw.

The rally on Friday certainly caused some bullish looking action in the indicators - and yet, its not quite completey bullish.

For example, it was a near 30 point rally in SPX, but the RSI is still not at the bullish level of 66.67. The CCI is still well below zero. The MACD is below zero and on the directional movement indicator, the +DI line is still below the -DI line.

Price is now at resistance represented by the 50ma, a prior gap,  and the upper line of a pink fork that I've added to the chart since I last posted it.

In theory, we should see some reaction to this in the form of a pullback, but its not out of the question that we just gap up above all of this on Monday. 

Whatever price does, I'll be keeping an eye on these indicators to see what they might tell us about the character of the move. Again, I've noted on the chart what I think we need to see in order to favour the bear case.

13:50 BST - SPX Update - Did we see an expanding ending diagonal from 1061.45 to 1039.70?

With trading elliott waves, it always pays to know what the alternatives might be so that you can work out where a particular count that you're trading at a given time might be wrong and when an alternative count might become more likely and take you in a different direction. 

So, I've been looking at the possibility that, on the bullish counts I'm following (see charts 1 to 3 in the end of day update from yesterday) the corrections down from the high at 1129.24 did end at 1039.70 (in that update I have labelled those corrections as needing one more leg down). If the corrections are over, it would mean that we have now started on the substantial rallies that those counts imply.

It all depends, in my view, on being able to count the move down from 1061.45 as the last wave in the correction. As I said yesterday, it has the look of 3 waves, not 5. However, I think it is possible to count an expanding ending diagonal for that move, which would be a 5 wave move and a valid 5th wave to end those corrections.

Here is is close up - its based on the labelling shown in chart 1 of yesterday's end of day update:

SPX 1 min  close up: expanding ending diagonal from 1061.45 to 1039.70:

It seems to fulfill the rules of an expanding diagonal - all waves can be counted as zig zags, wave [3] is longer than wave [1] and wave [5] is longer than wave [3], the lines connecting waves [2] and [4] and [1] and [3] diverge and wave [5] ended beyond the end of wave [3].

In addtion, its said that a diagonal implies a swift and deep thrust in the opposite direction. I think yesterday's move from the low qualifies on that count.

The thing that stands against an ending diagonal here is that its said that they occur where the preceding move has gone too far too fast - personally, I don't think we can say that of the down move from 1129.24. For me, its been quite laboured bearing in mind that the bearish counts put us at a point in the wave structure where we should be seeing severe and impulsive declines (I've mentioned this as a concern for the bearish counts in various intra day posts and on the 60 min counts page over the past few weeks).

However, the count is there and, I think needs to be kept under consideration given the implications it has (a strong upside move to follow).

This way of counting the move down from 1129.24 can also be applied to the bearish counts shown on charts 4 and 6 in yesterday's end of day update.

For the main count on chart 4 it would mean that wave iii of [3] ended at 1039.70 and we would now be in wave iv up. Wave iv would have to stay below 1069.49 in order not to invalidate that count, unless the wave i low should properly be placed at 1076.69, in which case, that's the level at which this labelling would be invalidated.  

On the alternate count shown on  chart 4, it would mean wave [B] of ii ended at 1039.70 and that we'd be on our way up in wave [C].

For the main count shown on chart 6, it would mean wave [1] of iii ended at 1039.70 and we would now be at an earlier stage in a wave [2] correction than the count shown currently suggests, retracing the decline from 1100.14. The diagonal shown from the low would be a leading diagonal wave (A) rather then an ending diagonal wave (C). So, we would likely see more upside once a wave (B) pullback is complete.

For the alternate count on chart 6, it would mean that wave i ended at 1039.70 and that we'd be at an earlier stage in a wave ii correction than the current labelling suggests, correcting the whole of the move down from 1129.24. 

Returning to the bullish count shown above, here's the count on a slighter wider view:

SPX 1 min - complete (a)-(b)-(c) from 1129.24:

You can see that the move up from the low yesterday has broken above the correction channel linking the top of (b) to the start of (a). If price does not fall back within this channel pretty quickly, its going to look like  this ending diagonal down to 1039.70 is valid. It won't mean that these bullish counts must be playing out because, as shown in yesterday's end of day update and as explained above, the bearish counts do also accommodate more upside of varying degrees.

Finally, here's a 60 min chart of this count for greater context:

SPX 60 min - end of correction from 1129.24 on the bullish counts:

So, the next  pullback is going to be important. If the move up from yesterday's low is a diagonal as suggested in yesterday's end of day update, it would be a 1st wave leading diagonal on these bullish counts. That means that the next pullback cannot drop below 1039.70. If it does, this labelling is invalidated. 

However, the labelling shown on charts 1 to 3 in yesterday's end of day update requires another low, so these bullish counts would not be off the table if we do take out that low, unless we also take out 1010.91. 

Assuming we do drop below 1039.70 but do not take out 1010.91, we'd then have to start monitoring how the subsequent move up behaves to try to get an early clue as to whether these bullish counts have ended their corrections or whether the bearish counts are actually coming to fruition.

 

10:13 BST - SPX : 60 min counts page updated

I've updated the 60 min counts page. Please use the tab in the menu above or click here.

21:16 BST - SPX End of Day Update

Well, we got the lower low below 1039.83, but it doesn't appear to have been a 5 wave move from the prior peak at 1061.45, which should mean that it wasn't the end of an impulse wave (whether a wave i, iii, (c) or [c]) down.

That would mean it should be counted as a (X) or (B) wave in an expanded correction.

The following charts show this in the context of the bullish and bearish counts (for the context of these charts, please see the 60 min counts page).

Bullish counts:

Chart 1:  SPX 60 min - single zig zag from 1010.91 still in progress:

This count applies to all the Options on the 60 min counts page.

You'll see on this chart why I don't think we've started the [c] wave up that should occur once the wave [b] correction shown ends. Essentially, we needed 5 waves down from 1061.45 for wave v of (c), but it appears that we only got 3 waves. 

So, this count suggests that we need one more low to complete wave [b] before we launch up in wave [c].

Chart 2: SPX 60 min - first bullish alternate under Option 4: impulse up from 1010.91:

You can see that the the point made in respect chart 1 above also applies here. So, it seems that we ought to see another wave down before we launch into a significant rally.

Chart 3: SPX 60 min - second bullish alternate under Option 4: leading diagonal from 1010.91:

The same comments apply - it looks like we need another leg down before we rally.

Bearish counts:

Chart 4: SPX 1 min - from 1129.24,  i-ii-[1]-[2]-[3]-[4] down from 1129.24:

For the reason explained in relation to the bullish counts, today's low should not be the end of wave iii down even though it went lower than 1039.83, because the move down from the prior high at 1061.45 apppears to only have been 3 waves and 5 waves were needed for wave [5] of iii.

So, it appears to be best counted on the basis of this labelling of the decline from 1129.24 as part of wave [4] of iii.

As shown on chart 4, this count is invalidated at 1070.66, (I've moved the wave [1] label to that low since the earlier posts). With wave ii where it is, that level of 1070.66 may  look better as wave [1], but it does mean that both waves [2] and [4] are expanded flats - not a rule breaker, but it is contrary to the guideline of alternation.

So, although this count remains valid until we take out 1070.66,  because of the issue with the [2] and [4] being the same type, of correction it probably means one of the  other alternatives for the bearish case is more likely to be playing out.  However, for the moment, I'll let the market decide by invalidating it (or not). 

Here's a close up of the count shown in chart 4 count:

Chart 5: SPX 1 min close up:

I've shown a complete ending diagonal for wave (C) of [4], but it could go higher. Wave 5 must, however, stay below 1068.74 to remain shorter than wave 3, assuming I have my labels in the correct place.

If we've completed wave [4] with an ending diagonal (C) wave, we need to drop hard now. A failure to do so raises questions about this count and would raise the odds that one of the alternates for the bearish case (or one of the bullish counts) is playing out.

One of those alternate bearish counts  is shown on  chart 4 above. It has us still in wave ii in the form of an expanded flat. 

Here's a chart with the other two alternate counts for the bearish case:

Chart 6: SPX 1 min - from 1129.24, i-ii-[1] or i:

Both of these counts still look good. 

On the main labelling, we're retracing the decline from 1100.14 so can't take out that high in this wave [2]. So far we've retraced about 38.2% of that decline. It could be enough for a 2nd wave at this stage of the overall bearish count which has us in a 3rd wave down at multiple degrees. However, the diagonal I've drawn in from today's low could be a leading rather than ending diagonal, so would only be the 1st wave of (C).

If we see a 5 wave decline and a 3 wave rally that stays below the high, there's a good chance that we may have topped. Another 5 waves down would have to follow this sequence, whether its an impulse down or a correction before another rally to take out today's high, so once we see another 5 down, we'd than have to stand back and see what happens on the next retracement back up. 

The alternative labelling on this chart implies alot more upside potential since it would be retracing the decline from 1129.24,  so another reason for caution if looking for short entries.

The logic set out in previous days still applies if we invalidate the main bearish count shown on chart 4 above by taking out the low at  1070.66:

1) the next count to look at would be the  i-ii-[1] which is the main count on chart 6 above That count remains valid unless we  take out the high at 1100.14;

2) if we take out that level, then we may be in the expanded flat for wave ii shown as an alternate on chart 4, or the count that has us having only completed wave i down from 1129.24 (the alternate shown on chart 6),  or one of the more bullish counts shown in charts 1 to 3.

3) if we take out 1129.14, that will eliminate those two remaining bearish counts for the move down from that high, but the first bullish count shown in chart 1 is, you'll recall, bearish once wave [c] of 2 completes. If that count is in play, we would need to see impulsive downside action once wave [c] and 2 end, otherwise, focus will have to switch to the bullish counts under Option 4 which which are shown in charts 2 and 3 above.

Have a great weekend!

19:49 BST - SPX Update: 1 min close up: ending diagonal from today's low?

The move up from today's low is starting to look like an ending diagonal:

SPX 1 min close up:

1055.80 remains the level to break to the downside in my view.

18:49 BST - SPX Update: 1 min close up

The wave (2) of [5] of iii count has now been invalidated with the move above 1061.45, so on the main bearish count, I'm looking at today's move as wave [4] of iii. As shown in the last post, this needs to stay below either 1063.91 or 1070.66, depending on where you place wave [1]. Here's the close up:

SPX 1 min close up:

Taking out the low at 1055.80 would suggest that wave (Y) is probably complete. Until then, the wave I've labelled C of (Y) could go higher.

17:31 BST - SPX Update: Nearing a top on the main bearish count?

This would be a good place for a top whether its wave (2) of [5] or, as shown below, wave [4] on the main bearish count - you can make out 5 waves up for (C), but of course, there could be more left in that 5th wave. If its wave (2) it doesn't have much room left before invalidating that count (at 1061.45):

SPX 1 min  - wave [4] expanded flat:

16:43 BST - SPX Update: One of the slighlty more bullish counts under the overall bearish one may be playing out here

I've posted a couple of possible counts for today's move based on the main bearish count  - for details of the main bearish count see the 1st and 2nd charts in yesterday's end of day update. But it may be that we see rather more possible upside if one of the alternates is playing out - see the 3rd chart in yesterday's end of day update. Here's the chart of the alternates showing an expanded flat for wave [2] and retracement levels (but it could be wave ii which could go higher as explained in that update):

SPX 1 min - Alternate counts for decline from 1129.24:

I can't say for certain of course, but it seems less likely that the bullish counts (see here) are playing out at this stage since the move down from 1061.45 to below 1039.83 needed to be 5 waves even for those counts , in order to complete wave (c) or [c] in their corrections down.  I think its very difficult to see 5 waves down from that high without wave 1 - 4 overlap. So, I think the balance of the evidence seems to be that the move down from 1061.45 is part of a correction, not the end of an impulse (whether a wave iii  or [1] or i on the bearish counts or a (c) or [c] wave on the bullish counts). Well, that's my view.

15:34 BST - SPX Update: 1 min close up

Or maybe wave (2) of [5] is forming an expanded flat. This is invalid above 1061.45:

SPX 1 min close up:

15:27 BST - SPX Update: 1 min: expanded flat for [4]?

There's a risk here that we're forming an expanded flat for wave [4] with the way we came up from the low. Something to be aware of:

SPX 1 min - wave [4] forming an expanded flat?

14:42 BST - SPX Update: 1 min close up

Could that have been the finishing touches to wave (2) of [5] of iii down? Its a tight stop if you use today's high. The count labelled would be invalidated if we take out the wave [4] high. We need to see it drop fast like a 3rd wave should if this is right, however:

SPX 1 min close up:

11:12 BST - SPX: links to the charts in the previous post below

If you're getting server errors when trying to view the 60 or 15 min charts in the post below, you can view them on my screencast page:

Click here for the 60 min chart

Click here for the 15 min chart

10:26 BST - SPX Update: The technical picture on the 60 and 15 min charts - setting up to diverge again on a new price low?

The 60 and 15 min charts are suggesting more downside to come, but also that we may see bullish divergences between price and the technical indicators on any new price low. This would be consistent with the main bearish elliott wave count which has us likely in wave [5] of iii down from the 1129.24 high (see yesterday's end of day update). So, any new low below 1039.83 today would be wave [5] of iii of and once that's complete we 'd expect to see a bounce in wave iv:

SPX 60 min:

The notes on this chart tell the story that the indicators and price seem to be conveying to us (you can see the last post on this chart here).

I really like the way that the RSI was unable to get above 50, and the CCI was unable to get above -100, despite the size of the rally from the 1039.83 low. I also like the way that the MACD came back up to test the broken green trend line from below and appears to be failing there - all occuring below the zero line. All of this seems to confirm that the rallies have been countertrend (even though they may not seem like it).

However, you can see from the notes on the chart that we could be setting up for bullish divergences in these indicators against any new low in price. That would be consistent with the main bearish count where I'm expecting a wave [5] of iii low and then a rally in wave iv. That would be in line with my reading of the behaviour of the -DI line making lower peaks, and the ADX line now moving more sideways than up while the -DI is above the +DI. That's consistent with a weakening in the downtrend.

SPX 15 min:

The 15 min chart  (you can see the last post on this here) paints a similar picture - its always good when different timeframes line up.

Again, the warning signs of a potential low of some sort are building - the directional movement indicator is probably doing this most prominently at this stage, with the lower peaks in the -DI and the ADX.

The blue pitchfork that I drew in off yesterday's high may have gained some validity with that late rally testing its upper line and failing there, but we need to see more confirmation that this may be an important fork to watch by seeing price drop to its median line (taking it out of the green fork).

Although I've said above that these charts are consistent with what is expected on the main bearish count, its important to be aware that its also all consistent with a potentially more significant low being formed on the bullish counts. You can see details of these counts on the first three charts in the end of day update from 25 August.

On those counts, any new low below 1039.83 would mark the end of the corrective moves down from the 1129.24 high so the next move up would be the start of a significant rally if any of those counts is actually playing out.

We should get a clue as to whether or not we're seeing something other than a countertrend rally following any new low today, by watching the behaviour of the technical indicators as price rallies. On countertrend rallies, the indicators should behave in the way I've described in the charts above and in the previous postings of them. Its not conclusive and different timeframes can give conflicting views, but if the indicators start to behave more bullishly, especially if we see this across timeframes, then its a warning that the bearish counts may be under threat.

Of course, if we don't get the divergences that appear to be setting up, and the indicators instead just confirm any new price lows, then things may be rather more bearish than the main count suggests.

21:13 BST - SPX End of Day Update

So far, the main bearish count has lived to fight another day. However,  that doesn't make it right since none of the other counts, of varying  degrees of bullishness, have been eliminated as yet (you'll need to read the 60 min counts page if you want to see the context of the following charts and to understand the reference to the Options mentioned on that page).

I showed the charts of the three (potentially) very bullish counts in yesterday's end of day update, so won't post them all again. Suffice it to say that the counts shown in that update still stand and will do so until 1010.91 is taken out. You can read that update by clicking here.

Turning to the bearish counts, and using the degrees applicable to Option 2, the main bearish count remains that we are in a i-ii-[1]-[2] down from 1129.24 and completed wave [3] in that sequence at 1039.83. Yesterday's move off that low and into today's high is counted as wave [4] of iii and we would now be in wave [5] of iii. Here's the view of the count from the 1129.24 high:

SPX 1 min - from 1129.24:

Here's a close up of it from the wave [2] of iii high at 1081.58:

SPX 1 min close up:

So, from today's high, we have what looks like a good start to wave [5] of iii down. But its not conclusive that this is the correct count.

Since we remain above the low of 1039.83, the moderately bullish alternative counts for this overall bearish count remain intact.

The first of those is the one you can see on the first chart above which assumes that we are still in wave ii and have not yet started wave iii. The low at 1039.83 would be wave [B] of ii in an expanded flat. Currently, the move down from 1100.14 can be counted as a zig zag for wave [B]. This would mean a substantial rally would now take place in wave [C] of ii, likely to above 1100.14.

As shown in yesterday's end of day update, there are other counts which might be playing out which would involve more upside before we start a major decline. Theses are shown on the following chart:

SPX 1 min - from 1129.24, wave i-ii-[1] or wave i down:

If the 1039.83 low was wave [1] of iii then we will now be retracing up in wave [2] but we can't exceed the high at 1100.14, otherwise, this count is invalidated.

If 1039.83  was only wave i, then we could, in theory, retrace all the way back up to 1129.24 without invalidating the count. However, as explained in prior updates, we'd probably be more likely to see a 50%-61.8% retracement (and preferably the lower end of that) given that the larger count has us in wave [iii] down.

So, having stayed below 1063.91 on the move up from 1039.83,  there's a good chance that the main bearish count could be the one that is playing out. 

However, if, before making a new low below 1039.83, we were to rally up and take out 1063.91, invalidating the main bearish count,  then the logic of elliott wave remains as set out yesterday:

1) the next count to look at would be the  i-ii-[1] which is the main count on the third chart above That would remain valid unless we  take out the high at 1100.14;

2) if we take out that level, then we may be in the expanded flat for wave ii shown as an alternate on the  first chart above, of the main bearish count, or the count that has us having only completed wave i down from 1129.24 (the alternate shown on the third chart above),  or one of the more bullish counts (see yesterday's end of day update);

3) if we take out 1129.14, that will eliminate those two remaining bearish counts for the move down from that high, but the first bullish count (see yesterday's end of day update) is, you'll recall, bearish once wave [c] of 2 completes. If that count is in play, we would need to see impulsive downside action once wave [c] and 2 end, otherwise, focus will have to switch to the bullish counts under Option 4 which were summarised in yesterday's end of day update.

It should be said that for the main bearish count, we obviously need to see 1039.83 taken out. However, taking out that level doesn't guarantee that its that count that is playing out. 

One thing I'm looking at is the lack of acceleration down in this move from 1099.77, which I'm labelling as a 3rd wave. Its not really any steeper than the 1st wave of the same degree which is the wave down to 1069.49. Also, we haven't broken the channel you can see on the first chart above - as you can see from my note on that chart, the 3rd wave should have done so.

Maybe we will see that acceleration occur in this wave [5] of iii. But if not, I think the wave behaviour starts to favour one of the other three counts shown above which don't count that section of the move down as a 3rd wave (I'm assuming that the overall bearish counts are playing out and ignoring the more bullish counts for the moment). This is just something to bear in mind. It may be sensible to just let the market rule out the main bearish count either as described above or,  if we make a new low for wave [5] of iii, on the wave iv retracement which would have to stay below 1069.49 for this count to remain valid.

19:22 BST - SPX Update: 1 min close up

This would be the way I'd count this action for the bearish case, but on the slightly more bullish case (shown here) where the decline from today's high is wave (B) in a zig zag, it would, currently, be a zig zag for wave (B). If we can make a clear 5 waves down and take out 1039.83, that would certainly increase confidence in the main bear count:

SPX 1 min close up:

As long as we stay above 1039.83, the risk of more upside remains.

16:55 BST - SPX Update: 60 min chart

There are signs of this rally failing at price and pitchfork resistance on the 60 min chart. The behaviour of the indicators so far seems largely consistent with a countertrend rally:

SPX 60 min:

16:47 BST - SPX Update: 15 min chart

There are some bearish signs appearing on the 15 min chart, but as explained on the chart, we probably need to see more to gain confidence that the next leg down may have started as per the main bearish count:

SPX 15 min:

16:23 BST - SPX Update: Watch out, this may be wave (B) on the alternate counts , with (C) up next

With the count for a top on the main bearish count, we have to be careful here because on the alternate counts for the decline from 1029.24, we've retraced 38.2% of what I have as wave (A) in a zig zag for wave [2] (or ii). Since it looks like 3 waves down from today's high, this could be wave (B). So, we could now be headed up for wave (C) if one of those slightly more bullish counts is actually correct:

SPX 1 min - alternate counts for the decline form 1129.24:

15:55 BST - SPX Update: 1 min close up: Top for wave [4] on the main bearish count - take 2

Well, the ending diagonal was invalidated, but the main count is hanging in there. So, with some re-labelling, here's a count for a top on this one - again, watch the invalidation point (1063.91) since those slightly more bullish and very bullish counts I showed in yesterday's end of day update remain on the table and this count could get invalidated very quickly. I'm concentrating on this one for the moment because its the one that has to top very soon to stay in play and its a good risk reward at these levels:

SPX 1 min close up:

The wave labelled v in the diagonal may have another up leg to go,  but taking out 1055.38 would mean it should be over. If we can take out 1055.38 (the low of wave ii in the diagonal) that would strengthen this count. While that level holds, we're at risk of more upside, so waiting for that level to break, preferably with a 5 wave move down and a 3 wave retracement, would be a safer play and even safer if we take out 1052.59 in such a 5 wave move.

14:51 BST - SPX Update: 1 min close up: possible top on main bearish count

On the main bearish count, this could count quite nicely as a top if it holds - (Y) is 1.618 x (W). If we take out today's high the ending diagonal can be re-drawn and remain valid, depening on how high it goes, if I keep the A and B of (Y) labels at 1056.40 and 1052.59, which is where I had them in yesterday's end of day update. So, its not a write-off if we do take out today's high, but the risk then is that  we go on to invalidate this count (at 1063.93) which could mean more upside, so tight stops required on any short trade here:

SPX 1 min close up: