20:12 GMT - SPX End of Day Update

The high at 1196.14 remained intact again today so we still have the possibility that we've seen a top to the rally from the August low at that high. However, the bullish count still allows for the possibility of a further high  in order to complete that rally.

The charts below show a close up of recent action. For the bigger picture please see the 60 min counts page where the bearish count is shown on the charts of Options 1 and 2 and the bullish count is shown on the chart of Option 3.

Bearish count:

Chart 1: SPX 1 min - bearish count:

The invalidation point for this count is 1196.14.  

If we did top at that high, we must take out the low at 1171.70. As explained previously, taking out that low doesn't guarantee that we've topped, since the bullish count can accommodate a drop below that low. However, it would mean that the bearish count would deserve equal consideration, whereas while we're above that low, I continue to consider further new highs for the rally from the August low likely. 

Turning to the bullish count, as mentioned, its possible that today's high marked a top for that count too, as shown as the alternative on Chart 2 below, though its possible that today's rally was only part of wave (v) on that alternate count.

However, the main count has that high as wave (iii), so we still require a pullback in wave (iv) and then a further rally for wave (v).

As mentioned in my earlier post, I prefer the alternate count out of these two, even if today's high does not mark the end of wave (v) on that alternate count.

Bullish count:

Chart 2: SPX 1 min - bullish count:

So, on the main labelling, if wave (iii) ended at today's high, we need a pullback in wave (iv) preferably to around 1159 (23.6% retracement) or 1136 (38.2% retracement).

On the alternate labelling, if we topped in wave (v) today, we should now see a good retracement of the rally from the August low for wave [ii] of C. A 50% retracement would be about 1118 and a 61.8% retracement would be about 1100.

So, on the counts as I've labelled them, the levels I'm watching are 1196.14 (above this level the bearish count is invalidated) and 1171.70 (below which we must drop if we've seen a top at 1196.14, though it doesn't rule out the main bullish count shown on Chart 2 above).

18:50 GMT - SPX Update on the bullish and bearish counts

Because 1196.14 still hasn't been taken out, the immediately bearish count still stands - for the moment. I've just jiggled it about a bit:

SPX 1 min - bearish count:

I've also jiggled the bullish count about abit:

SPX 1 min - bullish count:

At the moment, I actually favour the alternate on this chart, which would also be bearish now if we've completed wave (v) at today's high as the alternate labels suggest. Even if we haven't, its still less bullish than the main count.

Here's the alternate on a 60 min chart (the main count is shown on the chart of Option 3 on the 60 min counts page):

SPX 60 min - alternate bullish count:

14:25 GMT - SPX Update on the bearish count

This is what I've got left for an immediatley bearish count where the top was put in at 1196.14:

SPX 1 min - Bearish count:

Its not great, but its valid. Wave ii may or may not be done, but if there's more to come, it has to stay below 1196.14.

20:15 GMT - SPX End of Day Update

With the high at 1196.14 remaining intact, the possibility that we've seen a top to the rally from the August low at that high  is still on the table. However, the bullish count still allows for the possibility of a further high  in order to complete that rally.

The charts below show a close up of recent action. For the bigger picture please see the 60 min counts page where the bearish count is shown on the charts of Options 1 and 2 and the bullish count is shown on the chart of Option 3.

Bearish count:

Chart 1: SPX 1 min - bearish count: 

The main count shown in Friday's end of day update was invalidated today, leaving the i-ii count that I had shown as an alternate. The invalidation point for this count is 1196.14, but realistically, I don't want to see the high at 1195.81 get taken out at this stage.  

For this count to have any prospect, we must take out the low at 1171.70. However, as explained in the intra day updates, taking out that low doesn't guarantee that we've topped, since the bullish count can accommodate a drop below that low.

As you can see, I've labelled the decline from today's high as the early stages of wave iii down. I think it now makes sense that the initial decline to 1186.41 was the first complete 5 waves down, rather than as I had labelled it in my last post. This is simply because the decline after that low is now probably more like a 3rd wave than the 5th wave that I was expecting when looked at in the context of the move down from the 1195.81 high. 

If the labelling I've shown is correct, I'll want to see the retracement for wave (4) stay below the low of wave (1) at 1186.42. If we break above that low on this assumed wave (4) retracement, then the labelling will need to be reviewed.  One possibility will be that we're in a (1)-(2)-1-2 down from the 1195.81 high, as shown as an alternate in the chart above, in which case, we have to stay below the high labelled (2) at 1189.11.

Taking out that high would certainly increase the odds of more upside in the bullish count.

Here's the close up chart I posted earlier, updated with the latest labelling - the bear count is the main labelling:

Chart 2: SPX 1 min close up from the 1195.81 high:

Turning to the bullish count, as mentioned, its possible that today's high marked a top for that count too, as shown as the alternative on Chart 3 below. In that case, the bear count for the decline from today's high shown on Chart 2 above would apply.

However, it remains possible that we are still only in wave (iv) of the rally from the August low on the bullish count. This is the main labelling on Chart 3 below.

Bullish count:

Chart 3: SPX 1 min - bullish count:

So, on the main labelling, I've assumed that today's early push out of the triangle was wave v of (iii) and that we're now in wave (iv). If this is right, potential retracement levels for wave (iv) would be 1159 (23.6%) and 1136 (38.2%). Theoretically, this wave (iv) could go all the way down to just above the wave (i) high at 1065.21 without invalidating the count. In reality, I'd consider the count unlikely, even though it wouldn't be invalidated, long before that.

If we take out the high at 1195.81 now, I'd have to start thinking that wave (iv) may already have bottomed.

The alternate labelling on Chart 2 above shows how I'm seeing wave (iv) at the moment.

So, on the counts as I've labelled them, the levels I'm watching are 1195.81 (above this level I'd consider that the balance shifts in favour of the bullish count, though the bear count won't actually be invalidated unless we take out 1196.14), 1186.42 (above that rules out the main bear labelling of the decline from 1195.81 shown on Chart 1 above),  1189.11 (above that rules out the alternate bear labelling shown on Chart 1 above) and 1171.70 (below which we must drop if we've seen a top at 1196.14, though it doesn't rule out the bullish count).

16:49 GMT - SPX Update on the bullish and bearish count - possible count from today's high

If we have topped on the bearish count as suggested in the first chart in my last post, I'd be looking to label the decline from today's high something along the lines shown as the main labelling on the following chart:

SPX 1 min close up from today's high:

As you can see, it looks to me like we need another leg down to complete a larger 5 waves down from the high. It may be that 5 waves down completed where I have wave 3 labelled, by making wave 2 an expanded flat ending where I have the wave ii of 3 label currently. However, the rally from the wave 3 low is about a 38.2% retracement of wave 3, so presently consistent with a 4th wave so I'll stick with that count for the moment, but its worth keeping the other possibility in mind.

The alternate labelling shown relates to the bullish count and assumes that today's high was wave (iii) of [i] of C and we're now in wave (iv). Here's the larger picture chart of the bullish count:

SPX 1 min - bullish count:

If the alternate labelling on this chart applies, and we've in fact topped on this count, then the count in the first chart above for an impulse down in formation would apply here too.

On the bearish count, we need to stay below 1195.81 now and we have to take out the low at 1171.80 in a clear impulsive fashion. Until we do that, further upside remains on the table.

Bear in mind that taking out 1171.70 isn't a guarantee that the bearish count is playing out or that the bullish count topped as per the alternate labels. Wave (iv) on the main labelling on the bullish count can take out that low without invalidating the count, so we'll just have to watch the character of any further decline and retracements to try to judge whether the bullish or bearish counts are playing out. 

However, as long as we're above 1171.70, I'd consider that further upside is likely.

14:48 GMT - SPX Update on the bullish and bearish counts

The bearish count has been pushed pretty much to its limit so now has to keep dropping. If we don't, chances are this will be invalidated and the bullish counts will take over:

SPX 1 min - bear count:

On the bullish count, the triangle looks best as complete rather than on-going, as shown in the chart below:

SPX 1 min - bullish count:

So, on this count, we're in wave v of (iii) or wave (v) up. We now need to stay above the wave [E] low at 1182.20 or there will likely be something wrong with this count.

13:59 GMT - SPX Update

The main bearish count shown in Friday's end of day update was invalidate so the alternate comes into play, with the invalidation point at 1196.14:

SPX 1 min bear count:

On the bullish count, we may be completing wave [D] of the trinagle wave iv (or (iv)). If we exceed 1196.14, its likely we completed the triangle at the low labelled wave (B) of [D] (or possibly at the low of 1177.10 and have started the next leg up:

SPX 1 min bullish count:

12:12 BST - Dollar Update

Since my last post on the dollar - see here - its moved more consistently with the more obvious count I felt might be playing out at that time, requiring a further low to complete wave C of (2) on the overall bullish count.

Here's the daily picture:

Dollar Daily:

You can see that in the last post the technicals suggested some upside to come, but with the main wave count I had, it seemed likely that this upside would be in the context of what I would label as wave (iv) of [v] of C of (2).

Looking at the updated daily chart above, we got the move up in the indicators and some upward movement in price. Price moved above the yellow highlighted area of congestion which is the area shown on the daily chart from the last post. This was bullish. However, it then moved right back down again - bearish. It then moved back above it - bullish. By yesterday, it had moved back below it - bearish. 

This oscillating action would be more obviously consistent with a correction so I think that has to continue to be my main count for this overall bullish count for the moment. This means that we should see a new low below 76.144 at some point soon.

The indicators currently seem to confirm the possibility of a further decline. As I've noted on the daily chart, the RSI failed to make it above 50, the MACD histogram has been printing lower high bars, the MACD suggests it could be about to roll over and the stochastic failed to get to overbought and is now rolling over.

Here's the 80 min chart showing how I'm labelling wave C from the wave B high at 83.522:

Dollar 80 min:

Of course, we may still be in wave (iv) which could be forming as a triangle, with the decline into Friday's close being the d wave, so there could be another move up to come before wave (v) gets going.

I think if we take out the high at 78.273 at this stage, I might start thinking that 76.144 marked the end of wave C and (2) on this overall bullish count, as shown by the alternate labelling on the 80 min chart. Certainly, if we do that without taking out the low at 76.709, it might well become a distinct possibility. Here's how I would count the move up from 76.144 as the start of wave (3) up if that low marked the end of wave (2) down:

Dollar 10 min chart:

You can see from this chart why I've said above that if we rally above 78.273 without taking out the low at 76.709, the case for a bottom at 76.144 might well be strengthened.

Even if we drop below 76.709, it may just mean that we're still in wave ii, but we'd have to stay above the 76.144 low of course, to keep this alive.

So, taking out the low at 76.709 is going to suggest that the main count, for a new low below 76.144 is on the cards. If we fail to take out the 76.709 low but instead rally up again in 5 clear waves and take out the high at 78.273 the case for a wave (2) low at 76.144 would gain strengh, but it wouldn't be conclusive - we'd have to see whatever low we rally from above 76.709 hold on the next pullback.

21:10 BST - SPX End of Day Update

Once again we're left waiting to see whether the bullish or the bearish count is playing out, that is, whether we've seen a top to the rally from the August low or whether there's still more upside to come.

The charts below show a close up of recent action. For the bigger picture please see the 60 min counts page where the bearish count is shown on the charts of Options 1 and 2 and the bullish count is shown on the chart of Option 3. This is how I'm labelling them at the moment:

Bearish count:

SPX 1 min - bearish count:

This [1]-[2]-(1)-(2)-1-2 is what I'm sticking with for now. Wave 2 has a complex look about it, but essentially, I've labelled it as a  zig zag for wave w and a triangle for wave y with  and expanded flat type correction for wave x dividing them. On this basis it would likely be complete today. 

However, it may be that wave x should be at the 1179.70 low and wave y is a second zig zag with possibly more upside to come.

If there is more upside to come in wave 2, the invalidation point for this labelling remains 1189.53 on the main labelling so that shouldn't be exceeded.

If we take out the 1189.53 high that invalidates the main count. It would still leave the possibility of a [1]-[2]-(1)-(2) intact, but that would be invalidated above 1191.44. This wouldn't be my favoured alternate count.

If we do take out 1189.53, my favoured alternate count is the one I've referred to in previous days, but which I've now shown as the alternate count on this chart for ease of reference. For this alternate count, the high of 1196.14 would be the invalidation point.

Bullish count:

SPX 1 min - bullish count:

 

On this count, I've continued to label it as I did yesterday,  as if we're in wave [E] of the triangle, but as mentioned then, we could still be in wave [D], in which case, I'd expect the high at 1189.53 to be taken out before we drop again in wave [E].

On this count, the high at 1196.14 shouldn't be exceeded until we complete wave [E] and wave [E] must stay above the low of wave [C] - that's at 1171.70 on this labelling.

If the 1171.70 low is taken out, I'd have to consider it likely that we'll see more downside in wave iv, possibly down to the 38.2% retracement level at about 1152.

So, with today's sideways action, nothing has really changed since yesterday.

On the counts as I've labelled them, the levels I'm watching are 1189.53 and 1196.14 on the bear count (above these levels I'd consider the risk of more upside to be high) and 1171.70 on the bullish count (below which I'd think the risk of more downside increases).

Have a great weekend!

15:32 - SPX Update on the bullish and bearish counts

Markets still poised to go either way:

Bear count:

SPX 1 min - bearish count:

Staying below 1189.53 is crucial on this labelling, but with the other bear count mentioned in previous updates, 1196.14 remains the ultimate invalidation point for the bear count.

SPX 1 min - bullish count:

If we take out 1189.53, that could be wave [D] of the triangle so its not necessarily bullish because we'd then expect a drop in wave [E].

If we drop from here without taking out 1189.53, I'd assume its wave [E] but we have to stay above 1171.70 for that to remain valid.

11:11 BST - Dax Update

The triangle I saw in the Dax last time I posted (see here) wasn't complete, contrary to what I had previously labelled. It appears that it extended further, assuming that it is a triangle, as shown on the daily chart below:

Dax Daily:

As you can see, the possibility of more upside was what  transpired following the completion of this larger triangle. Out of that triangle we now have what looks like 5 waves up. Here it is on a close up of the daily chart from the April 2010 high:

Dax Daily chart close up from April high:

I've tentatively labelled the 5 waves out of the triangle as wave C of (Y) of [2] on the bear count. Its a 0.618 extension of wave A of (Y) and also, wave (Y) is 0.618 x wave (W). 

On the bullish count, however, this 5 waves out of the triangle could just be the end of minor A of wave (Z) up.

Here's a closer look on a 15 min chart showing the recent high and the bear count labelling:

Dax 15 min:

I've labelled an expanding leading diagonal down from the high. Its supposedly a rare pattern, but that's what it looks like to me. Also, the retracement of it, which I've labelled as wave [ii]  pretty much reached exactly the 78.6% level.

However, with markets having been so bullish of late, the benefit of the doubt has to be given to the upside. The diagonal I've labelled could just as easily be a triple zig zag correction prior to another advance (on either the bearish or the bullish count) or could be wave [a] of minor B within wave (Z) on the bullish count.

If we've seen a top on the bearish count, then I want to see this next decline move down impulsively to well below the low of wave [i] down at 6553.25. I'd then want to see the retracement that follows stay below that low so it can be counted as wave [iv], and then a further impulse down to complete wave [v]. 

That sort of decline would increase confidence in the bear count. However, until we take out the low at 6115.87, any decline could just be wave B within wave (Z) up on the bullish count. That assumes that on the bullish count I have wave (X) in the right place at that low.

So, its possible that we've seen a top on the bear count.  I think at this stage that we need to stay below the high labelled wave [ii] at 6644.61 and take out the low at 6553.25.  That would be a start on the bear count. However, I think that as long as we're above 6115.87, on my labelling, the possibility of further upside can't be ignored.

21:12 BST - SPX End of Day Update

The action today leaves open the question of whether the bullish or the bearish count is playing out, that is, whether we've seen a top to the rally from the August low or whether there's still more upside to come.

Here's how the counts look to me (the bigger picture is on the 60 min counts page where the bearish count is shown on the charts of Options 1 and 2 and the bullish count is shown on the chart of Option 3):

Bearish count:

SPX 1 min - bearish count:

This [1]-[2]-(1)-(2)-1-2 is what I'm going with for the moment. Wave 2 must stay below 1189.53. I've labelled it as complete at 1185.30 which is just over a 61.8% retracement.

However, we now need to see an impulsive move down for some sort of confirmation of this labelling.

If we take out the 1189.53 high that invalidates the count. It would still leave the [1]-[2]-(1)-(2) intact, but that would be invalidated above 1191.44. 

I'd then be left with the count for 5 waves down from 1196.14 that I showed on Chart 2 in yesterday's end of day update. For that count, the high of 1196.14 would be the invalidation point.

Bullish count:

SPX 1 min - bullish count:

On this count, I've labelled it as if we're in wave [E] of the triangle, but as mentioned earlier, we could still be in wave [D], in which case, expect the high at 1189.53 to be taken out.

On this count, the high at 1196.14 shouldn't be exceeded until we complete wave [E] and wave [E] mustn't drop below the low of wave [C] - that's at 1171.70 on this labelling. So, those are the levels to watch on this triangle count.

If the 1171.70 low is taken out, I'll be thinking its likely we'll see more downside in wave iv, possibly down to the 38.2% retracement level at about 1152.

I think at the moment we're in a quite difficult position. 

On the one hand, price action is such that it favours more upside simply because we haven't seen any truly decisive downward movement, plus of course, the trend is still up. This suggests caution is required on the short side.

On the other had, various technicals (see for example the charts I posted earlier today - click here) make a strong case for at least a pullback, suggesting caution on the long side.

The only thing to do is to indentify important levels on whatever count you're following and use them to let the market tell you which way it might be going.

On the counts as I've labelled them, the levels I'm watching now are 1189.53, 1191.44 and 1196.14 on the bear count (above any of these levels I'd consider the risk of more upside to be high) and 1171.70 on the bullish count (below which I'd think the risk of more downside increases).

18:31 BST - SPX Update on the bullish count

Here's an update in the bullish count - note that we may still be in wave [D] rather than in the middle of wave [E] of the triangle. If so, we're likely to take out the 1189.53 high in wave (Y) of [D]:

SPX 1 min - bullish count:

17:55 BST - SPX Update on the bearish count

Here's an update for the bearish count posted earlier (I've upped the degrees by one):

SPX 1 min - bearish count:

For the main count, wave 2 must stay below 1189.53. If we take that out then I'll be left with the count for 5 waves down from 1196.14 shown on Chart 2 of yesterday's end of day update.

If the alternative count is playing out, we have to stay below the wave 2 high at 1183.53 in wave ii.

15:26 BST - SPX Update on the bullish count

Here's what I'm looking at on the bullish count:

SPX 1 min - bullish count:

If the wave (1) high at 1179.52 gets taken out on this current decline, then we'll have 3 waves up from the low labelled iv, which makes the triangle option look more likely for a continuing wave iv. We'd have to stay above 1171.70 to keep that option intact, assuming that's wave [C] of the triangle with today's high being wave [D].

If we take out that low and then also take out 1171.17, I'll be thinking wave iv is forming an expanded flat with a subdividing [C] wave as mentioned in yesterday's end of day update.

14:46 BST - SPX Update on the bearish count

On the bear count, the count  shown on Chart 1 in yesterday's end of day update has been invalidated with the move above 1187.11. That leaves the count for 5 waves down from 1196.14 which I showed on Chart 2 in yesterday's end of day update, which means the bear count stands until we take out 1196.14. Or, there's this count which is invalidated above 1191.44:

SPX 1 min - bear count: expanded flat for wave 2 of (3) down:

So, 1191.44 and 1196.14 are the levels to watch to keep the bear count alive.

11:45 BST - SPX: Indicators and Internals still suggesting conditions are in place for a pullback - confirmatory price action still awaited

These charts, updated from the last time I posted them on 22 October (click here to view that post) continue to suggest that care is required on the long side:

SPX Daily:

The comments made in that last post with regard to the indicators on this chart continue to apply as price remains stuck around the median line of the pink pitchfork.

CBOE Equity Options Put/Call Ratio:

The 5ma has moved decisively above the 10ma and the latter is trying to break above the pink downward (bullish for the market) channel.

The McClellan Oscillator failed to make a new high with the market once again, simply backtesting the broken green upward channel and the zero line. It still paints a bearish picture.

SPX Percent of Stocks Above the 50ma:

The sell signal triggered on 19 October remains in force, but we now have the 13ma now appearing to roll over, which should reinforce the signal.

NYSE Tick:

The bearish divergence on this chart continued as the market shot up to the 1196.14 high, so, still indicates internal weakness.

In light of all of the above, short trades do seem to have a good risk reward, provided (and this is crucial, of course) proper stops are placed. This is because despite everything shown in the above charts, we still haven't seen any decisive downward action to confirm what these charts are suggesting. Until we see that, the trend remains up and these divergences and bearish configurations can feasibly continue and/or work themselves off as the market goes sideways or grinds higher.

21:15 BST - SPX End of Day Update

Following today's action, I'm left with two counts, one bullish and one bearish. The bearish one assumes that the rally from the august low topped at 1196.14 while the bullish count anticipates more upside before we see a top. You can see where these shorter term charts fit into the bigger picture on the 60 min counts page.

Here's the bearish count:

Chart 1: SPX 1 min - bearish count:

This shows a (1)-(2)-1-2-i-ii down from the 1196.14 high. For this count, as labelled, to remain valid, we need to stay below the high at 1187.11 on this current rally which I have as wave ii of 3 of (3). Its retraced nearly 78.6% of wave i now, so really needs to start dropping.

While that high remains intact, I'm thinking the odds are for more downside.

Its possible that we have 5 waves down from the 1196.14 high as you can see from the labelling on Chart 2 below, in which case, only taking out the 1196.14 high will invalidate the bearish count. However, I think that a move above 1187.11 will make me very cautious about the bearish count.

Here's the bullish count:

Chart 2: SPX 1 min - bullish count:

As mentioned in my last update, wave iv may be complete at today's low as labelled, or wave [C] may be subdividing as shown on Chart 1 above, to achieve a deeper retracement than we've seen so far (23.6%). The 38.2% retracement level is at about 1152, so that needs to be borne in mind.

Again, I think that the 1187.11 level is the level to watch here. If it remains intact, the chances are we'll see more downside. Taking out that level doesn't necessairly mean that wave iv is over, however, since the triangle possibility (see the blue dotted lines) remains and we'd now be in wave [D] of such a triangle. However, 1171.70 would mark the lower limit for wave [E] if a triangle is playing out here.

So, its nice and simple today - I'm watching 1187.11. Above that level, I'll be seriously questioning the bearish count even though it won't be invalidated unless we take out 1196.14. While we remain below 1187.11, I'll favour more downside.

 

19:19 BST - SPX Update on the bullish and bearish counts

Here's what I'm looking at on the bullish and bearish counts at the moment:

SPX 1 min - bearish count:

We have to stay below 1187.11 for this count to remain valid. 

SPX 1 min - bullish count:

Its possible that wave iv has bottomed - I've relabelled it to an [A]-[B]-[C]. However, we could be in a subdividing wave [C] down if I apply the count shown on the bearish chart  for the decline from 1196.14, so again, I'm watching the 1187.11 level. If we don't take that out, we should see more downside either on this bullish count or on the bearish count.

 

16:16 BST - SPX Update on the bullish and bearish counts

The ending diagonal shown in Chart 2 of yesterday's end of day update has now been invalidated with price reaching the dotted blue line shown in that chart.

That leaves the completed ending diagonal shown in Chart 1 of that update and the new bullish count I posted earlier today (see here). Here are the close up charts updated with the action so far today.

SPX 1 min - bearish count:

On this count, today's decline would be wave i of 3 of (3) down. Its not clear whether its complete yet. If things are really bearish and we just keep falling, it may start to look like the decline is wave (3) itself. However, one step at a time - I'll just see how things go.

SPX 1 min - bullish count:

The possibility of a triangle for wave iv will be invalidated below 1171.17. In that event, I'd be looking at wave iv as an expanded flat type of correction. I'm not sure its complete yet. the 38.2% retracement of wave iii is at about 1152, so there could be more downside to come in this wave iv. However, we're now at the 23.6% retracement, so its an area to watch for a potential reversal.