13:19 GMT - SPX Weekly and Daily charts

As you can see from the 60 min counts page and the intra day updates, I can count the rally from the August low as complete at 1227.08 or that high can be counted as only the 3rd wave up from the August low, so after a pullback in a 4th wave, we'd see a new high above 1127.08 before the rally is complete.

Personally, I prefer the first interpretation. However, in terms of wave behaviour, as I said in yesterday's end of day update, although I can count an impulse wave complete or nearly complete at yesterday's low, that move down from 1227.08 could just as easily be counted as a double three, which favours more upside. Further, in terms of price, we haven't yet breached any levels that would weight the odds in favour of the bear case. Indeed, the price levels that would really start to favour the bear case are so far below us that unless we get a stunning collapse, it could be a while before we can really begin to think that the bearish case could be the one that's playing out.

As you can see from the 60 min counts page, there are a number of ways to interpret what an end to the rally from the August low might be.

If we've topped in wave X or B on Option 2, then we could well see a fast and furious decline very soon.

If Option 3 is playing out, then, in reality, until we take out the low at 1039.70, the three bullish (of varying degrees) interpretations of that Option will remain very much on the table, though the least bullish one would be eliminated if we were to take out 1129.24.

Still, there are reasons to think that we may be in for a decent pullback soon, if we haven't already started it.

SPX Weekly:

Looking at the weekly chart, Friday's close meant no follow through to what was a very bullish bar the previous week which closed pretty much at its high. Its rarely a good sign when a bar that closes at its high or low fails to follow through on the next bar.

As you can see, that failure occurred at the median line of the green and blue pitchforks and the week closed below both. However, the question is whether that's a terminal failure (at least near term) or whether we're just coming back down to test the 200 ma that was broken above on the prior week's bar.

Well, the weekly indicators may, in the main, be suggesting that more of a pullback could be on the cards. The CCI is still rising, but could just be double topping below the zero line. There's bearish divergence in the RSI and the MACD histogram printed a lower high bar after the prior week's bar had managed a higher high. The stochastic is also more consistent with a pullback coming than with more significant upside.

However, by the end of next week, I'd really want to see the CCI actually turn down from the zero line, the MACD also start to turn down and the stochastic break down below the 80 line, with the RSI continuing on a downward path and the MACD histogram printing another lower high bar. I'd want to see this with another negative close for the week that closes below this week's bar.

The daily chart seems to suggest that this is possible:

SPX Daily:

The green and blue forks are those shown on the weekly chart. You can see more clearly here how price has bled up along the median line of the blue fork. To me, that does make the failed break above it seem even more bearish.

The indicators would suggest that more downside should be seen into next week, with bearish divergences showing up against the April high and/or within the rally from the August low itself.

However, if we do see further declines next week, these indicators really do need to confirm, with the CCI heading down quickly to below zero, the RSI breaking below 50, the MACD descending down to, and preferably below, the zero line and the RSI breaking down below its 50 line.

I wouldn't want to see such moves in the indicators occurring while price only moves sideways. I'd consider that to be more bullish than bearish.

Essentially, what it comes down to is that the weekly bar now has to do what the prior weekly bar failed to do, namely, follow through. 

The problem is that, as you can see from the daily chart, we're right at an area of price support which coincides with the 20 ma (as well as the 200 ma on the weekly) - see the yellow highlighted area on the daily chart. It may take a gap down to break through that support and that would certainly begin to look pretty bearish. However, while we hold that support, the benefit of the doubt, logically, must be given to more upside, whatever the indicators on the weekly or daily charts might be suggesting.

 

11:50 GMT - 60 min counts page updated

I've updated the 60 min counts page commentary to clarify a couple of points with regard to the two Options shown:

First, in relation to Option 2, if the waves labelled W and X are actually A and B, we'd be looking for a 5 wave move down in wave C rather than a 3 wave move down in wave Y. I'm not sure it makes much difference to the ideal target for the end of the decline once we've topped in the rally from the August low (which we may have done at 1227.08). However, its something to be aware of if we do get a large 3 wave decline which looks like wave Y since, if its actually a C wave, there'd be more downside rather than immediate upside.

Second, in relation to Option 3, I've listed four ways to interpret this Option. I'd previously listed three, but within the first one, there were two possibilities mentioned, namely that the rally from the August low is either wave (i) of [iii] of A or wave [iii] of A. I've simply listed the second one as a seperate interpretation since its considerably less bullish than the first one.

21:13 GMT - SPX End of Day Update

A strange thing happened this week - we actually had some downside follow through. In addition, its possible to count 5 waves down from the high at 1127.08. Yes, I know its not the best 5 waves down and it also counts well as a double three. Still, with the possibility that its 5 waves down, there's a chance at least that we've put in a top for the rally from the August low.

There are various possibilities for what this top may be - the ones that I've been following are set out on the 60 min counts page. The count shown as Option 2 would be pretty bearish if we have topped. Under Option 3, there are three interpretations, as listed, with varying degrees of bearishness, but two are ultimately bullish.

Its also possible, however, whether looking at Option 2 or Option 3, that the high at 1127.08 is only the 3rd wave of the rally from the August low, so following some very near term downside (which may, in fact, be over today), we'll see another rally that will likely take out the 1127.08 high before the August rally is complete. This is shown on Chart 2 on the 60 min counts page and as the alternate count on Chart 1 below.

Here's the close up chart I've been posting showing the move from the 1227.08 high:

Chart 1: SPX 1 min - close up:

As you can see, the main bearish count has us completing wave [1] down. This could come with the next decline below 1194.08. As stated in the blue note on the chart, we may have bottomed at today's low. However, looking at the move up from there, it looks very corrective at the moment, so the odds favour that we have a further low to come.

If this is correct and we see a decline that starts to look out of proportion in the context of  wave (5) as a whole, then the possibility referred to in the green note on the chart may be in play. This would have us in a subdividing wave (5) (this is actually what I labelled in yesterday's end of day update) which would be a little more bearish than the main labelling.

The other alternative for the bear count, which would be even more bearish, is referred to in the red note. It suggests that we had a wave [1] low at 1206.04 and that the high that I've labelled as wave (4) would actually be wave [2] so we'd now be in wave [3] down. If this leg down were to get to about 1181 (a 1.618 extension if wave [1] is at 1206.04)  and the next retracement stayed well below 1206.04 and we then made a further leg down, then I'd certainly look at this more closely.

The bullish count shown by the alternate labelling assumes that the high at 1127.08 was only a 3rd wave in a 5 wave rally from the August low and that we're now in or completing the 4th wave. We'd then see a further rally above the 1127.08 high. The bigger picture for this count is on Chart 2 on the 60 min counts page.

I think if we start to break above the 1219 area on the next rally, then the chances increase that we saw a 4th wave low on this bullish alternate. That area is where I'd expect a wave [2] rally on the bear count to stop. If we see a 5-3-5 up into that area and  then stay above the high of the first 5 waves up, that may give an early warning that the bullish alternate is playing out (since in an impluse wave, the high of the first 5 waves up has to hold on the second retracement (which would be the 4th wave of the impulse) whereas if its a wave [2] correction, that high would quickly be taken out once the 5-3-5 is complete).

Here are the 10 min charts of the bear and bull counts shown in Chart 1 above, just for some context:

Chart 2: SPX 10 min - bear count:

Chart 3: SPX 10 min - bullish count:

So, this is what I'm watching:

1) if we're in wave 4 of (5) as the main bearish labelling suggests, I want us to stay below 1203. If we don't, I'll start to think that we bottomed in wave (5) and, therefore, wave [1] at today's low;

2) If we stay below that level and drop from here, I'll be on the alert for the end of wave (5) and [1];

3) if that decline starts getting out of proportion to the rest of wave (5) as labelled, I'll be thinking that the subdividing wave (5) alternative (green note) might be playing out or, that we had a wave [1] low at 1206.04 and would now be in wave [3] down (red note);

4) if this current rally or the next one makes a 5-3-5 up into the 1219 area, I'll be watching the next move down: if it stays above the high of the first 5 in that sequence, I'll consider it likely that the bullish count is playing out with a wave (iv) low made today or at the next low. So, I'd be looking for the high at 1127.08 to get taken out.

Have a great weekend!

18:37 GMT - SPX Update

I'm looking for wave 4 of (5) on the bearish count, but it may be just as well to be prepared for today's low to be wave (5) and, therefore, wave [1] down:

SPX 1 min - close up:

I think if we get much above the wave iv of 3 high at 1203.51, I'll start to think that we've seen the end of wave (5), especially since we've hit the lower channel line. If we are in wave 4 of (5), a 23.6% retracement would take us to about 1199 and a 38.2% retracement would be about 1201.

The alternate labels reflect the bullish count shown in the last post.

17:31 GMT - SPX Update

The subdividing wave (5) that I suggested in the last post does now appear to be the most likely count on the bear case:

SPX 1 min close up:

The bullish count labelled as the alternate on the above chart is getting more and more unlikely even though it won't be invalidated unless we take out 1194.53. However, I'm inclined to consider it out at this stage. Still, its not all bearish - for the bull case, I'd put us in wave (iv) as shown on this 60 mim chart of the bullish case:

SPX 60 min bullish count - Option 3:

The further we drop away from the blue channel the more likely it becomes that we completed 5 waves up from the August low at 1227.08, as shown by the alternate label at that high on the 60 min chart. You can also see more information on that count on Chart 3 on the 60 min counts page. That page also lists various ways to interpret the completion of those 5 waves under Option 3 and the levels that might be important in determining which might be playing out.

15:47 GMT - SPX Update

I'm beginning to prefer something along these lines for the bear count (see the main labelling) over the count I was following yesterday (see yesterday's end of day update):

SPX 1 min close up:

Wave (5) might be subdividng, with the waves marked 3 and 4 being waves i and ii of wave 3.

For the bullish count (the alternate labelling on the above chart) we only need 5 waves down from the high labelled B to complete wave (Y). Again, the possibly subdividing wave from the 1215.45 high mentioned above, could also apply here.

So, basically, I'm looking for 5 waves down from 1215.45 to complete wave (5) on the bear count and wave c of (Y) on the bullish count. Its quite possible that the low at 1201.96 is it. If there's more downside, for the bullish count, we have to stay above 1194.53 to keep it valid.

21:24 GMT - SPX End of Day Update

Lots of possibilities still open for the market at this stage.

At the moment, for the bear count, I'll stick with the sub-dividing wave (5), but it wouldn't surprise me if we made the wave (5) low at 1206.04, where I've labelled 1 of (5)  to complete wave [1] down and we're currently now in wave [2] up. 

On the bullish count, I think it probably looks best as requiring a further leg down for c of (Y) to compete wave [4]. I've excluded the possibility that yesterday's rally was wave (1) of [5] and today's decline was wave [2] because the Dow went below yesterday's low which invalidates such a count on that index.

Here's the close up chart showing the above possibilities (you can see the slightly bigger picture for this chart on Charts 2 and 3 in yesterday's end of day update and the even bigger picture on the 60 min counts page):

SPX 1 min - close up:

As you can see, I've re-drawn the blue channel so it touches waves (2) and (4) rather than (1) and (3) of the bear count. Its interesting that today's move up stopped at that line. For the bear or bull count, the lower line might provide a potential target area for the end of wave (5) (bear count) or c of (Y) (bull count).

For the bear count, wave 3 of (5) should take us well below 1204.49. If wave 2 of (5) ended at today's high, then a 1.618 extension of wave 1 would take us to around 1195. For this count to remain valid, we have to stay below 1218.75 and take out the low at 1204.49.

If we're in fact in wave [2] for the alternate bear count, then we're likely to stay above the low at 1204.49 and, in order to achieve more of a retracement of wave [1], we could see another zig zag form to take us perhaps to the 61.8% retracement level at about 1219. The decline from today's high would probably be the x wave preceding the next zig zag.

On this alternate bear count,  its not impossible that the move up today was the whole of wave [2] - it retraced nearly 50% of wave [1] at today's high. However, I think that in terms of time when compared to the time taken by wave [1], it probably doesn't look right. So, if its wave [2] that we're in, then I'd expect more upside, which would also give it a better look in terms of time.

On the bullish count, wave c of (Y) should take out the low at 1204.49 before wave [4] is complete. It does, of course, have to stay above the 1194.53 level I've been mentioning, which is the high of wave [1]. If we do this and then move back up and take out the low at 1206.04 without making a further low, then this count will look like its higher odds since a move back above 1206.04 in the circumstances described would invalidate the main bear count because it would mean there'd be overlap between what would have been waves 1 and 4 of (5) on the main bear count. 

If we take out 1194.53, then the question will still be whether the high at 1127.08 was the top for the rally from the August low or whether, as shown in Chart 3 in yesterday's end of day update, and Chart 2 on the 60 min counts page, that high was only the 3rd wave up in that rally. So, taking out that low doesn't guarantee that the bear count is playing out.

So for the moment, the main levels to watch on these labellings are 1218.75 (to keep the main bear count alive this musn't be exceeded), 1204.49 (this has to be taken out on the bear count and ought to be taken out on the bullish count) and 1195.43 (this musn't be taken out if the bullish count is to survive).

18:04 GMT - SPX Update

All this sideways movement today isn't suggesting that we've bottomed in wave [4] of the alternate (bullish) labelling. Its suggesting that the labelling I showed in the last post has better odds of being on the right track, at least for now, albeit with a more extended wave 2 of (5) (on the bear case) or B (on the bullish case):

SPX 1 min - close up:

The other alternative, that we bottomed in wave (5) and [1] on the bear count, with a truncation in wave (5) is also still valid and the sideways action would certainly be consistent with a wave [2] correction. I'd assume, however, that if this is what's playing out, we have more upside to come in wave [2] since we've only achieved a 23.6% retracement if we bottomed in wave [1] at 1206.40.

15:45 GMT - SPX Update

Well, the bear count is still on the table with the low at 1120.40 not having been taken out and the drop at today's open. I'm thinking we may be seeing a subdividing wave (5) on this count, although its perfectly possible that wave (5) ended where I've indicated on the chart below in a slight truncation:

SPX 1 min - close up:

If the low indicated is a truncated wave (5) and, therefore, wave [1] on the bear count, the retracement for wave [2] could take us back up to the 1219 area (61.8% retracement, which looks like good resistance) but of course, it could go higher (78.6% is at about 1222). A move now below today's low would increase the odds that wave (5) is extending.

For the bullish count (the alternate labels) I've adjusted the labels to show a potential double three correction for wave [4], with wave (W) being a flat ending at yesterday's low, followed by wave (X) to yesterday's high and we'd now be in wave (Y) as a zig zag. Remember that this alternate is invalidated below 1194.53.

12:09 GMT - Dollar Update

If we're in a developing impulse wave up from the low at 75.631, as I labelled the 15 min chart in my last post on the dollar (see here), then if this updated labelling is right, I'd expect to see a big move up in the dollar pretty soon:

Dollar 15 min:

If that doesn't happen then I'll begin to doubt the labelling, although the count for a potential impulse may still stand, provided we don't take out the low at 75.631, of course.

As I said in my last post on the dollar, while we're below 78.273, the risk to the downside is greater. Breaking above that level is vital for the bullish case (though it doesn't preclude bearish counts and more downside, as to which, see the dollar page).

Here's the 95 min chart:

Dollar 95 min:

As you can see, we're at the top of the resistance area  (delineated by the red lines on the above chart) shown on the daily chart in my last post. An impulsive and significant break above this area would certainly inspire confidence in the bullish case, provided it then becomes support. Failure to break above it would not look good for the bullish case.

21:18 GMT - SPX End of Day Update

Somehow, the bearish count that I've labelled (the main labelling on the chart below) for the decline from 1227.08 managed to survive again, because, so far, we've stayed below 1220.40 in the wave (4) that I've labelled up from today's low:

Chart 1: SPX 1 min - close up:

Its not pretty, I know, but its valid. However, for that count to remain under consideration, we now have to drop pretty much from the outset tomorrow and also take out the low at 1204.33 to complete 5 waves down from 1227.08.

While taking out that low would invalidate the way I've labelled the bullish count (shown as the alternate count) from today's low, the possibility that we're still in wave [4] would still remain valid unless we were to take out 1194.53 before we take out the high at 1127.08. 

As I've said over the last few days, until we take out 1194.53, the bullish count remains higher odds. If we push above 1220.40 without taking out today's low first, then the odds of the bullish count playing out would become even greater.

Here's the slightly bigger picture for the above counts:

Chart 2: SPX  1min - bearish count:

This assumes we topped for the rally from the August low at 1227.08 or will do so once waves [4] and [5], shown as the alternate count on Chart 1 above, have completed.

Its possible, however, that the high at 1127.08 was only wave iii, not wave v, as shown on Chart 3 below, but you can see it more clearly on Chart 2 on the 60 min counts page. If we take out 1194.53 and so eliminate the alternate count on Chart 1, this possibilty will still remain - therefore, taking out 1194.53 doesn't guarantee that we won't see the high at 1127.08 get taken out before we complete the rally from the August low.

Chart 3: SPX 1 min - bullish count:

With this bullish count, its possible that its not as bullish as portrayed in Chart 3. It may be that 1227.08 was wave (v), not wave (iii), as shown on Chart 3 on the 60 min counts page. So, any further upside would simply be wave [5] of v of (v) if the alternate count shown on Chart 1 is playing out.

So, the levels to watch on the labellings shown are 1220.40 (taking this out before taking out today's low will eliminate the bearish count as labelled), 1204.33 (taking this out without a new high will keep the bearish count on the table) and 1194.53 (taking this out will eliminate the alternate count shown on the above charts).

18:45 GMT - SPX Update

The main (bearish) count doesn't have much room left for wave (4) if that's what's playing out. If we push above 1220.40 on this move, then the bullish alternate count shown will certainly look like the more likely count:

SPX 1 min - close up:

17:33 GMT - SPX Update

I'm starting to think that the bear count on the following chart should be labelled as follows:

SPX 1 min - close up:

This puts us in wave (4) down from the high at 1127.08. Its possible that we may just have completed wave (4) at 1214.02, approximately a 38.2% retracement of wave (3). However, it wouldn't be surprising to see it play out for longer (especially given what wave (2) did) and hit the upper blue channel line.

If there is more upside in wave (4), then it has to stay below 1220.40, the wave (1) low.

16:07 GMT - SPX Update

With that move up from today's low, the alternate bear count shown in the last post is now the main bear count. I've also adjusted the labels for the bullish count which would suggest it may have bottomed at today's low:

SPX 1 min close up:

If we stay below 1218.95 on this current retracement, then the main (bear) count will still be OK. If we take it out, its possible that we completed 5 waves down from yesterday's high at the low made today, but we'd have to stay below 1226.84 for that to remain valid.

15:37 GMT - SPX Update

For the move down from yesterday's high, I'll stick with the count I showed on Chart 4 in yesterday's end of day update for the moment for the main and alternate counts. Here it is updated:

SPX 1 min - close up:

The main count is very bearish, but you'll see I've added another possibility, that we're currently in wave 3 of (3) down and possibly nearing an end to it (it may have ended at today's low of 1204.33). On this alternate bear count, once wave 3 is completed, we'd need to see the next rally for wave 4 hold below the low at 1218.95 which would be wave 1 on the alternate bear count.

If the main bear count is playing out, I'd like to see wave iii of 3 become at least a 1.382 extension of wave i. That would take it to about 1200. Currently, its about equal to wave i.

The alternate labelling for the bullish case which puts us in wave [4] down is still valid. On my count, we have to drop below 1194.53 to invalidate it. Its currently retraced about 50% of wave [3]. The lower it goes, the less likely it may become, even though not invalidated.

21:20 GMT - SPX End of Day Update

This is the chart I've posted previously (labelled as if Option 3 on the 60 min counts page is playing out) showing a potentially complete 5 waves up from the August low and which is the basis of the main count on the 1 min close up chart I've been showing:

Chart 1: SPX 60 min - 5 waves up from August low:

So, that's the bigger picture for the bearish count I've been posting. Here's the updated 1 min chart showing the count from 1159.71 low (this chart is labelled as if Option 2 on the 60 min counts page is playing out):

Chart 2: SPX 1 min - bearish count:

There does still remain the possibility that we still need another high to complete the 5 wave rally from the August low. - see the alternate labels. As mentioned over the past few days, we'd need to take out the high at 1194.53 to eliminate that possibility.

However, even if we take out that high, there remains the possibility that the 1127.08 high was only the end of the 3rd wave up from the August low so we have a larger degree 4th wave decline to come and then another rally. The bigger picture for this is on the chart of Option 3 on the 60 min counts page. Here's the 1 min chart from the 1159.71 low that shows this (labelled as if Option 3 is playing out):

Chart 3: SPX 1 min - bullish count:

Again, there's the question here of whether we're still in wave [4] of v of (iii) and that will be eliminated if we now take out the high at 1194.53. But this count would then put us in wave (iv) which could take us down to about 1156 if it achieves a 38.2% retracement, but we'd then see a further rally to complete 5 waves up from the August low.

Here's the close up chart I've been posting for the move from the 1227.08 high (I've re-done the label degrees so both main and alternate counts coincide with the main and alternate counts shown on Charts 2 and 3 above):

Chart 4: SPX 1 min - close up:

The main labelling assumes that a top was put in at 1127.08 (on the bear count (Chart 2) it would be the 5th wave of the rally from the August low and on the bullish count (Chart 3) it would be the end of only the 3rd wave from that low).

The main labelling does seem a bit stretched given the size of wave (2) compared to the size of wave (1). However, the high at 1127.08 held so the count is valid.

Having said that, the risk that the alternate labelling is the correct count remains until we take out the high at 1194.53 and invalidate it. So far, on the alternate labelling, we've retraced 38.2% of wave [3], so I'd probably expect a turn around here if the alternate labelling is playing out.

For the main labelling, there are various ways to label the decline from today's high. For the labelling I've chosen, the bear count should ideally stay below the high labelled 2 at 1219.08. It wouldn't be fatal to the bear count if we take that out. It could well be that the low I've labelled as wave 1 is, in fact, only wave iii of 1, with the 1219.08 high being wave iv of 1 and the low at 1208.94 being the end of wave 1.

The crucial high for this count is, in my view, 1226.84. While that remains intact, the possibility remains that we made some sort of top at 1127.08.

So, I'm watching 1219.08 (taking that out would invalidate the main labelling on Chart 4 above, but wouldn't void the bearish count) and 1226.84 (taking that out would invalidate the labelling for the main count and make it very unlikely that a top was put in at 1127.08)  and 1194.53 (taking out that high would invalidate the alternate labelling on Charts 2, 3 and 4).

19:00 GMT - SPX Update

Taking out the low at 1217.55 that I mentioned in my last post gives the bearish count a fighting chance:

SPX 1 min close up:

As you can see the alternate count remains on the table, with wave [4] just forming a more complex correction.

For the bear count, it could be labelled as a 5 down from today's high or as the (1)-(2)-1-2 that I've shown. If the wave 1 low at 1219.46 gets taken out in an assumed wave 4 of (3), then I'll likely relabel the chart to show the 5 down instead.

The next target for the bear count is 1194.53, the wave [1] high (see yesterday's end of day update). Taking that out would rule out the alternate count on the above chart.

15:55 GMT - SPX Update

Here's an update of Chart 3 from yesterday's end of day update:

SPX 1 min close up:

You can see the slightly bigger picture for this chart on Charts 1 and 2 of that update and the even bigger picture on the 60 min counts page.

The most bearish count survives (just) with an adjustment to make it only a one-two down instead of nested ones and twos. However, we have to take out the low at 1217.55 for this count to have any chance. While we're above that level, the alternative count on the chart above should really be favoured

8:25 GMT - Dollar Update

Last time I posted the daily chart of the dollar, it looked likely that there would be more downside before we could really start thinking that a low may be in on the overall bullish count (see the post on 30 October 2010).

We did get the new low that was anticipated and this has resulted in some nice looking bullish divergences on the indicators in the daily chart:

Dollar Daily:

As you can see, as price made a new low, the indicators shown all made higher lows. This suggests that there is a good chance that we may have seen a low of some sort.

However, despite the dollar's comeback over the last couple of days, there's still alot it has to do to prove that a low is in.

As you can see from the daily chart, we're back into the yellow resistance area I've highlighted in previous posts of this chart. We need to break above it and turn that area into support in order for the bullish case to have any prospect (though doing so wouldn't preclude more downside, so wouldn't be conclusive that the dollar has bottomed). If that can be achieved, the next thing to look for would be a break out above the downward sloping price channel that has formed during this decline.

As a follow through to the bullish divergences in the indicators, we now need them also to get to bullish levels along with a good move up in price: the RSI above 50 and up to the 66.67 level; the MACD above the zero line and the stochastic up to the 80 area. I don't want to see this happen with price only moving sideways - that, in my view, would be a warning of potentially more downside to come.

Here's a 95 min chart showing the move down from the high labelled B on the daily:

Dollar 95 min:

The red horizontal lines show the area of resistance highlighted in yellow on the daily chart. 

The high at 78.273 is key to the bullish case. It has to be broken above on the bullish case. However, doing so wouldn't mean that the bullish case must be the one playing out. If the next significant pullback were to stay above the low at 75.631, we might then have more reason to believe that a bottom has been put in.

Here's a 15 min chart with a potential wave count for an impulse off the low at 75.631:

Dollar 15 min:

It looks like we may still be in wave (5) of [1], but a significant break below the green channel would suggest that its over and we'd then be looking to see a three wave pullback that stays above 75.631 if the bullish case is playing out.

So, while we're above 75.631, the bullish case has a chance, but we need to break above 78.273 if serious consideration is to be given to the possibility that we've bottomed on this count. While we're below 78.273, further downside remains the higher odds option.

You can see the bullish and bearish counts I'm watching on the updated dollar page.

21:16 GMT - SPX End of Day Update

While the high at 1227.08 remains intact, its still possible that it marks the end of the rally from the August low. However, it has to be said that the action since that high doesn't inspire confidence in such a count and the counts which entail further highs to come remain higher odds at this stage.

The context for the following short term charts can be found on the 60 min counts page.

Chart 1 shows the count  which assumes that we put in a top for the rally from the August low at 1227.08 or that we have one more rally to come, but once a top is in, that will result in significant downside. How much will depend on which Option from the 60 min counts page is playing out. 

Chart 1 is labelled as if Option 2 on the 60 min counts page is playing out so the top for the rally from the August low will be wave X and the decline that follows would be wave Y in an expanded flat type correction. However, it could equally be applied to Option 3 and what that means on Option 3 would depend on which of the three interpretations of that count is in operation (I've listed them on the 60 min counts page) :

Chart 1: SPX 1 min - bearish count:

Chart 2 below shows the more bullish count and is labelled as if Option 3 is playing out. It has us looking for only the end of the 3rd wave in a 5 wave rally from the August low. Again, its not clear yet whether the 3rd wave, wave (iii), on the labelling on Chart 2 below, has topped or whether a further rally is required as suggested by the alternate labelling.

Chart 2: SPX 1 min - bullish count:

On the labelling on both of the above charts, while we're above 1194.53, the odds favour  a further high being required to complete the wave v or wave (iii) labelled on those charts. Taking out 1194.53 without a new high above 1127.08 would void the alternate counts shown. It would then be a question of whether we completed 5 waves from the August low at 1127.08 (as shown in Chart 1) or whether that was only the end of a 3rd wave (as shown in Chart 2).

For the moment, the price action since the 1227.08 high suggests its more likely that we're in or we completed a 4th wave on the alternate count shown on the above charts. However, until the high at 1127.08 gets taken out, its possible that it could be  series of ones and twos down as shown as the main labelling on Chart 3 below (once again, ignore the degrees I've used for the main labels - they're just for illustration):

Chart 3: SPX 1 min - close up from 1227.08:

On the main labelling on Chart 3, I've labelled a set of ones and twos down on the assumption that 1227.08 was a top in wave v or wave (iii) on Charts 1 and 2 above. However, as you can see,  the alternate, that we only completed (or are still in) a 4th wave within wave v or (iii) today is very much a viable count. As mentioned in previous updates and above, its to be preferred while we're above 1194.53.

For the bear count now to gain credibility, we need to stay below 1224.57, even though taking it out doesn't invalidate the labelling on Chart 3 above and only taking out 1227.08 will mean that a top was not in at that high.

We also need to take out the low labelled [1] on Chart 3 above at 1218.21 and do so in a very impulsive manner. Taking out that low will keep the bear count on the table but won't mean that its the count that is playing out.

Going on to take out 1194.53 without a new high above 1127.08, will exclude the alternate count shown on the above charts. However, the possibility that 1227.08 was only a 3rd wave high in a 5 wave rally from the August low, as shown on Chart 2 above, will remain. It wouldn't become invalid unless we we're to drop below 1065.21 in an assumed wave (iv). With that invalidation point being so far below the market, we'd just  have to monitor wave behaviour if we do drop below 1194.53, to try to determine if we topped at 1227.08 (Chart 1) or if a further high is still likely once we've seen a larger degree 4th wave correction (Chart 2).