Sunday, January 17, 2010

1/17 - SPX : A BULLISH COUNT [UPDATE: 1/18/10]

[UPDATE: 1/18/10] : I guess I forgot I presented a similar count/option for e-mini on my post friday as well: 1/15 - E-Mini : Final 5 or Top?. An application of the ratio relationship of wave 1 through 3 to 5 takes E-mini towards 1145-1157.

This is a chart of E-mini's as of 8:30 AM PST. E-mini is trading up 4.5 pts and the structure appears to be forming a possible Leading Diagonal. Whether bearish or bullish, I think it may be safe to say that this may be a wave (a) of either:

1. wave iv of (iii) down


2. wave 5 up 

Now with all that being said, I also did not mention that if we see more downside early next week, one must keep in mind that wave 4 (from a bullish perspective) may still be in the works. I see a potential target of 1115 E-mini and 1120 SPX and then a bounce from there to complete the final wave 5 up.

Sorry for the confusion but that is what I see at this point in time. I think the next week or two should finally give us greater clues as to the direction of the market.

I know I have been presenting bearish options lately. I certainly can't forget the bullish counts though so I have put one together here.

This chart lays out what may come next week if last week's decline only completed wave [iv]. If this is the case, we should expect a final push higher to complete wave [v].

EW channels are helpful in determining where wave 5 may end. For those not familiar with EW channels, R.N. Elliott found that parallel trend channels typically helped marked the upper and lower boundaries of impulse waves.

The channel is constructed by connecting a line at the end of wave 2 and 4. A second line is drawn parallel to the first line and placed at the top of wave 3. With the trendlines in place, one may expect wave 5 to terminate at the upper trend line. However, wave 5s may also terminate at the center-line as well.

I also perused through the Ratio Analysis section (Fibonacci) of the Elliott Wave Principle (EWP) over the weekend. On page 136, it states that wave 5's length is sometimes related by the Fibonacci ratio to the length of wave 1 THROUGH 3.  The typical relationship is .382 to .618 when wave 5 is not extended.

So taking this into consideration, a .382 -.618 ratio to waves 1 through 3 would take wave 5 back to 1150 through 1165. I like this potential relationship because wave 5 would also terminate near the mid-channel line at .382 and the top channel line at .618.

So there you have it. If the market pushes higher and if it is a final wave 5, the 1150-1165 range is what I will be keeping an eye on.


  1. Thanks for posting this bullish count. I always like to see at least 2 opposite possibilities. The $VIX gave me some doubts about this rally extending when it made some divergences last week, but that higher low it put in on Friday as the $SPX was testing 1130 level again did seem to be a positive development, especially ahead of a 3-day weekend!
    Here is a link to my blog. I dont always post a lot, but I do post more often when the market seems to be approaching a level where the direction might change.
    btw, I just noticed you have the lounge link at the bottom of your webpage. I always enjoy your posts on the CiL.

  2. Nice work grand. I agree with those near term bullish thoughts.

  3. jman and pug,

    thx for the feedback guys. look forward to your analysis everyday as well. i guess we should be close?? jman, just added u to my blogroll.GL guys!