Friday, May 7, 2010

5/7/10 - SPX EOD, Techniques Revisited and Speculative Counts [Update 5/9/10 2pm]

 I added a support line at 1044. Two hits so far and almost a third.

I've been updating my charts at the bottom but wanted to put this simple one here at the top. Why isn't anyone talking about this trendline anymore?

Notice the reversal hammers? This week will be key to determine if there is a confirmation on a reversal. 


As bearish as this week has been, we needed this correction (and have been expecting it) to set the stage for higher highs to come. Yes, believe it or not, my preferred count is still valid (granted it is in jeopardy) even with the nasty leg down.

The bearish count is in gray. Based on the bear count, we are still working on the third wave down (which by my preferred count works for minute [y] )

Here are a few reasons for giving preference to my preferred count.

1. The structure still counts only as a three-wave structure from 1219, which technically is still considered a corrective wave. (note orange lines on the 60 min chart below).
2. The market found support at the 200 day moving average, which is still sloping higher.
3. The market may have found support at the lower trendline of the expanding ending diagonal/expanding triangle count  (see chart below).
4. The market was able to close back over the 61.8% of the Feb-Apr rise (see SPX Moving Averages chart below).

What I'll be looking for next week:

If the market drops below 1044.50, I'll drop this preferred count.

However, if the market bounces and takes out 1138 (where I label wave a red), the triangle option will be ruled out and will start to signal that the leg down may be complete. The next confirmation will be 1158.15, which I have labeled as minuette (i) of minute [iii]. The final confirmation will come if the market can rally back over 1181.62.


Here's a look at the daily chart of my preferred count.  A break of 1044.50 and I will say the leg up from Feb-Apr is complete. Notice the market backtested and failed at the purple trendline that was broken yesterday.


It looks like we lost that last trendline support. Hmm.....

 SPX - Trendline Break and EMAs

Price tapped the 200 day moving average and closed on the 61.8% retracement of the Feb-Apr rise. 

 SPX - Moving Averages

It appears this reverse Fibonacci technique panned out after all. It was spot on. Notice the potential H/S pattern forming?

SPX - Reverse Fibonacci


This one is interesting because it almost appears to be a consolidation pattern with an expanding nature. It can be labeled as an expanding ending diagonal (one final 5th wave higher) or an expanding triangle that I label as an alternate (X).

Though the expanding ending diagonal implies that the end of this move is near, they both still imply new highs to come.


Here is one count that I had toyed around with. If I can find that first chart, it would be interesting to see if this plays out becase the trendlines for the triangle were arbitrarily drawn in. Strange that the market stopped on the lower trendline where I have it labeled as wave C (green) of a possible wave 4.

Speculative Count

The channel and Fib fan chart below will be an interesting one to watch. There should be concern that the market dropped out of the red channel. However, the blue channel and light blue Fib fan may be relevant as well. 

There are three touch points on the lower channel line of the blue channel so it is safe to say that this is a good support line for now. This happens to correspond with the 50% Fib fan as well. Price previously respected the 38.2% fan so per Columbia1 (Thanks Col!), this is a relevant fan to watch.
A Relevant Fib Fan?

Below is a weekly MA chart. Notice how the market found support at the 50 week MA, which is still rising toward the 200 MA. This may add support to my thesis that we should get one more Minor C wave up to new high. 

I placed the pink circle (guesstimated on timeframe and level) but this would work out with a backtest of the green trendline and possibly where the 50 week kisses the 200 week only to be rejected. Roughly eyeballing it, that may take us to 1250 - 1300 depending on the speed of the rise. Of course that would be the bear scenario since we would expect a rejection there to end the entire P2 rally.

But, given that the 50 week is rising toward the 200, one should also be thinking about a potential bullish cross up. 

I'm obviously not a funda

SPX - Weekly MAs
Ok. That is all for now. I'll try to post more charts and a squiggle count over the weekend.


  1. Grand, very nice work. I too still see lots of evidence that suggests that there still might be some more upside left, maybe even a lot. I'll post something later over on Fibs and Waves.

  2. Thx highrev. Ya I think the next week or two should b telling. Let me know when u post

  3. Grand I love your analysis. I want to know why no one is mentioning how to handle the bogus/ artificial spike down from SPX 1092. Without that, I can see a five wave structure down to complete wave c of your preferred count.

  4. Does it matter that the Dow Jones Utilities did break under the Feb 5 lows on an intraday basis? P2 is about the return of the "risk trade." However, the fear that the public witnessed during the freefall will be tough to smooth over, no matter how many silly excuses the pundits suggest, or congressional investigation are undertaken to find "the cause" of the freefall (IMO it was caused by widespread PANIC and FEAR). I do not think "they" will be successful in "putting the fear genie back in the bottle." Upside volume was already anemic before we witnessed "the largest one-day point drop" in history. EW is about probabilities, and the probabilities suggest that P3 is here, even though I agree with you that a nice C wave to finish Z would be more satisfying. While probabilities may suggest P2 is here, prudence suggests we consider all options and watch the market play-out in an unbiased manner, using a disciplined trading strategy. Toward that end, I appreciate your contribution to the analysis and debate!