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Elliott Wave chart analysis for the SPX500 for 26th October, 2010. Please click on the charts below to enlarge.

We still have two wave counts today. We do not have confirmation on the S&P of a trend change yet. However, the pound and euro have confirmed trend changes and the Dow is either going to invalidate its wave count at primary degree (unlikely) or has just turned downwards (more likely). Therefore, it is looking increasingly likely that we have already seen a trend change for the S&P.

SPX500 daily 2010

The trend change will be confirmed with a full candlestick sitting below the lower edge of the smaller pink parallel channel on the daily chart. Until the trend change is confirmed the possibility of new highs remains. Therefore, we should continue to consider a wave count which requires upwards movement and use confirmation and invalidation points to work with the two counts.

If we see a new high we may expect price to continue towards the target of 1,219.65. This is where wave 5 green will reach 0.618 the length of wave 3 green within wave 5 pink.

Any further upwards movement may not move above 1,220 as wave 2 blue may not move beyond the start of wave 1 blue.

We can see divergence with price trending up and MACD trending downwards on a 2, 4 and 8 hourly chart. This indicates an expiring (or expired) trend.

When the trend change is confirmed I will calculate downwards targets for you. To do so now would be premature.

Main Wave Count.

SPX500 hourly 2010

This wave count is looking less likely but it is still technically possible. If price moves above 1,196.1 we should expect further upwards movement towards the target.

At 1,201.1 wave 3 orange will reach equality with wave 1 orange.

Within wave 2 purple wave C aqua is just 0.3 points longer than 0.618 the length of wave A aqua.

Because wave 2 within wave 3 purple may not move beyond the start of wave 1 we should not see price move below 1,177.4. If this point is invalidated then labeling of recent movement is incorrect. This may be our first indication that this wave count at a larger degree is incorrect.

Movement below 1,170.6 will invalidate this wave count. At that stage any alternate wave count requiring upwards movement would require a lot of upwards movement to complete a satisfactory structure; that will be increasingly unlikely.

Movement below 1,158.9 will confirm a trend change. This would also likely take price outside the pink channel on the daily chart.

Alternate Wave Count.

SPX500 hourly 2010

The labeling for wave 1 orange has been decided upon a 15 minute chart. Ratios within wave 1 orange are: wave 3 purple is 1.25 short of 4.236 the length of wave 1 purple and wave 5 purple is just 0.6 points longer than 2.618 the length of wave 1 purple.

Within wave 2 orange wave C purple is just 0.3 points short of equality with wave A purple.

If this wave count is correct then price should move below 1,177.4 as wave 3 orange must move beyond the end of wave 1 orange.

Movement below 1,170.6 will invalidate the main wave count and confirm this one.

Finally, movement below 1,158.9 will invalidate other less likely alternate wave counts which allow for new highs. At that stage we may consider the trend change as having occurred.

We should not see price movement above 1,189.6 as any second wave correction within wave 3 orange may not move beyond the start of the first.