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Price has again moved higher, which was what yesterday’s main hourly wave count expected. Movement to a new high has invalidated yesterday’s alternate wave count. We have only one hourly wave count left today.

Click on the charts below to enlarge.

S&P 500 daily 2011

Again, upwards movement remains within a narrow band of the midline of this parallel channel. We should expect it to continue to do so. When downwards movement varies significantly from this narrow band we shall have an early indication of a trend change.

Waves a and b pink both lasted a Fibonacci 8 days. If wave c pink is continuing and if it is to have a Fibonacci time relationship then the next possible end date is 8th February, where it would have lasted a Fibonacci 34 days. However, Fibonacci time relationships are not very reliable. This possible end date is a rough guide only and it does not have a high probability.

When the pink parallel channel containing wave Y blue zigzag is breached by downwards movement then we shall have confirmation of a trend change.

Wave (2) black is labeled here as a double zigzag structure, which is relatively common. The only way wave (2) black could continue further sideways when the second zigzag of Y blue is over is as a rare triple zigzag. The rarity of triples means this has a very low probability. Furthermore, the purpose of triple zigzags is to deepen corrections. Wave (2) black is already a very deep correction, over 80% of wave (1) black. It does not need to be deepened further.

Wave (2) black may not move beyond the start of wave (1) black. This wave count is invalidated with movement above 1,359.44.

* Please note: Placement of (i) and (ii) green within c pink on yesterday’s daily chart was incorrect. I have corrected this.

S&P 500 hourly 2011

Price remained above the initial invalidation point at 1,306.06 and continued on higher as this wave count expected it to do.

Upwards movement for Wednesday’s session is now looking very much like a five wave structure. Wave 5 purple is just slightly short now of equality with wave 1 purple.

On the 5 minute chart the structure of wave 5 purple is very close to completion. With one more small upwards push it will be a perfect impulse. This may also bring price up to touch the upper trend line.

Within an impulse it is common to see a Fibonacci ratio between two of the three actionary waves (waves 1, 3 and 5 are actionary) and not so common to see Fibonacci ratios between all three actionary waves. When we see a Fibonacci ratio between waves 1 and 3 then we may expect that wave 5 has a low probability of exhibiting a Fibonacci ratio to either of 1 or 3.

This is the situation at all wave degrees now within wave c pink. Wave (iii) green is 1.7 points longer than 1.618 the length of wave (i) green. Within wave (v) green wave iii orange is 1.56 points longer than 4.236 the length of wave i orange. Within wave v orange wave 3 purple is just 0.28 points short of 1.618 the length of wave 3 purple. So it may not be useful to use any of these wave degrees to calculate a target for upwards movement to end.

A more reliable way to see where this wave ends may be the parallel channel drawn here. Draw the first trend line from the lows of (ii) and (iv) green, then place a parallel copy on the high of iii orange within (iii) green. Wave v orange may end about the upper edge of the parallel channel.

When this parallel channel is breached by downwards movement then we shall have our first indication of a trend change.

Movement below 1,306.06 would indicate that wave v orange would have to be over and this would add confidence to a trend change.

Movement below the parallel channel on the daily chart would add further significant confidence to a trend change.

Finally, movement below 1,242.82 would provide final confirmation of a trend change.