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October 7th, 2013: SP-500 EOD Update

Posted by pugsma on October 7, 2013

5:55 pm EST:   Since the 1730 high on the SP-500, this is one of the ugliest waves I can recall in the past 4 years. The SP-500 closed today underneath its 50-day SMA (1680) at 1676, while the VIX soared +16% to 19.41 well above its upper BB (18.19).   A downside surprise could be underway, per the new alternate (red) account details below.

The primary count for the leading diagonal minor 1 wave now looks like it needs one more small push down to 1668 to 1666 to complete wave c-(5) of minor 1 of major [A]-P4-C1.  The maximum for wave (5) of the ED is at 1665.75, so that wave (3) is not the shortest wave.  A break below 1665.75 would mean the primary count is invalid and the alternate (red) downside surprise count is the new primary count.  Assuming minor 1 holds 1665.75, from this minor 1 low of 1666, minor 2 should rally to at least the 78% retrace of 1716, which is typical of a wave 2 following Leading Diagonal wave 1.  Minor 2 will remain valid below 1730.  A move above 1730 will invalidate the primary count mean that the alternate (blue) count is underway.

The alternate (blue) count is looking for wave c-(w) of minor 4 of major [5]-P3-C1 to end at 1666, where (y)=(w).  However, there are lower minor 4 targets and this alternate (blue) count for minor 4 wave remains valid above the minor 2 low of 1627.  Once the minor 4 low above 1627 is found, minor 5 of the major [5] ending diagonal will then rally to a new high above 1730, which will be limited to a maximum of the minor 4 low +103 points.  If minor 4 ends at 1666, then we have 1666 + 103 = 1769 as the maximum for the top of major [5]-P3-C1.

If the SP-500 continues to slide lower and breaks 1665.75, then the primary count leading diagonal will be invalid and the primary count will be replaced with the alternate (red) count that has minor 2 of major [A]-P4-C1 already complete at 1692 on Friday and that minor 3 down is underway headed for a target of 1603, where minor 3 = 1.62* minor 1.

Remember that for the primary count that has P3-C1 topped at 1730 and the large P4-C1 correction down to 1481 has been underway the past couple of weeks.  Surprises are expected to be to the downside.  So the alternate (red) while much more short bearish than the primary count is a downside surprise that certainly could occur during this major [A]-P4 leg down towards 1600 to 1576.

SP-500 15-min chart (EOD):

PUG SP-500 15min chart EOD 10-7-13

SP-500 60-min chart (EOD):

PUG SP-500 60-min chart EOD 10-7-13

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