August 3, 2012 Postmarket

What a crazy end of the week.

As of Thursday end-of-day it looked as though the 1391 Y=0.618W top was going to hold, but then a powerful surge of energy came through the markets for evidently no reason.  VIX and UVXY are way down; the logical technical reason for this is that the VIX is endeavoring to fill its gap at 15.45.

This has nothing to do with the Fed, the ECB, the election, high-frequency trading, or algos.

Because the original count, that of 1391 being the top of Minuette (y) ending Minute [b], was invalidated, we switch to the alternate count - 1391 was merely Subminuette "a" of (y), with Thursday's low being "b".

There are two logical targets.  First, we notice that "a" of (y) was almost the exact length of "a" of (w).  The "b" waves certainly weren't, but that's not a problem.  If "c" of (y) = "c" of (w), this would put the target at 1411.49.  If (y) = (w) entirely, this would put the target at 1425.96.

Either way fits well with the flat scenario.  155.62 points separate the top from the bottom, and the ideal B wave of a flat retraces 90 to 105 percent of the A wave.  In our case, this would be between 1406.80 and 1430.14.

Time ratios suggest we should turn down starting around August 9 if C of Y lasts the same length of time as C of W.  Because we already advanced so far with respect to price, we might expect the next few trading days to be a series of shallow up days wending their way to whatever the target is, then falling.

• Apart from the gap at 15.45, the VIX has no gaps further down to fill, and a gap at ~34.50 from November it has yet to fill.
• There is RSI and MACD divergence on the SPX hourly with overbought stochastics.
• There is triple RSI divergence on the SPX 2-hourly with overbought stochastics.
• VIX stochastics are oversold at weekly, 1-hour, and 2-hour time frames.
• The hourly VIX is is oversold on RSI and the MACD red line is diverging from the black line.