Tuesday, July 3, 2012

Tuesday's Market 07/03/12

On Monday I said a 5 wave sequence had completed at 1365, and to expect a move lower at the open Tuesday. The market actually opened slightly higher, before the anticipated move lower. That move lower was quite minor, taking the market only to 1363.53, before rising once again. Yesterday I said if 1356 held, I would first look for a high at 1368, and then another, slightly higher, top. From the morning’s low at 1364, the market moved to 1368.27, pulled back slightly, then made another top at 1370.08. At this point, there was a possibility that this was the completion of a 5 wave sequence from 1356, with waves 1, 3, and 5 ending at 1365, 1368, and 1370. In order for this scenario to be true, the move from today’s low would need to have been 2 separate 5 wave sequences, forming waves 3, and 5. The move from 1364 formed as one 5 wave sequence, indicating this was not the termination of a sequence.

This was confirmed as the market failed to move below what would have been wave 4, 1367.53, and then moved above the 1370 high. I discussed yesterday that a move above 1372 would most likely mean higher prices ahead, based on the wave count. After moving above 1370, the market continued to rally, reaching 1374.81. The market then fell back to 1370, before rising again into the close.

In my view, today’s slightly higher open at 1365.39, completed wave 5 from 1355.70. That then became wave 1 of a larger degree sequence with wave 2 completing at 1363.53. The rest of the day was spent forming waves 1, 2, 3, and 4 of a smaller degree sequence. Wave 4 terminated at 1369.80, meaning the market is poised to move higher when it re-opens on Thursday. Wave 5 should terminate at 1378, completing wave 3 from 1355.70. Wave 4 should be a very small corrective wave most likely less than 2 points, with wave 5 completing at 1391.
At this point the market could undergo a bit more of a correction, but the magnitude of this is still unclear. Longer term, it appears the uptrend from 1267 is continuing. After 1391, my next targets are 1426, and 1497. Support is at 1367, 1357-1356, and 1326-1323.






4 comments:

  1. Steve,
    On my way out for the 4th of July, stopped by to say hey. I think your counts are a bit too optimistic. Yes we can and probably will move a little higher, but on low volume and hope only.
    The macro picture remains the same, global slowdown, Iran tensions really building, EU is a mess, Greece has been bought by Rhode Island for $32.00 in beads and blankets, etc... I am looking for a move down to around DOW 12,100 by end of July the latest, and possibly DOW 11,800 by end of September. I am 100% short using DIA puts from 126 to 129 strikes. I just don't see anything near term that will keep this "hope rally" alive much longer.

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    1. Hi Vinnie. Hope you enjoyed your 4th. I'm a little concerned with the projections myself. I think we need a further correction to temper the projections. Still see a move higher though.
      Steve

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  2. Steven, I appreciate your great effort, but will it be too good to be true? It seems you are not going to call a top but just raising your target higher. According to what you said, we are nearly going to pass 2008 high and it appears to be a bull market. Is that what you think? By the way, Thursday reopen with falling. How do you view then?

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    1. Hi Nick.
      I think the waves will resolve themselves in a way that brings some of the projections down. Just not sure at the moment how. Best guess is a complex correction from 1365 forming. That would take the market lower, and get us back to the original projections. The drop Thursday was unexpected, but totally my fault. I mis-read the waves, and didn't see the final 5 wave sequence to 1374.81. Longer term it doesn't change anything at this point.
      Thanks,
      Steve

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