Tuesday, April 2, 2013

Tuesday's Market 04/02/2013


After dropping to 1558.47 on Monday, I was looking for the market to subsequently rally to the 1578 level. The market built on the small rally into yesterday’s close this morning, moving markedly higher at the open. Although it is most likely that the SPX formed Waves 1, and 2 of a 5 Wave sequence that will ultimately bring the index to 1578.24, the failure to reach that level today has opened up several interesting possibilities.

 
 
The market opened higher today, and kept running higher for the first hour and a half of trading until reaching the day’s high of 1573.66. This turned out to be a complex nested inverted wave structure.  You will see a series of 1’s from the 1558.47 low, and then the unwinding of the series moving into the high of 1573.66. The main sequence was 1558.47-1559.46-1569.86-1571.65-1571.03-1573.66. This gave a model value of .9978. This sequence can be seen in blue on the 3 Minute Chart.
 
After reaching that high the market struggled. A small pullback turned into a substantial drop from the highs, eventually reaching 1565.55. This was a more characteristic wave structure, a simple 5 Wave structure containing an inverted corrective Wave 2. This series was 1573.66-1572.43-1572.53-1570.16-1570.41-1565.55. The model value for this series was .9996.
 
The most reasonable interpretation is that these are Waves 1, and 2 of a 5 Wave sequence that will result in the SPX rising to 1578.24, my target for the sequence from 1546.22. If these indeed are Waves1, and 2, I would expect the market to move higher on Wednesday, or at a minimum, hold the 1565.55 low seen today. The market action today also opens up at least two other scenarios worth noting.
If the SPX fails to take out the 1570.11 high seen after the 1565.55 low, a drop to 1557 would complete a semi-inverted corrective Wave 4 from 1570.57, and I would then expect to see the market rally, with the 1576-1578 area remaining my target. A move above 1570.57 while holding the 1565.55 low would take this scenario out of play.
The second scenario would be slightly more bearish. If the market moves slightly lower, between 1560.40, and 1562.90, it is possible that an inverted corrective Wave 2 from 1563.95 has completed. From there, a rise to 1564.70-1565.40 could complete a 5 Wave sequence from 1538.57, and Wave 3 from 666.79. I would then expect a correction, which will hold above 1538.57, followed by one more wave moving above 1565. That would complete a 5 Wave sequence from 666.79 and portend a more severe correction.
In summary, I would still expect the SPX to move to 1578 unless the index falls to 1560-1563, rises to 1565, and then falls below 1560.
Thank you.
 
 
 
 

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