Tuesday's Market 04/23/2013

It was quite an interesting day for the market today. With the SPX having completed a 5 Wave sequence from the 1536.03 low, I thought it was a likely point for the market to resume its downtrend. I could not have been more wrong.

The market moved higher from the opening bell, blowing past the 1567, and 1572 resistance levels I mentioned yesterday. By midday, the SPX had hit my 1579 resistance level, topping out at 1579.58. The market started to pull back from that point, and then a flash crash sent the SPX down to 1563.03. Within minutes the market had recovered, before pulling back to 1573.13. The market then rallied into the close, falling just short of the 1579.58 intra-day high.

From yesterday afternoon’s 1565.55 high, the market formed an inverted corrective wave that carried over to this morning. This sequence was 1565.55-1562.90-1564.52-1561.56-1575.16-1572.46 (.9994). This completed Wave 2 from 1536.03, and the sequence then completed as 1577.40-1575.80-1579.58 (.9952).

The SPX pulled back from that high, and formed a 5 Wave sequence, 1579.58-1578.97-1579.36-1577.09-1578.08-1563.03 (.9992) that included the flash crash. 1563.03 also formed a relationship with the 1536.03 low, the Wave D high from this morning’s inverted corrective wave, and the 1579.58 high. If we look at (1536.03, 1563.03), (1563.03, 1575.16), and (1575.16, 1579.58), we find a correlation of .9978. Following the recovery from the flash crash to 1578.55, the SPX then formed a 5 Wave sequence to the downside, 1578.55-1575.90-1577.85-1575.11-1575.80-1573.13, .9989. This was followed by a 5 Wave sequence higher, 1573.13-1575.02-1575.87-1578.14-1576.97-1579.16, .9981 that included an inverted corrective Wave 2, 1575.02-1574.08-1576.74-1575.75-1576.87-1575.87, .99999.

I am still of the opinion that the SPX is in Wave D of an inverted corrective wave from 1292.66. The difficult part of this wave has been calling the top, and thus the start of Wave E down. I brought up the possibility of this wave moving beyond the 1597.35 high before that wave begins. This scenario is becoming increasingly likely.

The wave from 1536.03 to 1579.78 contained no overlapping waves by my model’s count. This generally means a continuation of that move. After today’s drop to 1563.03, the SPX formed two 5 Wave sequences to the upside, without completing a sequence from 1563.03, or 1536.03. This again implies another move to the upside. It is likely that the SPX is forming a complex corrective wave from either 1579.78, or 1578.50, so the exact structure is in doubt. A likely point of resistance would be 1592. This would be the 3^rd wave from 1536.03, meaning at least one more move after that.

If the SPX falls below 1573.13, this count would be in doubt, and a move below 1563.03 would most likely mean the next move down is upon us. Support is at 1574-1576, with resistance at 1580, and 1591. If the SPX moves above 1579.58, 1592 would be the likely next stop.

Thank you.