Wednesday's Market 05/22/2013

It was an interesting day for the markets, to say the least. A sharp rise to another all-time high, followed by the biggest decline we have seen in over a month.

The SPX opened higher, rose to 1684, and after a minor pullback, hit 1687.18. But it was all downhill after that. The SPX dropped to 1673, tried to rally, but after hitting 1683 started a steady decline that dropped the index to 1648.86. The SPX then rose to 1655 into the close.

As I mentioned yesterday, I expected a move above 1677 to lead to higher prices. It did, as the SPX rose to 1687, although you had to be quick to catch that move. At 1687 the SPX completed a 5 wave sequence from 1662.67, and has finally completed a sequence from 1581.28. This completes Wave 3 from 1074.77. A pullback had been expected once Wave 3 ended, and it looks like we saw the majority of it today. At this point it appears that only 3, and possibly 4, waves of this corrective sequence have completed. I expect to see another move down, with a target of 1641. I would then expect one more move to new highs before a more substantial correction occurs.

Thank you.