Thursday's Market 06/13/2013

You always have to love when the market throws you a curveball. After the dramatic decline yesterday, and everyone anticipating a further decline, the SPX opened slightly lower, and then headed virtually straight up.

After opening lower to 1608, the index headed higher after that, moving up to 1617 before pulling back. The next stop was 1619, and after a small pullback, 1625. Another small pullback followed, and then the SPX headed to 1639.25, with barely a pullback along the way. The index then dipped to 1635.87 shortly before the close.

The move down to 1608.07 completed a 5 Wave sequence from 1647.72, denoted by the blue “C” on the 5 minute chart, which I currently see as Wave D of 2. Because of the configuration of Waves A, B, and C, it allowed Wave E to be rather powerful, which indeed it was. This move still fits within my model’s parameters for a move lower to 1561. Wave 1 down completed at 1639.26, with today’s move higher possibly completing an inverted corrective Wave 2 from that point. Waves 3, 4, and 5 should then carry us down to the 1561 level.

Support would be at 1619, and then 1611. Should the next wave complete at 1619, there would most likely be a very small bounce before a drop to 1561. If Wave 3 moves to 1611, I would then expect a rebound to near 1623 before the move to 1561.

Although my current count would allow for a move to slightly higher levels, a move above 1648.69 would put my count in serious jeopardy, and a move above 1674.21 would mean that my current count is wrong. Given those facts it is prudent to explore the alternative at this point.

My current count calls for a move down near 1561, followed by a move higher. I would anticipate this move to fall short of the previous 1687.18 high, and be followed by another move lower, most likely carrying the market to new lows.

My alternate count would be that 1598.23 was the low of this move, and would be followed by a move to substantially higher levels. My minimum target for this count would be 1800. If the SPX moved above 1648.69, I would start considering this count, and if the index moved above 1674.21, this would most likely become my preferred count.

At the moment I still consider a move to 1561 the most likely, with support at 1619, and then 1611.

Thank you.