Monday, September 9, 2013

Monday's Market 09/09/2013

The SPX gapped higher at the open, hitting 1663, and then 1666.15 after a small pullback. After reaching 1666, the index paused, dropping 4.5 points before resuming the move higher. The SPX rose steadily until late afternoon, rising to 1672.4, before spending the last part of the day trading sideways, between that high and 1670.01.


On Friday I said that it appeared the SPX had completed a 5 wave sequence at 1664.83, and another to the downside at 1654.45, indicating another move higher was likely. With today’s move higher, that seems to have been the correct interpretation. The move to 1666.15 this morning looks to be a wave 1, which was followed by an inverted corrective wave 2, which completed this afternoon at 1670.01. This would mean that SPX should make at least one more move higher.

By way of review, I have been looking at two possible scenarios for this wave. The first is that this is part of a complex correction from 1687 that would go something like 1687.18-1560.33-1709.24-1627.47-1685?-1540? This scenario would require the current wave to complete between 1680 and 1687. I erroneously stated on Friday that the SPX would need to drop further than Friday afternoon’s 1654.45 low for the current wave, as I have been counting it, to complete within that range. I apologize for that, as this wave from 1627.47, as currently constructed, could complete above 1683.

The second scenario has 1687.18 as a top, 1560.33 as a bottom, and a 5 wave sequence underway from that point that would go 1709.24-1627.47-1745-1680-1773. This had been the preferred sequence, as until Friday it looked as though the wave from1627 would complete above 1687. However, after I identified the inverted corrective wave on Friday, and the possibility of the SPX completing this wave between 1680 and 1687, both scenarios are at least equally likely, with perhaps a slight edge given to the first scenario.

There are a couple of reasons for this. First, there is a good possibility that this wave will complete within the 1680-1687 range. Second, if this wave does end there, the first support zone is setting up to be in the 1645 area. That would seem to be a pretty severe drop if the SPX were setting itself up for new highs. Also, many of the technicals are reaching overbought levels again.

As I said on Friday, the battleground is shaping up to be in the 1680-1687 range. If the SPX gets above 1687, I would be inclined to think that this market will continue higher. If the index gets into that 1683-1687 range, and then pulls back, it is likely that it is headed lower, most likely below 1560.

Shorter term, I am looking for the SPX to make one more move higher, to above 1683, and that should be followed by a pullback, as it would complete a sequence from 1627. Resistance is at 1685, with support at 1669, 1651, and then 1621.



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