Tuesday's Market 09/10/2013

The SPX gapped up again this morning, and barely looked back. After hitting 1681 shortly after the open, the index continued higher until it reached 1683.77. From there the SPX pulled back 5 points, and then worked its way back to the intra-day high, and then surpassed it at the close.

I have been outlining two scenarios lately, one which has the market moving to new highs, 1745, and the other which has the SPX resuming its downtrend to below 1560. I have stated that the 1680-1687 range would be the battleground, and today the index found itself within that range. A top in this area would point to a continuation down to below 1560, while a move above 1687 would indicate a move to new highs.

  I have been looking at two wave sequences, with the first being from the 1627.47 low. Wave 1 of this wave completed at 1641.18, and was followed by a complex corrective wave that completed at 1640.62. Wave 3 completed Friday at 1664.83, and Wave 4 at 1654.45. This gives a target for Wave 5 above 1683. The second is from the 1654.45 Wave 4 low. Wave 1 of this 5^th wave completed at 1666.15. After a complex corrective Wave 2, this ended yesterday at 1670.01. At the moment it appears that the move above 1683 today only completed Wave 3 of this sequence. The pullback to 1678 then looks like Wave 4, but the SPX has yet to complete Wave 5.

The upper limit of the wave from 1627.47 is 1699, and I can now give a target range for Wave 5 of this sequence as 1690 to 1697. It now appears quite likely that the wave from 1627 will complete between 1690 and 1697, above 1687, and would indicate a move to new highs. I will be looking for a move above 1687 to confirm this scenario. If the SPX moves below 1678.29, the Wave 4 low, before moving above 1687, my short term count from that low is probably wrong, and the more bearish scenario would be in play.

A move above 1687 would indicate new highs, while a move below 1678, without moving above 1687 would most likely mean a move to below 1560.