Wednesday's Market 09/04/2013

After opening slightly higher than Tuesday’s close, the SPX dipped briefly into negative territory before moving higher once again. The index climbed steadily to 1655.72 by mid-afternoon, before finally taking a breather. The SPX pulled back to 1652.51, then bounced back to 1655.35, before pulling back again to 1651.22 before the close.

Yesterday I presented three scenarios, of which the first one was the SPX holding above 1633, and then eclipsing yesterday’s 1651.35 high. I noted that if this scenario played out, I would expect the index to test the 1709, and possibly surpass it.

The larger scenario I presented yesterday was that the SPX was forming a semi-inverted corrective wave from the 1687 high. For this scenario to be correct, the SPX cannot surpass that 1687 high. I also noted that the current wave structure from the 1627.47 low pointed to a minimum target of 1693 for this wave. Given today’s action, it appears that 1693 would be the next minimum target, which would nullify the semi-inverted corrective wave scenario. The optimal target for this wave would be 1745, which makes a different scenario most likely.

As those who have followed me may remember, I had been looking for a minimum target of 1776 for the wave from the 1560 low. That would complete an entire 5 wave sequence from the October 2011 low of 1074.77. Using the optimal target of 1745 for this wave, it is possible to extrapolate a 5 wave sequence from 1560.33 as 1709.24-1627.47-1745-1680-1773. This fits quite nicely with my 1776 target.

On a shorter term horizon, the initial move to 1641.15 this morning appears to be a wave 1 from yesterday afternoon’s 1633 low. The SPX then completed an inverted corrective wave that went 1637.16-1655.72-1652.51-1655.35-1651.22. This also completed right at the 1651 support level. If this count is correct, the SPX should continue higher at this point. Resistance is at 1669, and then 1685. Support is at 1651, and then 1621. A move below 1634 would put this count in jeopardy, and a move below 1627 would invalidate it.