Weekend Outlook 09/14/2013

Last Friday, with the SPX at 1655, I targeted the 1680-1687 range as a possible battleground for the bulls and the bears. On Tuesday morning the index moved above 1680, and the remainder of the week was spent between 1678.29, and 1689.97. On Wednesday the SPX moved above 1687.18, the upper limit for my semi-inverted corrective wave scenario that would have targeted a move lower to below 1560. This means that it is most likely that the index will continue higher, likely taking out the 1709 all-time high.

This has been a trying week for bulls and bears alike, and it seems only fitting that the market should head into the weekend without a clear resolution. I am still looking for the market to move higher, but I would feel more confident if the SPX could clear this 1685 support zone with some authority. Nevertheless, the SPX has moved above what I consider a critical level, 1687, and the wave structure still supports a move higher.

From the 1627.47 low, the SPX completed a 5 wave sequence to 1641.18. From that point, it formed a semi-inverted corrective wave that terminated at 1628.05. It was at this point that I indicated the index was poised to make an extremely powerful move to the upside. This semi-inverted corrective wave turned out to be but the first wave of an extended inverted corrective wave that eventually completed at 1640.62. So from 1627.47 the SPX has completed a wave 1 at 1641.18, and a wave 2 at 1640.62. The next move higher was to 1664.83, and looks to be wave 3 from 1627. This was followed by another inverted corrective wave that completed wave 4 at 1681.96. This gives an optimal target of 1639 for wave 5, very close to my original 1645 target.

When the SPX moved off its 1560.33 low in late June, I set a target of 1776. This target came into question as the index pulled back off the 1709 high, and eventually found its way to 1627. In my post on 9/4/13, http://5wavemodel.blogspot.com/2013/09/wednesdays-market-09042013.html, I outlined a scenario where the SPX could still reach that target. This entails the index forming 5 waves from the 1560 low that would complete a sequence from 1074.77 at 1773. These waves would go something like 1709.24-1627.47-1745-1680-1773. Given the discussion above, this seems to be a likely scenario. This would not complete a sequence from the 666.79 low, so there should be at least one more move to the upside after that.

For the week ahead, I am looking for a continuation of the move higher from 1627, with a target of 1745. My current wave count requires the SPX do hold above 1682. A break of that level at this point and the index could correct further, with support at 1669, 1651, and then 1621.