Thursday's Market 02/27/2014

The SPX opened slightly to the downside today, but quickly recovered and moved above yesterdays close to 1847.04. This completed a 5 wave sequence following the completion of the semi-inverted corrective wave yesterday afternoon. From there the index again pulled back, falling to 1841.13. After that the SPX embarked on a more sustained rally, completing a 5 wave sequence to the upside at 1854.53. Another pullback, this time to 1849.93 was followed by three waves to the upside as 1853.51-1850.19-1854.13.

Putting today’s action together with the completed waves from 1840.19 reveals that a 5 wave sequence from that low may have completed at today’s 1854.13 close. From that low, Wave 1 completed at 1847.60. A quite complex semi-inverted corrective wave, which I have been describing the past two days, then completed a second wave yesterday at 1840.91. This wave appears to have been Wave A of a continuing Wave 2. Wave B was completed with the opening move higher, and was followed by the drop to 1841.13 which completed Wave C.  The extended rally through the afternoon to 1854.53 completed Wave D, with the pullback to 1849.93 Wave E, and finally Wave 2 from 1840.19. The three quick waves into the close then may have completed Waves 3, 4, and 5.

This count would indicate that a pullback from here is likely. Until the SPX breaks below 1840.19 it is possible for the index to move higher, but with a 5 wave sequence from that low, it appears likely that the next move will be lower. It is also possible that the SPX is still in Wave3 from 1840.19. The upper boundary for the 5 waves completed scenario is only slightly above today’s close, so any move to the upside at the open would suggest this is the case. I would still be looking for a move above 1858.71 to confirm a move higher is underway.

Wednesday's Market 02/26/2014

The SPX moved higher at the open today after completing the semi-inverted corrective wave at 1842.43 yesterday. That seems to have been only Wave A of a larger degree semi-inverted corrective wave. That wave completed today at 1842.43-1849.23-1843.47-1844.7-1840.91. That would indicate that at least the short term bias is to the upside. This may still be only part of a corrective wave from the 1840.19 low. If this move carries above 1858.71 the SPX is likely to move higher. A break below 1840.19, would likely been this correction has further to go, but I would still look for a break of 1835.60 to totally confirm this.

Tuesday's Market 02/25/2014

The last two days have been interesting in terms of wave structure. From Monday’s 1858.71 high, the SPX dropped to 1854.69. After an inverted corrective Wave 2, the index opened lower this morning to complete Wave 3 at 1847.66. After a small bounce to 1849.94 for Wave 4, Wave 5 completed at 1843.49. The SPX was not finished moving to the downside however, as the index want on to complete a larger degree wave as 1843.49-1845.34-1840.79-1842.42-1840.19. Waves of this structure often reverse sharply after moving beyond Wave 4, which in this case was 1842.42. This was no exception, as the SPX climbed to 1847.60 once clearing that level.

After pulling back to 1843.56 the SPX continued higher, this time reaching 1852.91. The index then went into an extended pullback throughout the remainder of the day. The SPX first formed a 5 wave sequence that completed at 1845.24, and then formed an inverted corrective wave then terminated at 1845.15. From there, the index made another small move lower to 1842.43.

Looking at the wave formation from the 1840.19, the SPX formed three waves to the upside, 1847.60-1843.56-1852.91. With the subsequent move below the second wave low of 1843.56, the move from 1852.91 to 1842.43, this could be interpreted as the beginning of an inverted corrective wave, which would indicate lower prices to come. But taking into consideration the fact that the 5 wave sequence lower from 1852.91, and the inverted corrective wave that followed both completed between 1847.60 and 1843.56, the first two waves from the 1840.19 low, it opened the door to another interpretation, namely the formation of a semi-inverted corrective wave. When the small drop from 1845.15 to 1842.43 completed within my model’s parameters, this was confirmed.

Generally these formations are followed by a very sharp move in the direction of Wave 1, which in this case is up. If this interpretation is correct, I would expect the SPX to move slightly above 1855, undergo a shallow pullback, and then continue higher.

If the SPX moves below 1842.43, this interpretation is wrong, and the index should move to new short term lows. A move above 1858.71 would confirm this scenario.

Monday's Market 02/24/2014

The SPX opened higher today, hit 1845.50, had an ever so slight pullback, and then continued higher to 1851.55. From there the index pulled back to 1849.24, and then rose steadily until it reached 1858.71. After that the SPX dropped to 1856, bounced slightly, and then gained momentum to the downside into the close.

Picking up the count from the weekend, I will make one small change to the short term count from 1824.58. As I discussed over the weekend, a 5 wave sequence completed at 1842.79. The change would be the move from there to 1846.13. It now appears that from 1842.79, the index formed an inverted corrective wave, and then completed a higher degree sequence at 1846.13. That high would be Wave 3 from 1737.92. Wave 4 then completed near Friday’s close at 1835.60. The move today can then be counted as 5 waves from that low, 1845.50-1844.09-1851.55-1852.15-1858.71. This would appear to be the 5^th wave from the 1737.92 low.

Assuming a 5 wave sequence from 1737.92 has completed, this could either be Wave 1 of 5 from 1560.33, or Wave E of an inverted corrective Wave 2 from 1560.33. In the first case I would expect support at 1815, and then 1775. In the second case, I would be looking at a target of 1743. To confirm one of these two scenarios is in play, I would like to see the SPX fall below 1835.60.

A rise above 1858.71 at this point would mean either that Wave 1 is still ongoing, or that Wave 2 has completed. If Wave 1 is still underway, it is possible that the index has just completed the fourth wave from 1824.58, or the Wave 2 low. 1846.13 would then be Wave 1 of 3, with either waves 2, 3, and 4 completed into today’s low, or an inverted corrective wave under formation. With the similarity in the pullbacks from 1846.13 to 1835.60 and 1858.71 to 1847.96, this is a possibility. On a move above 1858.71, 1873 would be the next resistance.

Weekend Outlook 02/23/2014

I apologize for the absence of posts late last week. The past few years seem to have been marked by one medical situation after another. As soon as one abates, another arises; this time in the form of a fractured wrist suffered by my wife, a result of an over abundance of ice around here lately. So in addition to my real job, I will be pulling double duty around the house for the next several weeks.

I have recently been trying to heed some unintended advice from someone whose opinion I have come to respect over the last few years, and someone I had come to regard as a friend. I fear I have damaged that relationship to some extent with some ill-chosen words, but still respect his opinion. This advice has to do with not seeing the forest for the trees, and conversely sometimes missing the trees for the forest. I have been told I tend to over complicate things, and in some respects that is true. Lately I seem to have been caught somewhere between the trees and the forest, so I have been trying to keep both of those in mind in my analysis. But I am sure no one comes here to hear about me, so I will leave it at that, and offer that analysis.

I will start with the trees, in particular the short term count from the recent 1847.50 high, and work my way out to the forest.  From 1847.50, I count 5 waves down, 1843.26-1845.05-1834.05-1841.71-1824.58. The SPX then completed three waves to the upside, 1842.79-1839.25-1846.13.

If one then widens one’s view to the 15 minute chart, one can see how this completes a 5 wave sequence from the 1737.92 low. From this low, the index completed the first wave at 1798.03, and then Wave A of an inverted corrective wave at 1791.83. Wave B then completed at 1822.27 and Wave C at 1809.22. Notice that the end of Wave B, 1822.27, completed below the high of the wave which was 1826.55. This was due to Wave D of an inverted corrective wave completing at 1826.55, and then Waves 3, 4, and 5 completing beneath that high. Wave D of 2 from 1737.92 followed, completing at 1847.50. The 5 wave sequence that followed, the sequence I started with was then Wave E, and completed the inverted corrective Wave2. The three waves I described from that point then completed Waves 3, 4, and 5, and a complete sequence from the 1737.92 low. Just as was seen in Wave B of this sequence, this sequence completed below the actual high of the sequence, which was 1847.50.

With a sequence seemingly completed from the 1737.92 low, one can once again widen the view, this time to the 4 Hour chart. This time frame tracks the sequence from the 1560.33 low. Wave 1 of this sequence completed at 1709.36. After more review, I have reverted to my original count for the next wave, going back to the 1639.43-1669.51-1627.47-1729.86-1646.47 inverted wave. This still seems to be the most appropriate count, and for now I will call this Wave 2 from the 1560.33 low. Assuming that count, I would next say that the move from 1646.47 to 1850.84 completed in 5 waves, and would become Wave 3. This wave gave me quite a bit of trouble during its formation. I counted the first three waves, 1711.57-1695.93-1759.33, and was looking for the completion of waves 4 and 5, but the SPX became somewhat choppy at that point and quite complicated to follow. After much consternation it now appears that Wave 4 was a very complex double inverted corrective wave, which also included a semi-inverted corrective wave. This will also play a part in an alternate count I will discuss shortly. The first inverted corrective wave completed between 1759.33 and 1746.20. This then became Wave A of a larger inverted corrective wave. Wave B carried the index to 1849.44, and had a semi inverted second wave. Waves C, D, and E, and Wave 4 from 1646.47 then finally completed at 1815.52. A final move higher to 1850.84 completed the sequence and Wave 3 from 1560.33 in this scenario. The drop to 1737.92 that followed would be Wave 4, with Wave 5 underway. Under this scenario the recently completed sequence at 1846.13 would be Wave 1 of 5. This would be a very bullish scenario, and would have an ideal target of SPX 2001.

In this scenario I would be looking for a small pullback, to be followed by a resumption of the move higher. Short term support would be at 1826, and then 1793. At this point, any move above 1846.13 would solidify this scenario.

The alternate scenario I alluded to has Wave 1 completing at 1709.36, followed by the inverted corrective wave that completes at 1646.47. However, in this scenario, this inverted corrective wave is Wave A of a larger inverted corrective wave, similar to the Wave 4 I described previously. The move to 1850.84 would then be Wave B, 1737.92 Wave C, and 1846.13 Wave D. That would put the SPX in Wave E of 2 from the 1560.33 low. In this scenario I would expect the SPX to move lower, to near the 1737.92 low to complete this wave. The actual target at this point would be 1733. From there the index should continue higher, but I like this to complete back near the 1850 level.

At the moment I prefer this scenario, but it hinges on the SPX remaining below 1846.13. Short term support is at 1826 and then 1793, while resistance is at 1844-1845.

Wednesday's Market 02/19/2014

The SPX gapped down this morning, dropping to 1836 near the open. Today was a mirror was in a sense a mirror image of yesterday. Whereas the index opened higher, dropped below the previous close, and then drifted  higher for the remainder of the day, the SPX did the opposite today. After opening lower, the index moved to new highs for this move, and then moved steadily lower through the rest of the day.

The move to slightly higher highs for this move was intriguing. The move above 1847 seems to decrease the probability of this marking the end of the move from 1560. This is above the upper boundary of the count I was looking at for that scenario. At the moment it seems more likely that this was the end of Wave 3 from 1560, with Wave 4 now in progress. I would look for the SPX to move lower to 1787 at this point, before making another push higher. I will keep both options open for the moment, and see how this wave develops.

Tuesday's Market 02/18/2014

The SPX opened slightly to the upside this morning, chopping its way higher to nudge above Friday’s high.  After hitting 1842.42 the index reversed direction and dropped to 1835.01. From there the SPX moved higher once more until reaching 1842.87. Trading then became choppy as the index moved between that high and 1839.33.

As some of you may know, I have been counting last month’s 1850.84 high as the completion of a 5 wave sequence from the October 2011 1074.77 low. I had been expecting a drop to 1679 before the next move higher. The SPX fell short of that mark, and so I have been reviewing my charts to try to understand why. During that review I noticed something interesting when looking at the chart from the 1560.33 low. The recent 1737.92 low may actually have completed an inverted corrective wave; a wave that I thought had ended at 1646.47. From 1709.36 the SPX has completed 5 well defined waves, 1627.47-1729.86-1646.47-1850.84-1737.92, which forms a 5 wave sequence.  And so it appears I was premature in calling 1850.84 the end of a sequence. Re-evaluating the entire structure from 1560.33 it appears that the SPX completed Wave 1 at 1709.36, which was followed by an inverted corrective Wave 2 that completed at 1737.92. This would mean that the index would need to complete Waves 3, 4 and 5 to complete the sequence from 1560.33.

Looking at the structure from the Wave 2 low, or 1737.92, there is a strong possibility that Wave 3 completed at 1798.03, Wave 4 at 1791.83, with the SPX in the range to complete Wave 5. This wave could have completed at 1842.87. It is also possible that 1842.87 is only the end of Wave 3. If that is the case the index should pull back at this point, and then make one more move higher.

Since this market has been notorious for finding a way to continue moving higher, I will remain cautious with this count until I see some price action confirming it. But it seems that a pullback of some sort is a strong possibility. I will work on some targets for both scenarios in the coming days.

Thursday's Market 02/13/2014

The markets headed lower this morning, with the SPX gapping down, and dropping almost immediately to 1809.22. The negative bias did not last long, as the index quickly reversed, and closed the opening gap by mid-morning. Just before noon the SPX hit 1824.65, where it paused momentarily, and pulled back to 1821.75. Once again the selling soon dried up, and the index continued higher, moving ahead to 1830.25 by mid-afternoon. Another pullback to 1827.29 followed, and then the SPX chopped higher into the close, reaching 1830.15.

Looking at the count once again from Monday’s 1791.83 low, I have made a slight change since yesterday. I had originally been looking at the initial move from 1791.83 to 1799.94 as a single wave. I am now counting this as three waves. This fits the rest of the sub-wave structure better, and shifts the Wave 1 high from 1826.55 to 1822.27. The move from that high to today’s 1809.22 low can then be counted as a 5 wave sequence. This turned out to be the first wave a very complex inverted wave structure. 5 waves can be counted from the 1822.27 high to the 1821.75 low which occurred shortly after noon today. This would be Wave A of the inverted wave, with Wave B carrying the SPX to 1830.25. I have been mentioning 1831 as the upper boundary of my current count from 1850.84. This level held, as the index dropped back, completing Waves C. D, and E, and Wave 2 at 1827.29. The choppiness into the close carried the index once again to just below the 1831 level, and completed Waves 3, 4, and 5 from 1791.83 at 1830.15.

If my current count is to remain intact, the SPX will need to stay below 1831. From the 1850.84 high I have 1835.23 as Wave 1. Wave 2 is being counted as an inverted corrective wave which looks to have completed today as 1849.31-1739.66-1798.03-1791.83-1830.15. My downside target remains at 1679.

Wednesday's Market 02/12/2014

The SPX opened higher once again this morning, reaching the high of the day early on at 1826.55. This week long rally has been pretty impressive, with the SPX rising from 1737.92 to 1826.55, that would be 89 points for you Fibonacci fans, with but one lone 11 point pullback being the only blemish on a nearly vertical move. Although impressive, this rally can also be viewed as a classic short covering rally. As the index neared, and the fell from, the 1850, many people, including myself, started calling for a correction. The depth of the correction varied by analyst, but most were looking for some sort of pullback. This view was reinforced as the SPX continued to decline, eventually falling below 1740. This marked the largest decline since the May-June 2013 move from 1687.18 to 1560.33. With ample warning it is likely that many people had shorted, or at the least moved to a neutral position. Once the index started moving higher, traders could not get back in fast enough, leading to this impressive rally. The question now is whether there are enough buyers left to push the markets higher, or has this sharp rise only solidified the buy the dip mentality. Perhaps this will lead to continued complacency if the markets start to move lower once more.

That, unfortunately, is a question that can only be answered in time. My view continues to be that the SPX will move lower, with a target of 1679. But getting back to the market, I will start with the move from Monday’s 1791.83 low. The move from that low to Monday’s high of 1799.94 looks to be a Wave 1. The index then pulled back to 1797.31 into the close, and then started off Tuesday morning by rising to 1806.45. I see these as Waves 2, and 3. Wave 4 would turn out to be an inverted corrective wave, which topped yesterday at 1823.54, and then completed near yesterday’s close at 1818.38. Wave 5 then completed this morning at 1826.55. From there, the SPX pulled back to 1815.97 in a 5 wave sequence, and then bounced back to 1822.27 in three waves, before pulling back into the close.

My current count then has Wave 1 from 1850.84 completing at 1835.23, with the entire action from that point being an inverted corrective wave completing as 1849.31-1737.92-1798.03-1791.83-1826.55. This move could move slightly higher, but 1831 is the upper boundary for this count, and any move above that would greatly increase the likelihood that a complete sequence completed at the 1737.92 low, with the SPX now on its way to new highs. I will address that scenario if 1831 is surpassed. Until then I will continue to look at 1679 as the next target.

Tuesday's Market 02/11/2014

It was “another day, another twenty points to the upside” for the SPX. I will be the first to admit that my count since the SPX reached 1740 has been somewhat suspect. Following today’s action it became readily apparent that I needed to re-evaluate my count from the 1850.84 high. I have spent much of the night doing just that, and have adjusted my counts accordingly. Although my count from 1850.84 has changed, my outlook remains the same. I continue to count 1850.84 as the completion of a 5 wave sequence from the October 2011 1074.77 low. This does not, however, complete a sequence from the 666.79 low.

I still think the bull run from the 666.79 low has further to go, and I was expecting a correction to 1679 before a resumption of the move higher. Although there are several different scenarios from 1850.84, I will save that for a later date. At the moment I will concentrate on the shorter term count from that point.

From 1850.84, the SPX made an initial drop to 1835.23. I still consider this Wave 1. After bouncing higher to 1849.31, the index fell sharply over the next two weeks to 1737.92. This has been the perplexing move, as the fell steeply at points, and then went into very choppy periods. I had some trouble deciphering and tracking all the moves. I now believe this entire move was one single 5 wave sequence. So from the 1850.84 high, I have 1835.23 as Wave 1, the bounce to 1849.31 as Wave A of an inverted corrective Wave 2, followed by Wave B of 2 to 1737.92. It appears that Wave C completed at 1798.03 and Wave D at 1792.01. Today’s high of 1823.54 falls within the range to complete Wave E, and thus Wave 2, although 1831 would be the upper boundary for this wave.

This count still implies further downside, and I will keep my target of 1679. A move above 1831 would invalidate this count, and at that point I would have to consider the next move to new highs started at the 1737.92 low.

Monday's Market 02/10/2014

It was a relatively quiet day for the markets, following Friday’s big gains. The SPX opened slightly lower, and moved down to 1793 before rebounding to 1798. Another move lower took the index to 1792, and that proved to be the low for the day. From that point the SPX rose to 1797 by noon, paused until mid-afternoon, and then resumed the push higher to 1799.94. From there the index pulled back to 1797, bounced to 1799, pulled back again to 1797, and then moved back to 1799.77 near the close.

The move today looked like a small continuation of the wave that started last Thursday afternoon, and carried over into Friday. The SPX is still within the range to complete a complex corrective wave from January 29^th’s 1770.45 low. In fact it is right at the 1800-1801 resistance level I had talked about on the 28^th.

Tomorrow should be an interesting day. I am still inclined to see the move from 1770.45 to now as a complex corrective wave. This implies that the SPX will move lower from this point. In my mind this is still but a pullback in an overall bull market. My downside target remains at 1679.

Friday's Market 02/07/2014

Well, today obviously did not go as I had expected.  After the SPX completed a 5 wave sequence from 1739.66 yesterday afternoon, it seemed probable that the index would resume the downtrend from the 1850.84 high. That did not happen, as the SPX moved to 1788.25 near the open, pulled back to 1777, and then moved steadily higher throughout the remainder of the day, topping out at 1798.03.

Looking at today’s move, it appears to be one complete 5 wave sequence, 1788.25-1786.63-1795.47-1793.98-1798.03, which included an inverted corrective Wave 2, 1777.28-1788.63-1786.77-1788.6-1786.83. If you recall, I had counted yesterday’s high as the completion of a semi –inverted corrective wave from 1739.66 low, and the completion of Wave E which completed an inverted corrective Wave 2 from the 1850.84 high. I had mentioned that the SPX could move higher and still support this count, the index moved above the upper boundary for this count, making it invalid.

With that count invalid, I must now re-evaluate my count. This takes me back to the January 29^th 1770.45 low. This is the termination point of Wave C of the inverted corrective Wave 2 from 1850.84. From that point I have counted 5 complete 5 wave sequences, 1798.77-1739.66-1773.46-1771.33-1798.03, which brings us to today’s high. This series is interesting because it meets the criteria for a 5 wave sequence. So the entire move from the 1770.45 low can be viewed as an inverted corrective wave. This can be either all of Wave C of the inverted corrective wave from 1850.84, or it could mean that the SPX completed 3 waves from 1850.84 as 1835.23-1849.31-1770.45, which was then followed by an inverted corrective Wave 4. Both of these counts suggest that the downtrend should now resume.

Of the two scenarios listed above, the first would still target 1679, while the second would present a very bearish case, targeting much lower than 1679. If the SPX continues higher from this point, the probabilities increase that the index is headed to new highs. It is also important to note that I still consider 1850.84 the completion of a sequence from 1074.77, and both of these scenarios are consistent with that view. 

Thursday's Market 02/06/2014

Yesterday I described the current wave structure from Monday’s 1739.66 low as a semi-inverted corrective wave, with a target of 1776. This would be Wave E of an inverted corrective Wave 2 from the 1850.84 high, which I had targeted to complete at 1773.

Wave D of this semi-inverted corrective wave ended yesterday afternoon at 1749.92. The first wave of Wave E also occurred yesterday afternoon at 1755.56, as well as Wave A of the second wave, which turned out to also be an inverted corrective wave. The SPX opened higher, reaching 1762 shortly after the open. After a short pullback, the index kept moving higher, finally reaching 1770.54 by late morning. The SPX then traded in a narrow range through early afternoon, hitting 1770.78. This was Wave B of 2, and was followed by a minor pullback to 1766.47 for Wave C. Wave D carried the index to 1773.21, with Wave E following, taking the SPX down to 1770.55, and completing Wave 2 from the 1749.92 low. Waves 3, 4, and 5 followed quickly thereafter, as the index drifted higher into the close at 1773.46-1771.33-1774.06.

This would seem to complete Wave 2 from the 1850.84 high, with a resumption of the move lower probable. My target for this entire move to the downside is 1679. While it is possible for the SPX to move higher from the current point and still keep this wave count intact, I am not expecting that.

Wednesday's Market 02/05/2014

It was another choppy day for the markets, as the SPX remained range bound for the second straight day. Yesterday afternoon the index had completed 5 waves down from the 1758.73 high at 1749.58, and then rebounded to 1757.07 onto the close. I expressed my reservations about a continued move to the upside, and this morning the SPX started the day lower, falling to 1749. After a small bounce the SPX fell further, dropping to 1744. The index then rallied sharply, rising to 1754 before reversing course and dropping to a new low from the 1850.84 high at 1737.92. This completed a higher degree sequence from 1758.73 high.

From there the SPX rebounded, rising to 1746, dipping back to 1740, and then steadily rising until it reached 1755.79 by early afternoon. This looks to be a 5 wave sequence from the morning’s 1737.92 low. The index then fell to 1749.92 before recovering into the close.

Yesterday I said the move from 1739.66 to 1758.73 looked to be 3 waves. There is another, more complex count that shows it as 5 waves. Using that count, it looks like 4 waves have now completed from Monday’s 1739.66 low, 1758.73-1737.92-1755.79-1749.92. You will notice that the second wave, 1737.92, completed below 1739.66, and the third and fourth waves completed between 1739.66 and 1758.73. This is exactly what I would expect to see in a semi-inverted corrective wave. Given the 4 waves that have completed, the fifth wave projects to 1776, quite close to the 1773 level I have been mentioning. And so, it appears that the count I have been looking at, namely a move to 1773, followed by another leg to the downside, possibly to 1679, is still on track.

Tuesday's Market 02/04/2014

In the wake of yesterday’s market rout, I was expecting a move higher today, and that move started from the opening bell. After quickly running up over nine points at the open, the SPX then settled into a slightly upwardly biased choppy range for the next two hours. The index pulled back to 1745, and then rallied again to 1754. Another pullback took the SPX to 1748, at which point it rallied once more to 1753, and was followed by another pullback to 1748. A more prolonged rally took the SPX to the high of the day at 1758.73 by early afternoon. The choppiness then returned, as the index bounced between 1750 and 1757 into the close.

From yesterday’s 1739.66 low, it looks like a Wave 1 higher occurred at 1752.19, and was followed by an inverted corrective Wave 2 that completed at 1747.84. A five wave sequence then looks to have completed at 1758.73 which may be a Wave 3, with a 5 wave sequence lower then completing at 1749.58.

I have been looking for a move from the 1739.66 low to a minimum of 1762, with an ideal target of 1773. This would complete an inverted corrective wave, and would be followed by another move lower to 1679. That remains my preferred count, but some red flags were raised today. First, the SPX failed to reach the 1762 threshold. Second, given the four waves completed from the low, Wave 5 would project to complete below 1762. While this could simply mean that this bounce will continue a bit longer, it could also suggest that there is something else going on. An alternate count puts the SPX still in Wave D of 2 from the 1850.84 high, which means the next leg down could start from this point.

Monday's Market 02/03/2014

On Friday I posted that I was looking for the SPX to move higher, to 1800, before the next leg of this ongoing decline got under way. That did not happen, as the index rose slightly at the open, and then went into free fall throughout the remainder of the day. This means that my short term count was incorrect, but actually increased the probability that the medium term count is correct.

I have modified my count beginning with Wednesday’s 1770.45 low. That low would be Wave B of 2 from the 1850.84 high. That would make the rally on Thursday to 1798.77 Wave C of 2 from that high. From that point the SPX dipped, and then recovered slightly into the close.  I now count that as a Wave 1, followed by a Wave A of an inverted corrective Wave 2. Wave B then was the steep drop on Friday morning, and was followed by Waves C, D, and E into the afternoon, which completed the Wave 2 inverted corrective wave. The SPX then dropped again, in three waves, into Friday’s close. This can then be counted as Waves 3, 4, and 5 from Thursday’s Wave C high of 1798.77. This 5 wave sequence appears to have been only the first wave of a larger degree sequence from that high. The small rise this morning completed Wave A of an inverted corrective Wave 2. This wave would eventually carry the index down to 1751 with Wave D, and completed at 1757. It then looks like Waves 3, 4, and 5 completed into the close. With a 5 Wave sequence now completed from the Wave C high, it is likely that Wave D completed today at 1739.66.

While my short term counts have been suspect, the major points I outlined last Tuesday have remained intact. I had a possible scenario as 1800-1801, a drop to 1744 followed by a bounce, and then a final move lower to 1679. On Thursday the SPX hit 1798.77, and was followed by a decline to 1739.66. I would now expect a rally to complete Wave E, and Wave 2 from 1750.84. I am looking for a minimum of 1762, with an ideal target of 1773 for this rally. From there I am still looking for a further decline to 1679.