Wednesday's Market 07/30/2014

After opening higher, the SPX reached 1978.90 before changing direction. The index quickly declined to 1962.42 before rebounding to 1976.24.

Yesterday I mentioned that I was waiting for some very short term waves to resolve themselves. Part of that began today with the open into the 1978 area I had indicated might be important. This seems to have completed a Wave D from 1979.95. This can be seen as the red A, B, C, and D on the 5 Minute Chart. Wave E has a target of 1945-1955. This target calls into question my count from the 1985.59 high, or Wave D in yellow on the 4 Hour chart. Since this target indicates that the previous low from that high, 1952.86 may be taken out. If that occurs it seems likely that the corrective wave from 1985.59 has not yet completed. I would still expect this wave to remain above 1937.

If this plays out I will explain the implications in more detail. For now, it looks like 1945-1955 is the next target. I would then be looking for a bounce to 1969.

Chart of the Day:

Tuesday's Market 07/29/2014

I had thought that the SPX had put in a bottom last Friday at 1974.37. That was not the case. After an afternoon rally on Friday, the index failed to follow through on Monday, moving down sharply to 1967.31. A strong rally followed that drop, lifting the SPX to 1984.85. That rally ended this morning, and the SPX moved lower once again, first to 197.53, and then 1970.34.

My longer term view remains unchanged. The SPX, in my view, still needs to complete several waves up to complete the sequence from 1074.77. The shorter term outlook is not as clear. The simple view would be to see the move lower from Friday’s rally as part of an inverted corrective wave from 1986.24. There are several very short term waves that have not been resolved in my opinion, and so I am hesitant to be overwhelmingly bullish. For several reasons I still think the SPX is in a complex corrective wave from either 1986.24, or 1969.84, although it is likely that the index has put in the low of this corrective wave.

It does appear that a wave completed today at 1970.34. The SPX should move higher at the open tomorrow, possibly to 1978. And now that I’ve written all that, I have just seen a quite elegant solution. A complex inverted corrective wave may have bottomed at 1970.34. If the SPX can move above 1978, it should continue to rally.

Charts of the Day:

Friday's Market 07/25/2014

 The SPX reversed the trend of the previous two days by gapping down at the open instead of up. But unlike the last two days, there would no closing of the gap today. Within ten minutes the index had dropped to 1978.37, and then tried to rally. After reaching 1983.17 the SPX moved lower again, this time falling to 1974.37. After that the index moved slightly higher, trading sideways between that low and 1979.95.

2 Day Chart:

The SPX is currently in Wave 5 from 1074.77 with a minimum target of 1776, and an optimal target of 2041-2046. Wave 5 began at 1560.33.

4 Hour Chart:

This chart shows the progress of Wave 5 described above. Four waves have completed, along with Waves 1, and 2 of 5. Wave 5 target is between 1957 and 2064.

10 Minute Chart:

With Waves 1 and 2 completing at 1882.35 and 1952.86, this chart is tracking Wave 3 of 5 from 1952.86. Currently four waves of Wave 3 have completed, with a Wave 5 target of 2003-2060, and an optimal target of 2018.

5 Minute Chart:

It was an interesting day, and as I remarked yesterday the SPX did leave us with something to think about this weekend. Yesterday afternoon the index completed Wave E from 1989.06 at 1985.79, and then bounced to 1989.06 before the close. That bounce, coupled with the drop this morning, and the ensuing rally to 1983.17 completed an inverted corrective wave as 1985.79-1989.06-1978.37-1981.39-1980.41-1983.17. Another 5 wave decline followed, completing at 1974.37. Looking at the 5 Minute Chart from 1986.24, the SPX completed sequences at 1981.27, 1989.06, 1985.79, 1983.17, and 1974.37. By putting these together, and then pairing them off, one gets the points (1986.24, 1981.27), (1989.06, 1985.79), (1983.17, 1974.37). These points have an R^2 value of .990955, and thus complete a sequence. Given this it appears that the entire move from 1986.24 to 1974.37 has been one complete corrective wave. The count from the 1965.77 low now becomes Wave 1 at 1971.20, Wave 2 at 1973.37, Wave 3 at 1986.24, and now Wave 4 at 1974.37. The change in wave structure also requires a change in the target price, which I would now put at 1987-1990.

There is another possibility I will discuss. Looking at the waves from 1965.77 to 1986.24 on the 5 Minute Chart, I have been counting this as three waves, 1971.20-1973.37-1986.24. With one minor wave addition this counts as a complete 5 wave sequence. 1971.20 would be Wave 1, what I have labeled as  Wave A would be Wave 2, Wave B would be Wave 3, and Waves C, D, E, 1, 2 would an inverted corrective Wave 4. There is a small wave between Waves 2 and 3, and I count this as a Wave 1, and a Wave 2, Waves 3, 4, and 5 complete that sequence. This gives 1965.77-1971.20-1969.51-1975.51-1979.62-1989.06. This would give an R^2 value of .999781. This second scenario would require the move from 1965.77 to 1986.24 to be a complete 5 wave sequence.

Considering this for the moment as a completed 5 wave sequence, and looking back at the 10 Minute Chart, another larger wave sequence may also have completed today. Recall Wave 1 on that chart completed at 1969.84. A sequence then completed at 1955.59, another at 1979.91, and a third at 1965.77. Assuming another sequence completed at 1986.24 as explained above gives the fourth sequence, and I described how another sequence completed from that point today at 1974.37 for the fifth. Taken together these waves can be seen as1969.84-1955.59-1979.91-1965.77-1986.24-1974.37. This gives the points (1969.84, 1955.59), (1979.91, 1965.77), (1986.24, 1974.37). These points have an R^2 of .99323, which would complete a sequence.

Yesterday I mentioned that if the current wave were to complete short of 2003, I would expect a pullback of about 14 points, which was the extent of Waves 2 and 4 of the wave from 1952.86. The wave that completed today from 1986.24 was about 12 points (1986.24-1974.37).

Given the possibilities, it seems most likely that the SPX completed an inverted corrective Wave 2 from 1969.84 as seen on the 10 Minute Chart. If so this would likely alter the targets for this wave. This does not change my view that the SPX still has at least a couple of waves higher to complete before the wave from 1074.77 ends. 

Thursday's Market 07/24/2014

Today was almost an exact duplicate of yesterday. After a higher open, the SPX reversed course, dropping into negative territory. After that the index reversed course once again, moving up to a new all time high by late morning. After establishing that new high, the SPX drifted mostly lower throughout the afternoon.

2 Day Chart:

The SPX is currently in Wave 5 from 1074.77 with a minimum target of 1776, and an optimal target of 2041-2046. Wave 5 began at 1560.33.

4 Hour Chart:

This chart shows the progress of Wave 5 described above. Four waves have completed, along with Waves 1, and 2 of 5. Wave 5 target is between 1957 and 2064.

10 Minute Chart:

With Waves 1 and 2 completing at 1882.35 and 1952.86, this chart is tracking Wave 3 of 5 from 1952.86. Currently four waves of Wave 3 have completed, with a Wave 5 target of 2003-2060, and an optimal target of 2018.

5 Minute Chart:

Wave 4 of 3 completed at 1965.77. This chart tracks Wave 5 of 3. As is shown on this chart, four waves of the 5 wave sequence from 1965.77 have completed. The target for wave 5 is 1998-2008. This chart is also tracking the progress of Wave 5. I am counting yesterday’s 1989.06 as the completion of Wave 1. I further identified yesterday afternoon’s 1984.81 low as either Wave 2, or Wave A of a more complex corrective Wave 2. From that 1984.81 low, the SPX completed a 5 wave sequence at today’s 1991.39 high. Another 5 wave sequence followed, this time to the downside, and completed at 1987.03. The index first moved higher to 1990.24, and then lower to 1985.79, before moving higher into the close.

The 5 waves from the 1989.06 high can be seen as 1989.06-1984.81-1991.39-1987.03-1990.24-1985.79. The points (1989.06, 1984.91), (1991.39, 1987.03), (1990.24, 1985.79), have an R^2 value of .994393, meaning that this sequence counts as a complete sequence, and most likely Waves A, B, C, D, and E of an inverted corrective Wave 2. There is one caveat to this; Wave E (1985.79), did complete below the Wave 1 high (1989.06). In many instances of the past several weeks this type of corrective wave has turned out to be only Wave A of a larger corrective wave. If this is the case I would not be surprised if the SPX moved slightly lower from here, but the decline should be similar in size to Wave A, perhaps 3-5 points.

One other thing to keep in mind is that a similar thing may be happening from the 1952.86 low as seen on the 10 Minute Chart. My target for this wave is 2003-2060, while the target generated so far by Wave 5 of this sequence from 1965.77 is 1998-2008. The sequence from 1965.77 can complete below 2003, which would not complete the sequence from 1952.86. If this does happen, I would expect a decline similar to the ones seen between Waves 1 and 2, and Waves 3 and 4, both of which were around 14 points. The SPX will no doubt give us something to think about over the weekend. 

Wednesday's Market 07/23/2014

The SPX gapped higher again this morning, but this time quickly reversed and closed the gap within the first twenty minutes of trading. The index reached 1987.46 before falling back to 1982.44. The rest of the morning saw the SPX moving higher, making it to 1989.23. A decline to 1984.81 followed, with the index rallying back to 1988.73 before the close.

2 Day Chart:

This chart shows the main wave from 1074.77 that I have been tracking. So far the SPX has completed four waves of the 5 Wave sequence. Wave 1 completed at 1292.66, Wave 2 at 1158.66, and Wave 3 at 1422.38. Wave 4 was an inverted corrective wave, which completed as 1422.38-1266.74-1474.51-1343.35-1687.18-1560.33. The points (1422.38, 1266.74), (1474.51, 1343.35), (1687.18-1560.33) give an R^2 value of .995468. Given the waves already completed, a Wave 5 target can be extrapolated. The minimum value for this target is 1776, which has already been surpassed, with an optimal target of 2041-2046. The range for this target is admittedly large, so tracking the smaller degree waves should help narrow the range.

4 Hour Chart:

As shown on the 2 Day Chart, Wave 4 from 1074.77 completed at 1560.33. The 4 Hour Chart picks up the count from that point. Once again, it appears that the SPX has completed four waves of this sequence. Wave 1 completed at 1709.36, with Wave 2 being an inverted corrective wave that completed at 1646.47. Wave 3 completed at 1850.84 and Wave 4 at 1737.92. Again, with four waves completed, a Wave 5 target can be generated. This target is 1957-2064. Additionally, from the Wave 4 low of 1737.92, Waves 1, and 2 of 5 have completed, at 1882.35, and 1952.86, with Wave 2 being a very complex inverted corrective wave.

10 Minute Chart:

1952.86 is then the starting point on the 10 Minute Chart. So far, this wave also has completed four waves. Wave 1 ended at 1969.84, and was followed by another complex corrective wave, this time a semi-inverted one, which completed at 1955.59. Waves 3 and 4 can be seen as completing at 1979.91, and 1965.77. The target arrived at for this sequence is 2003-2060, with an optimal value of 2018.

5 Minute Chart:

With Wave 4 on the 10 Minute Chart completing at 1965.77, the 5 Minute Chart shows the progress of the wave from that point. This wave has also completed 4 of the 5 waves at 1971.20-1973.37-1986.24-1981.27. This structure gives a target for Wave 5 of between 1998 and 2008. When this wave completes, it will mark the end of the third wave from 1937.92 as seen on the 4 Hour Chart. I would then expect another shallow decline for Wave 4 and then one final move higher for Wave 5. This should complete the entire sequence from 1074.77 as seen on the 2 Day chart. 

Tuesday's Market 07/22/2014

It was another gap higher open to begin the day. After running up quickly to 1982.58, the SPX paused slightly, and then stair stepped to 1986.24. The index then traded sideways in a narrow range through mid-afternoon before breaking down to 1981.27. This was followed by a recovery to 1985.07 before a dip into the close.

5 Minute Chart:

Continuing my short term count from yesterday, the SPX followed up the inverted corrective Wave 2 with a 5 wave sequence to 1986.24. This completed as 1973.37-1982.58-1979.62-1985.06-1982.85-1986.24. Taking the points (1973.37, 1982.58), 1979.62, 1985.06), 1982.85, 1986.24), yields an R^2 value of .991167. The SPX then completed a sequence lower as 1986.24-1984.13-1986.13-1983.96-1985.35-1981.27, with the points (1986.24, 1984.13), (1986.13, 1983.96), (1985.35, 1981.27) having an R^2 value of .996333. After rebounding to 1985.07, the SPX dipped slightly. Short term support is at 1977, with resistance between 1990 and 1999.

10 Minute Chart:

The 10 Minute Chart shows the wave sequence from the 1952.86 low. So far the SPX has completed Wave 1 at 1969.84, which was followed by a very complex corrective wave to 1955.59. I have this labeled as Wave 2 on the chart. A sequence higher to 1979.91 followed, and then a sequence lower to 1965.77. I currently have these labeled as Waves 3, and 4. Given this count, Wave 5 would need to complete above 2003. There is also the possibility, as I alluded to a couple of days ago, that these waves are still part of an even more complex corrective wave from 1969.84, or the Wave 1 top. This scenario may come into play if the SPX does drop to 1977 as discussed above. I will cover this in detail when and if it happens.

60 Minute Chart:

On the 60 Minute Chart the completed Wave structures from 1814.36 to 1985.59, and 1985.59 to 1952.86 can be seen. These are labeled Wave D, and Wave E. Wave D completed as 1814.36-1884.89-1925.78-1968.17-1944.69-1985.59. These points, (1814.36, 1884.89), (1925.78, 1968.17), and (1944.69, 1985.59) have an R^2 value of .999222. Wave 2 was an inverted corrective wave with the points (1884.89, 1850.61), (1891.33, 1862.36), and (1955.55, 1925.78) having an R^2 value of .995999.

4 Hour Chart:

On the 4 Hour Chart, the entire sequence from 1560.33 can be seen. This is the sequence that needs to complete to end the larger sequence from 1074.77. So far I count 4 completed waves, 1709.36-1646.47-1850.84-1737.92. Given this structure Wave 5 can be projected to complete between 1957 and 2064.

2 Day Chart:

This is the Wave that most are waiting for. As shown on the chart, 4 waves have completed. The SPX is already within the range to complete this wave, however the smaller degree waves must resolve themselves before it can actually complete.

Monday's Market 07/21/2014

While the SPX did not move higher today as I had anticipated, my overall outlook that the index will soon make new all time highs remains unchanged.

The SPX started of lower this morning, falling to 1965.77 within the first hour and a half.  Once again, after that initial drop, the index spent the rest of the day in recovery mode, climbing back to 1975.83 before dipping into the close.

Obviously my short term count from Friday was incorrect, as the SPX did not move higher at the outset. Friday’s bounce from 1955.59 to 1979.91 now looks to be a simple 5 wave sequence to the upside, which was followed by a sequence lower this morning to 1965.77. My 10 Minute Chart shows the entire wave thus far from the 1952.86 low. Friday’s 1979.91 high can be seen as Wave 3, with today’s decline Wave 4. Wave 5 looks to be underway from 1965.77. So far it looks like the SPX has completed a Wave 1, followed by an inverted corrective Wave 2. If so, the index should now move higher to complete Waves 3, 4, and 5.

With the wave structure so far, Wave 5 from 1952.86 should complete above 2003, with an optimal target of 2018. Once this wave has completed, the SPX should undergo another shallow decline, followed by one more move to new highs. This would complete the entire sequence from 1074.77.

Short term resistance is at 1981 and then 1990-1999. Support is at 1961-1962. I am looking for the SPX to move higher, with a target as of now above 2003.

Friday's Market 07/18/2014

I will apologize in advance for this being a brief update. It was a very long day at the paying job, with another one on tap for tomorrow. I did however; want to comment on today’s market.

Yesterday I outlined two possible scenarios, one bearish, and the other bullish. The bearish scenario would come into play with a break below 1952.86, which did not happen. At least not today that is. Looking at the SPX from yesterday’s 1955.59, there was a small move to 1959.95 before the close, and then a slight dip. Today the SPX opened higher, and completed a 5 wave sequence from the slight dip (1957.68) at 1974.06. After reaching that point, the index chopped its way to 1971.80, and then completed another sequence higher at 1979.81. This was followed by a small pullback to 1976.64. The three small pullbacks, 1959.95-1957.68-1974.06-1971.80-1979.91-1976.64, can then be counted as an inverted corrective wave. The result is a Wave 1 to 1959.95, followed by an inverted corrective Wave 2 that completed at 1976.64. This would suggest a continuation of the advance from 1952.86.

From 1952.86 Wave 1 completed at 1969.84. Wave 2 was the very complex semi-inverted corrective wave that completed yesterday at 1955.59. In my model, waves are proportional dependent on the starting point of the wave. With the shortness of Wave 1 from 1955.95 to 1959.95, it seems likely that Wave 3 will be longer than that, and Wave 5 longer still. Wave 1 from 1952.86 was about 17 points. The current wave from 1955.59 is already over 24 points, and should eventually be even longer. If this is Wave 3, it would project Wave 5 to be extremely long. Given this it seems likely that the entire move from 1969.84 to 1955.59 was a Wave A of an even more complex corrective Wave 2. This would have the effect of tempering the length of the entire wave from 1952.86. I will keep an eye on this going forward. I will try to update again over the weekend at some point.

Thursday's Market 07/17/2014

Today was a decidedly down day for the SPX. From yesterday’s 1983.94 opening high, the SOX completed a 5 wave sequence down to 1965.95. Although this fell exactly within the range I gave yesterday, I had expected 5 waves from 1982.45. This nullified my scenario from yesterday, and with the subsequent breach of the 1964-1966 support area, forced a re-evaluation of my count from the 1952.86 low.

I still have a sequence completing at 1969.84 from that low. Today’s 5 wave sequence from 1983.94 to 1965.95 completed an inverted corrective wave from 1969.84. This formed as 1959.63-1982.52-1965.34-1983.94-1565.95. With the bounce to 1975.99 that followed, the market action from 1952.86 can be counted as the first 3 waves of an inverted corrective wave, 1969.84-1965.95-1975.99. This would suggest the SPX is still in a corrective wave from 1985.59. A break below 1952.86 would confirm this. I would still be looking for this wave to complete above 1937.

Until the SPX moves below 1952.86, I will still keep my count of 1952.86 as the end of a corrective wave, and 1969.84 as Wave 1 of a continuing advance.  Under this scenario the 5 waves from 1969.84 can be seen as Wave A of a semi-inverted corrective wave1975.99 as Wave B, With Waves C, D, and E completing at today’s low of 1955.59. At the moment this scenario seems like the lower probability, but this market has liked surprises.

Wednesday's Market 07/16/2014

Today started with a gap up which saw the SPX reach 1983.94 within the first ten minutes of trading. That turned out to be the high for the day as the index reversed quickly and gave back most of its gains, falling back to 1975.67. The SPX tried to rally back into the afternoon, but after reaching 1982.45 it reversed again, fading into the close.

I have relabeled the advance which began yesterday afternoon. It now appears to have been only part of a 5 wave sequence which concluded with this morning’s high at 1983.94. From that high it looks as if the SPX completed a sequence down to 1975.67, and then a sequence higher to 1982.45. I continue to see this as an incomplete advance from 1952.86, with the first wave of the sequence ending at 1969.84. The SPX then looks to have completed Waves A, B, and C of a continuing inverted corrective wave, with Wave C completing at 1959.63. The SPX now appears to be in a complex Wave D. There a many ways this can complete with the given wave structure, but I will outline the two most obvious ones at this point. I have added support and resistance levels from these two scenarios on the 5 Minute Chart. Again, these are simply the two most obvious of many short term scenarios.

Yesterday morning’s 1982.52 high can be counted as Wave 1 of D. The decline to 1965.34 can then be counted as Wave 2 of D, or Wave A of an inverted corrective Wave 2 of D. This morning’s high is then Wave 3 or B, the 1975.67 low Wave 4 or C, which then leaves us with the advance to 1982.45. If this turns out to be Wave D of 2, the Wave E low can be projected to be 1964-1966. 1982.45 may also turn out to be Wave 1 of 5 of D from 1959.63. If the first 4 waves of Wave D have completed as outlined above, 1982.52-1965.34-1983.94-1975.67, Wave 5 would project to 1986-1987.

To recap, with the given wave structure, there is support at 1964-1966. This would complete Wave 2 of D, and clear the way for a further advance. Resistance is at 1986-1987, which would complete Wave D of 2 from 1952.86. I would then look for a decline to perhaps 1975 to complete Wave E, and Wave 2.

Both of these are very narrow ranges, which opens the possibility that the SPX may clear them. A break above 1986-1987 would be bullish, and a break below 1964-1966 would not only be bearish, but might put my current count from 1952.86 in jeopardy.

Tuesday's Market 07/15/2014

The SPX started the morning by moving higher, in line with my analysis from yesterday. It appears the index did complete the sequence from 1959.63 as I had expected, although it was short of the 1991 level I had mentioned. That target was derived using a secondary technique, which is sometimes less accurate, so the 1982.52 high was acceptable. The SPX began to move lower from that point, and moved down to 1968.91 with only minor bounces. This was within the range to complete the inverted corrective wave from 1969.84, and the source of my call for an 8+ point pullback; however it did not reach this point with a complete 5 wave sequence. Instead, the SPX continued to fall to 1965.34 before completing the sequence, which was beyond the range to complete the inverted corrective wave. After completing that sequence, the index completed a sequence to the upside, bouncing back to 1976.16 before fading into the close.

Since it appears that the SPX has completed a sequence from 1959.63, but failed to complete the inverted corrective wave, today’s 1982.52 cannot be Wave D from 1969.84 as I anticipated, but more likely only Wave 1 of D. This would indicate higher levels for the SPX can be expected. If the SPX falls below 1959.63 at this point it would likely mean that the decline from 1985.59 is not over.

Monday's Market 07/14/2014

It certainly appears that Thursday’s 1952.86 low marked the end of the recent decline from 1985.59. If this count remains intact, it means that the SPX has completed the inverted corrective Wave 2 from 1737.92, and is now in Wave 3 as I discussed last week. When the index completes Wave 5 of this sequence it will complete the entire sequence from the October 2011 1074.77 low.

After falling to 1952.86 last Thursday, the SPX staged a rally to 1969.84, and then traded in a narrow range through the end of last week. The index appears to have formed a series of nested waves that eventually resulted in the gap up this morning and the ensuing rally to 1979.85. After reaching that high mark, the SPX then traded in a very narrow range for the rest of the day between that high and 1976.22.

The 5 Minute Chart shows the nested waves, which by my count contain four degrees of waves from the 1952.86 low. The first degree wave was the initial rally to 1969.84. The pullback from that high now appears to be three waves of an ongoing inverted corrective wave.  Following a lower opening on Friday to complete that 3^rd wave, a lesser degree Wave 1 formed, which was followed by a small pullback. The SPX went on to form two more lesser degree Wave 1’s, and then began to unwind all those nested waves. At this point it appears there is still more upside potential with the SPX now in Wave D of 2 from the 1952.86 low. Wave D should complete near 1991(1985-2002), which should then be followed by a pullback greater than 8 points to complete Wave 2. The index should then continue higher as it completes Waves 3, 4, and 5.

From this point the SPX should move higher to 1991 +/-, pull back 8+ points, and then continue higher.