Friday, July 18, 2014

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.

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