Thursday's Market 09/11/2014

Ever since the SPX fell to 1074.77 in October 2011, the index has moved progressively higher. I have been counting this sequence as Wave 1 at 1292.66, Wave 2 at 1158.66, Wave 3 at 1422.38, and an inverted corrective Wave 4 which ended at 1560.33. Given this structure the minimum target for Wave 5 was 1776, with an optimal target of 2041-2046. The SPX surpassed the minimum target last November.

The Daily Chart shows the progress of Wave 5 mentioned above. Once again four waves of a sequence completed at 1709.36, 1646.47, 1850.84, and 1737.92. In this case Wave 2 was the complex inverted corrective wave. With four waves completed, a target range of 1957-2064 was indicated. From the 1737.92 Wave 4 low, Wave 5 then tracked fairly well into July when the SPX reached 1985.59. Wave 1 of 5 looked to have completed at 1882.35. Wave 2 of 5 then looked to be forming a complex corrective wave. Waves A, B, and C of this wave completed at 1814.36. A 5 wave sequence higher then followed which formed Wave D of 2. At this point the SPX seemed to vary from the script, as I was looking for a move lower to complete Wave E, and thus Wave 2. The lower limit of this wave projected to 1937. When the index fell to 1955.59, and then started to move higher, it looked like Wave 2 of 5 had completed. The short rally to 1991.39 was difficult to follow, and the subsequent drop to 1904.78 complicated things further. The best count for this is that Wave 2 of 5 did indeed complete at 1955.59. Waves 3, 4, and 5 of 5 then can be counted as 1968.84-1981.27-1991.39.This would mean that Wave 4 was also a complex corrective wave. This is rare, with usually only one of the corrective waves being complex, but something that is sometimes seen at the end of higher degree waves. With a 5 wave sequence completing within the target zones, it seems likely that the sequence from 1074.77 completed at 1991.39.

With the SPX having made new highs since then, the above statement seems a bit absurd. However, there are at least two scenarios in which this makes sense. First, either the wave from 1560.33 is extending, or the sequence from 1074.77 is extending. What I see as more probable is that the sequence from 1074.77 completed at 1991.39, and now the SPX is forming a complex corrective wave.  The decline from 1991.39 to 1904.78 counts as a 5 wave sequence and is likely the first wave of the corrective wave. Wave 2 is now underway, and has carried the index to new highs. This will likely form a semi-inverted corrective wave. After this wave higher completes, the SPX will likely move lower, finding support between 1991.39 and 1904.78. Eventually this sequence should complete below 1904.78.

The sequence from 1904.78 so far looks like a Wave 1 completed at 1944.90, with Wave 2 an inverted corrective wave that completed at 1982.99. A preliminary target for this wave is above 2031, but a more accurate target should be able to be calculated soon. There is a possible count that shows 2011.17 being the top of this wave, and a move below 1981 would likely confirm that.