Thursday's Market 06/07/2012

The market opened sharply higher again today, continuing the rally off the 1267 low. This opening move took the SPX to 1329, just as I said to expect. Again as expected the market pulled back to 1318, right within the range I was looking for. The market tried to turn higher, but could only make it to 1325 in a somewhat choppy fashion, quite different from the sharp moves higher we have seen lately. Most of the afternoon was spent in a tight trading range just below 1325, until a sell-off in the final hour took the index to 1313, after which it moved slightly higher into the close.

This afternoon after the market had dipped to 1318, and started to recover, I put out an update saying I expected the final move higher to 1345 to be underway, with a drop below 1318 most likely signaling the end of a 5 wave sequence from 1267. This was based on several factors, which I will elaborate on now. First, today I noticed a possible 5 wave sequence from 1267 on the hourly chart. This sequence does not translate well to shorter term charts, with the sub-waves not breaking down correctly. Even with these issues, I kept this as a possibility. Second, I saw the move from 1329 to 1318 as a 5 wave sequence which I assumed was wave 4 of 5 from 1267. I move below wave 4, usually signals the end of a move.

The sell-off into the close took the market to 1313, and also completes a 5 wave sequence from 1329. This occurred at one of our support levels, and kept the market above our original count wave 4 at 1296. In addition, this still fits within our model as wave 4 of 5. It also keeps the projection of wave 5 at 1345. For these reasons, I am sticking with my original count for the moment, and consider this wave 4 of 5 from 1267.

Short term, I am still expecting one more move higher, with a target above 1333, and most likely 1345. This would satisfy several relationships within our model. It is possible for a move slightly lower, while still keeping this scenario intact. 1306-1307 looks like support, with a move below 1296 meaning 1329 was the completion of the 5 wave sequence from 1267. I view this as an impulsive move so far, and even if 1329 was a 5 wave high, we should still see higher levels.

Thank you for your support.

Thursday Midday Update 06/07/2012

The market opened to the upside once again this morning, rising to 1329, and completing the initial move I was looking for. The pullback then came as expected, taking the market to 1318. That appears to be the end of the pullback. I now look for one more push higher, with a target of 1345, to complete the 5 wave sequence from 1267.

Wednesday's Market 06/06/2012

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The market opened sharply higher today, reaching our 1294-1296 wave 3 forecast within minutes. After a very slight wave 4 pullback, the SPX rose again, hitting 1303.53. From that point, an inverted corrective wave occurred, lifting the market to 1311, before we finally saw a real move lower. Even this pullback was minor, dropping the index slightly more than five points, before the corrective wave ended at 1305.78. The rally continued from there, with the market rising steadily, closing at the high of the day at 1314.53.

Yesterday I said I expected this wave to reach 1320, and now I think it can move even higher. I believe the market is in wave 5 from the 1267 low, but this wave 5 may push the index quite a bit higher before it’s over. From the 4 completed waves, wave 5 projects above 1333. Using wave 3, one of my secondary relationships points to 1345 as the high. From what has completed of wave 5, it appears we could see a move to 1324, followed by a slight pullback, and then a final move above 1333, with 1356 being the optimum target.

These types of waves lend themselves to very large target ranges, and although they usually terminate in the lower end of that range, there is the possibility that this wave could carry substantially higher than the optimum.

If this wave plays out as I think, it should terminate between 1333 and 1345. I see resistance around 1338. If we move below 1306 at this point, the move from 1267 would most likely be over, and I would look for a further pullback.

Longer term, this wave thus far has appeared to be impulsive. As we mentioned in our Weekend Outlook, the DJIA appears to have completed a semi-inverted corrective wave, which would be bullish for the market.

Thank you for your support.