Friday's Market 06/08/2012

 

I hope you find this blog useful, and informative. I appreciate any feedback.

According to my model, wave 5 of the move from 1267 began on Wednesday at 1294.96. Wave 5 started with a short wave 1, followed by an inverted corrective wave 2, which took the market to 1311, before completing at 1306. Wave 3 propelled the market to 1329, sparked by a gap opening on Thursday. After completing wave 3, the SPX faltered for the first time since the rally began. The index fell to 1318, rallied to 1325, and then completed a 5 wave sequence at 1312.68. In Thursday’s update, I said that even with a 5 wave sequence completed, there was room for a move lower, with support at 1306-1307. From there I expected one more move to a new rally high. Friday morning the market did open lower, with the SPX moving to 1307.77, and completing another 5 wave sequence from 1329. This completed wave 4 of 5.

The market then began to work its way higher, completing a 5 wave sequence at 1323, with each impulsive wave increasing in length. From there, into the close, the market traded in a narrow range, forming what I believe to be an inverted corrective wave, which terminated at 1324.10, shortly before the close.

I believe we are now in wave 3 of 5 of 5 from 1267. Wave 5 should terminate between 1333, and 1337, with wave 3 reaching above 1329, most likely 1331-1332, a pullback of a point or two, and a final high between 1333 and 1337. With wave 5 completed, a corrective of some sort is due. Should the market fall below 1308 before making a new rally high, I would say 1329 was the wave 5 high.

Over the weekend I will give more detail on why I have targeted 1333-1337, and also what might be expected after reaching that high.

Thank you for your interest and support.

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.