Last Week 06/09/12

At this time last week, I posted that the market was due to complete a 5 wave sequence from 1422. My target range was between 1265 and 1270, with my actual target being 1268, from which point we could see a rally. On Monday we got that low at 1266.74, and from there the market went into rally mode. At its best level, the SPX hit 1329, and then saw the only significant move down for the week, dropping back to 1308. After that the market again found itself moving higher, finishing the week at 1325.

According to my model, it appears the market has completed for waves from the 1267 low, and is in the process of completing wave 5. You will be able to see waves 1 through 4 on the following chart.

Wave 1 can be broken down into 5 sub-waves, which can be identified using my model. One of the secondary relationships that develop using my model, takes those sub-waves, and projects two possible price targets for wave 3. On Monday, using these relationships, I projected a wave 3 price of either 1285, or 1294.

 On Tuesday, the market did reach 1285, but I only identified that as wave 3 from 1273, not from 1267. Using the sub-wave structure from 1273, I set a target for wave 3 from 1267 between 1294 and 1296. On Wednesday the market rose sharply at the open, where it reached 1296.34. After a short pullback, the market moved above 1296, with that pullback becoming wave 4 from 1267. With 4 waves completed, my model could now project a termination point for wave 5 above 1333. Using the sub-waves for wave 3, my secondary relationship also indicated a wave 5 termination point above 1333, with the optimum being 1345.

From the wave 4 termination point at 1294.46, the wave structure started becoming slightly more complex. It appears that the market has completed 4 waves from that point, with wave 5 of 5 now underway. The first wave of this sequence moved the market to 1303.53. The market then formed an inverted corrective wave 2, which terminated at 1305.78. Wave 3 contained another sharp opening rally, taking the market to the rally high of 1329.05.

Wave for was the only significant pullback thus far of this rally. The market first completed a 5 wave sequence to 1312.68. At this point I said the market could move slightly lower, with support a 1306-1307, after which the market would move to a rally high, completing wave 5. These projections were based on the secondary relationship using the sub-waves from 1329 to 1313. The next day the market did open lower, dropping to 1307.77, before resuming the rally.

This now brings us to wave 5 of 5 from 1267. From the 1308 wave 4 low at 1308, the market moved higher to 1323, which completed a 5 wave sequence. Another inverted corrective wave formed from there, which terminated at the close on Friday.

Using the wave structure from 1267, wave 5 would project above 1333. The wave structure from wave 4 at 1295 indicates a termination point between 1331, and 1337. Using our secondary relationships the model gives a target above 1328. Given these projections, a wave 5 high between 1333, and 1337 would satisfy my model the best.

Using secondary relationships once again, the model projects wave 3 from 1308 to terminate at 1326-1327. Putting this all together gives us a scenario of a rise to 1326-1327, a very minor pullback, and then a wave 5 high between 1333, and 1337.

After making that high, I would be expecting some sort of correction. In a market like this, corrections can be quite shallow, amounting to no more than a pause. There is also the possibility of an irregular correction, which again would result in a very minor pullback. Given the scenario I have outlined above, this may be a bit more than that. If we see the rise, small pullback, and final top at 1333-1337, the small pullback would be considered a wave 4. These formations usually correct rather sharply after moving beyond wave 4. Should we drop below that wave 4, and rise to new highs, it would signal the correction was very shallow, and the next up move could be quick.

Longer term, I believe the market will move higher, minimally retesting the 1422 high. I will be working on more exact targets for the next move up tomorrow, and also more exact support levels to watch.

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.