Wednesday' Market 06/13/12

It was another very interesting day for the markets. It started with another gap opening to the downside, stopping right between the 1318, and 1316 support levels. After a slight bounce, the SPX made a temporary bottom at 1315.26. The market then rallied and neared 1327 before falling back to 1320. Another rally pushed the index to the day’s high, just over 1327.

Up until this point, the market was behaving pretty much as expected. I had been watching 2 wave sequences for my projections, one from 1306, and the second from 1315. The sequence from 1306 had completed 4 waves before today, with wave 4 terminating at 1315. My projection for wave 5 was above 1327. The second sequence was wave 5 of the first sequence, and I thought wave 1 had been completed Tuesday at 1324.31. This sequence had a projected wave 3 at 1327, and a wave 5 projection of 1329-1333. I thought today’s first move near 1327 was wave 3. I expected wave 4 to move back near 1318, and wave 5 to come in between 1329, and 1333. This would have completed both sequences. What I thought would be wave 4 came up a little short of expectations, and what should have been wave 5 only made it back to 1327. This does satisfy the main sequence from 1306, and I either misinterpreted wave 5, or it came up short of our target.

From the 1327 high, the market sold off sharply, completing a 5 wave sequence near 1316. It appears that became wave 1 of another sequence, which terminated at 1310.51. This wave has the characteristics I have mentioned before, with an extended wave 1, followed by a rapid, short. 2-3-4-5 sequence. As I have said before, with this type of wave, a move above wave 4 usually precipitates a sharp reversal. As you can see on the chart, the small rally to end the day moved above wave 4.

At this point nothing has changed to eliminate my original scenario of 1335 being wave 1 from 1267, 1335 to 1306 being the corrective wave 2, and now waves 1, and 2 of wave 3 of that sequence being completed. My target for wave 3 from 1306 is 1354. For now I will stay with this scenario.

Because of the inconsistent wave action today, it is, of course possible that the market will break below 1306. Should that happen, a move to the support levels below 1300 seems likely.

Resistance is still the 1316-1318 area, with support at 1297, and 1290.

Thank you for your interest.

Tuesday's Market 06/12/12

One of the scenarios I mentioned yesterday had wave 3 from 1336 terminating near 1306, with wave 5 ending slightly below that. I said if that scenario played out, the correction from 1336 was most likely over.

The market opened higher today, moving up to our resistance line at 1316. The market turned lower from there, moving slightly below yesterday’s low, bouncing slightly, and then making another slightly lower low at 1306.62. At that point the market rallied sharply, rising swiftly to 1320.75. The mid-day hours were spent in a fairly narrow trading range, bounded by our 1318, and 1316 support/resistance lines. Nearing the last hour of trading, the SPX broke above 1318 once again, bounced off of it twice, then rallied into the close. This last rally carried the market above 1324. This 1324 level has been a persistent point of support, and resistance since before the 1267 low. It is interesting that it has appeared once again. Perhaps this time the market will put that level behind it for awhile.

The action this morning, in my view, was the completion of a 5 wave sequence from 1336, and the end of the correction phase from that point. It appears the market has completed 4 waves up from 1307, with wave 5 expected to terminate between 1329, and 1333.

That should complete a 5 wave sequence from 1307, but I believe the market is headed to the upside. To the downside, the 1307 level is significant. Should the market fall below that level, the correction from 1336 could continue.

Thank you for your interest.

Monday's Market 06/11/2012

A 5 wave sequence was completed today as the market opened higher, hitting 1335.52, right in the middle of the 1333-1337 target range. After that strong opening move, and the completion of the sequence, the market quickly reversed course and started selling off. The market completed a 5 wave sequence to the downside at 1320, and tried to rally. However, the market only made it to 1326 before heading back down.

Given the first 5 wave sequence down, 1318, and 1312 were the downside targets for a possible wave 3 from the 1336 high. Both of these levels were right at resistance levels identified over the weekend. The market hit 1318, bounced, dropped to 1317, bounced again, then broke through that support level, and fell to 1312.70. After another short rebound to the 1316 resistance level, the market completed 5 waves from 1336 at 1307.73.

With a 5 wave sequence completed from 1336, it is possible that this corrective phase is over, and the push higher will continue. At this point, however, it would seem that the market still needs to work lower before resuming that uptrend. With the break of the 1316 support, the next support is near 1290. The same thing can be seen on the hourly chart, with support at 1298. It seems most likely that the market will move down to those support levels before moving higher.

Assuming today’s 1308 low was wave 1; wave 3 would project to either 1306, or 1300-1294. If wave 3 occurs at 1306, wave 5 would project at slightly below that. If this scenario plays out, the correction should end at that point. If wave 3 occurs below 1300, wave 5 should terminate near the 1298, or 1290 support levels.

If the market is able to move back above the 1316-1318 resistance levels, the rally could very well resume at that point. Right now it is difficult to say, for the short term, which way the market will go. Longer term, the bias is still to the upside.

Thank you for your interest.