Friday's Market 07/06/12

It was another down day for the market, as the sell-off from Tuesday’s high continued. The market gapped to the downside, very quickly reaching the 1356 level I mentioned yesterday as the initial downside target. After a brief pause, the selling continued. When the market hit 1349, it tried to rally, but that was brief. After moving up to 1353, the market dropped to the low of the day at 1348.03. The market then rallied to the close, making back right to the 1356 level.

The sell-off from Tuesday’s 1374.81 high is best seen as a 5 wave sequence to 1348.03. The drop to 1363 on Thursday was wave 1, followed by an inverted corrective wave 2, and then waves 3, 4, and 5 bringing the market to 1348. The afternoon rally carried the market back above the wave 4 high of 1353.11, which could be a positive going into Monday.

It now appears that the wave 3 high from 1306.62 occurred at 1374.81, and not at 1365.35. Although it appears likely the market will continue to rally on Monday, a further correction would fit the model better. It is possible that a different wave structure has been unfolding since 1336 high from 1267. For now I am still looking at 1393 or 1475 as targets for wave 3 from 1267. Support is at 1338, 1326-1323, and then 1315-1313. Resistance remains at 1356-1359, 1367, and 1393.

I will address this in more detail over the weekend.

Thursday's Market 07/05/2012

Well, I was completely wrong about where the market was headed today. I was looking for a move higher, initially to 1378, and then possibly 1393. Instead, after a small move higher at the open, the market headed lower, and stayed there throughout the day.

After opening slightly to the upside, the market quickly reversed course, and headed lower to 1368. After a short consolidation, the market headed lower again, bottoming at 1363. The market did rally off that low, moving back above 1371 before headed back down to 1368. Another move to the upside took the market back near break-even to 1374. The market could not hold this level, and quickly sold off again, dropping below 1368 near the close.

I have become concerned recently with the projections becoming increasingly higher. The original projections for wave 3 from 1267 were 1393, and 1475-1480. Projections for the smaller waves have been higher, and higher, and have begun to exceed the 1475-1480 level, which is not realistic. I was looking for a further correction after hitting 1365, but that did not materialize. A correction back to the 1325-1326 level would have been ideal. The other possibility is that I have missed a wave at some point, just as I did on Tuesday. After getting the 5 wave sequence from 1355 to 1365 correct, I saw the move after that as waves 1, 2, and 3 of another sequence, when actually 1374.81 completed another 5 wave sequence from 1355.

There are several possibilities for the move today, one of which is that the market is undergoing a complex correction from 1365. If it is, we may see that correction to 1325-1326 I was looking for earlier. For now, I will look at support and resistance, and projections for an up move and a down move. To the upside, there is resistance at 1374, 1392, and 1393. To the downside, support is 1367, 1359, 1356, and 1326-1323. If the market moves higher, the initial targets are 1374, or 1382. The downside projection is 1356-1359.

Longer term, this does not change my outlook of 1393, or 1475-1480 as the next SPX targets.

Tuesday's Market 07/03/12

On Monday I said a 5 wave sequence had completed at 1365, and to expect a move lower at the open Tuesday. The market actually opened slightly higher, before the anticipated move lower. That move lower was quite minor, taking the market only to 1363.53, before rising once again. Yesterday I said if 1356 held, I would first look for a high at 1368, and then another, slightly higher, top. From the morning’s low at 1364, the market moved to 1368.27, pulled back slightly, then made another top at 1370.08. At this point, there was a possibility that this was the completion of a 5 wave sequence from 1356, with waves 1, 3, and 5 ending at 1365, 1368, and 1370. In order for this scenario to be true, the move from today’s low would need to have been 2 separate 5 wave sequences, forming waves 3, and 5. The move from 1364 formed as one 5 wave sequence, indicating this was not the termination of a sequence.

This was confirmed as the market failed to move below what would have been wave 4, 1367.53, and then moved above the 1370 high. I discussed yesterday that a move above 1372 would most likely mean higher prices ahead, based on the wave count. After moving above 1370, the market continued to rally, reaching 1374.81. The market then fell back to 1370, before rising again into the close.

In my view, today’s slightly higher open at 1365.39, completed wave 5 from 1355.70. That then became wave 1 of a larger degree sequence with wave 2 completing at 1363.53. The rest of the day was spent forming waves 1, 2, 3, and 4 of a smaller degree sequence. Wave 4 terminated at 1369.80, meaning the market is poised to move higher when it re-opens on Thursday. Wave 5 should terminate at 1378, completing wave 3 from 1355.70. Wave 4 should be a very small corrective wave most likely less than 2 points, with wave 5 completing at 1391.

At this point the market could undergo a bit more of a correction, but the magnitude of this is still unclear. Longer term, it appears the uptrend from 1267 is continuing. After 1391, my next targets are 1426, and 1497. Support is at 1367, 1357-1356, and 1326-1323.