Tuesday's Market 07/10/12

The market started the day to the upside on Tuesday, quickly moving up to 1361.54. Yesterday I thought this move would be wave 3 from Monday’s 1346.65 low, but I was wrong. I missed a small wave from 1347, and this move turned out to be wave 5. The market then turned lower, breaking through the 1357-1358 resistance level, and then moving down close to yesterday’s low. After hitting 1348 the market tried to rally, but could only make it back to 1352 before falling again. The selling continued, pretty much unabated, through the afternoon, until the SPX reached 1336.27. A rally off that low brought the market back to 1342.70 shortly before the close.

The action today, after the morning rise, was somewhat unexpected. This market has not been easy to follow as of late, and today was no exception. Longer term, I see still see a continuation of the uptrend at some point, the only question being when. I mentioned over the weekend that a move down to 1325, or 1313, would actually fit better with longer term projections. At the time I saw this as a low probability, with the expectation of a higher move this week.

The move today looked like a completion of 5 waves from 1346, and then 5 waves down to 1336. This would make three waves from 1375, with wave 5 projecting to 1313. So this move still fits within expectations. As I said before, this market has been difficult to read lately. The market could rally further from today’s low, but I see one more move down as probable. Support is at 1326-1323, and 1315-1313, with a target of 1313.

Resistance is at 1357-1357, and 1367. If the market moves above 1361.54, the market may have completed 5 waves down from 1375, and we may see a continuation of the uptrend.

Monday's Market 07/09/12

After completing a 5 wave sequence from 1374.81 on Friday, I was looking for a move higher today. Instead the market moved lower, moving just below Friday’s low of 1348.03. That low turned out to be wave 1 of another sequence lower, which played out today.

The market opened lower, and continued down through the morning. The first low came at 1347.44, and after a rally to 1352, the market out in a slightly lower low at 1346.65. This completed the 5 wave sequence, and the market rallied from that point. It rose to 1353, before falling back towards the previous low, but held at 1347.67. The market then rallied into the close, rising above 1353, before fading into the close.

As I stated above, the action today appears to be the completion of a sequence from the 1375 high. While it is possible for the market to form another sequence from that high, I feel this would only result in slightly lower lows. It does not appear that a 5 wave sequence has completed from today’s low, so I still think the market is headed higher.

Near term I have targets of 1356, or 1368. The 1356 target would be near the 1357-1358 resistance level. This would be wave 3 from today’s low, with another move higher expected after that. If the market moves much below today’s 1346.65 low, the market could be in the midst of a more prolonged corrective wave.

In summary, I am looking for a move higher, with an initial target of 1356, or 1368. This should signal a resumption of the uptrend from 1267. If the market falls below 1346 by a couple of points, this correction could be headed down to 1323-1323, or even 1313-1315.

Weekend Outlook 07/08/2012

The SPX entered this week having come off a strong two day rally from 1313 to 1362. The rally continued at the open on Monday, as the index reached 1366.35 before pulling back to 1355.70. The market then continued the rally, and by midday Tuesday, the index stood at 1374.81. This completed a 5 wave sequence from 1313, and what I currently see as wave 3 from 1306.62.

From that point the market turned lower, dropping to 1370 Tuesday afternoon, and then falling to 1363 Thursday morning. Thursday afternoon saw the market trying to recover, making it back to 1374 before falling into the close. Friday the market opened sharply lower, and continued down from there, as the SPX fell to 1348.03. The market then rallied back to 1356 into Friday’s close.

I continue to see 1266.74 as the completion of a 5 wave sequence from 1422.38. This means the market is now forming a 5 wave sequence to the upside, which should eventually take the market back above 1422. From 1267, the market has thus far completed 2 waves of that 5 wave sequence. Wave 1 terminated at 1335.52, and wave 2 at 1306.62. Wave 3 from 1267 is now in progress, and my current count has wave 3 of 3 terminating at 1374.81. Wave 4 of 3 may have terminated on Friday at 1348.03.

Although I am still quite confident that the market is still working on a 5 wave sequence up, and that sequence should carry above 1422, the shorter term count is less clear. My current count would require the current correction to continue down to about 1318, but I view that as highly unlikely. It is more likely that some kind of complex corrective wave is forming, and the market is set to move higher from the 1348 low put in Friday.

My long term targets remain the same. I see 1393, or 1475-1480 as the termination point of wave 3 from 1267, with wave 5 completing at 1426, or 1497.

Even though the short term wave structure could resolve itself in several ways, it is still possible to follow the individual 5 wave sequences, giving us an idea of where the market is headed. Looking at the corrective sequence from 1374, I see a 5 wave sequence which contained waves of diminishing lengths, which ended at 1348, right at a support level generated by the up sequence from 1309 to 1374. The move up Friday afternoon carried above the wave 4 high of 1353.11. This would point to the market moving higher from 1348. I would expect this wave to carry first to 1378, and then possibly the 1393 level I have been target for some time.

Resistance should be at 1357-1358, 1367, and 1378. Support should be at 1349, 1333-1336, 1323-1326, and 1313-1315.