Monday's Market 07/16/12

After having run up from 1325 to 1358 on Thursday and Friday, the market spent today trading in a narrower range, undergoing some apparent consolidation before the next move. The market made an initial drop this morning, completing a 5 wave sequence from 1358 at 1348.51, which proved to be the low for the day. A scenario is developing which would make 1393 the termination point of a 5 wave sequence from 1267, and 1348 is precisely the pullback needed for this scenario.

From that low, the market proceeded to form a sequence of 5 wave sequences making a series of lower highs, and higher lows. The market moved higher to 1357.26, lower to 1351.38, higher to 1356.70, and lower to 1351.83, before rising slightly off that low into the close.

The structure that has formed from the 1358 high indicates a powerful move is forthcoming, but has formed in such a way that leaves open the possibility of a breakout in either direction. A move above 1356.70 would indicate another move higher, with 1393 remaining the most likely target, and a break below 1351.83 most likely resulting in a strong move back to the downside.

Resistance is at 1357-1358, 1367, and 1387-1397. Support remains at 1338, 1323-1326, and 1313-1315.

I mentioned above that a scenario is developing in which a move to 1393 would complete a 5 wave sequence from 1267. Up until now I have been calling this wane 3 from 1267. Both scenarios are still possible, but I wanted to acknowledge the existence of both possibilities. Due to other commitments, I was unable to put out a weekend update as planned. Instead I will post a Medium Term Update in the next day or two that will outline each of the different scenarios.

Friday's Market 07/13/12

Yesterday I said I was expecting one more move down to 1318 to complete a 5 wave corrective sequence from the 1374.81 high. I also said there was a count that showed a completed sequence, with a continuation of the uptrend in progress. 1342 was the level I was looking at. I was looking for a move to that level, and then the move down to 1318. If the market moved above that point, the uptrend was continuing.

The market opened higher, and soon moved past that critical 1342 level, to 1347.5. After a small pullback, the market spiked higher, to above 1352, and then drifted higher for the rest of the session. In the last hour of trading, the market hit its high of 1357.70, right at my 1357-1358 resistance level.

The market has now completed a 5 wave sequence from 1374.81, at 1325.41. I have been calling this wave 4 of wave 3 from 1267, but I have voiced my reservations about that labeling for some time now. Ever since the 1306.62 low in early June, the wave structures have been pretty complex, and were starting to give rather high projections. I have felt for some time that a more complicated larger wave structure was developing and that at some point it would reveal itself, bringing the projections back in line with the 1393 original projection for wave 3 from 1267, and then 1426, or 1497. I think the market is starting to reveal that structure. I will be addressing that in more detail over the weekend, but for now, suffice it to say that the market is now on track to move up to 1393.

The current move should finally take the market to 1393, completing wave 3 from 1267. Support is at 1337, 1326-1323, and 1315-1313. Resistance is now at 1367, and then a cluster at 1387-1397.

Thursday's Market 07/12/12

Yesterday I offered several scenarios for today’s market. The first involved a slight move higher into the low 1340’s followed by a move to the downside. This would have completed an inverted corrective wave 4 from 1374.81, and then wave 5. Another scenario had the market moving sharply lower if it broke 1336. This would be wave 5 down from 1374.81. My target was 1318, with support at 1323-1326, and then 1313-1315.

The market did open lower, dropping to 1331 in the opening minutes of trading. The market continued lower for the first hour and a half of trading, hitting a low of 1325.41. The market did find support at that level, and rallied for most of the remainder of the session. First the SPX moved up to 1334, and after a small pullback continued on to 1339. After another pullback, the market made a slightly higher high at 1339.93, and then fell back to 1334.41 near the close.

Today’s initial drop to 1325 broke down into a 5 wave sequence. The ensuing rally contained a 5 wave sequence to 1334, and another to 1339. I have been targeting 1325, and 1318 for some time, and today’s low of 1325 does offer a possible 5 wave sequence completed from 1375. However, looking more closely at the sub-waves of the sequences, it seems most likely that the move down today was wave 4 of an inverted corrective wave 4 from 1375. The rally after that were waves 1-3, and most likely 4, of wave 5 of that inverted corrective wave. If this turns out to be the case, wave 5 of that inverted corrective wave should terminate at 1341-1342, and then we should see wave 5 down from 1375. This wave should terminate at 1318-1325, with 1318 being preferable.

Thus, the perfect scenario for the conclusion of the 5 wave sequence from 1375 would be a move from here to 1341-1342, followed by another drop to 1318. Since the market rarely accommodates perfection, there are a couple of things I will be keeping my eye on. First, if the market rallies beyond 1342, I would assume the 5 wave sequence from 1375 ended at 1325. The uptrend should then continue. T o the downside, 1309, and 1306 are important levels. If the market moves below them, our count would be incorrect. As the market approached the 1375 high, I mentioned a possible count for the completion of a 5 wave sequence from 1267. I discounted this possibility because the market moved beyond the limits of my model. If the market moves below 1306, this may still be a possibility.

Support remains at 1323-1326, and then 1313-1315. My target remains at 1318. Resistance is at 1337, and then 1357-1358.