Thursday's Market 08/02/12

The market opened sharply lower this morning, falling to 1361 in the first minutes of trading. The SPX staged a pretty strong rally off that low, almost making it back to 1374, but the rally ended there. Another steep drop followed, this time taking the market down to the low of the day at 1354.65. Unlike the earlier rally, this one started slowly, but then gained momentum throughout the afternoon, closing just off the rally high of 1365.86.

On Tuesday I mentioned that if the market broke below the that day’s low by more than a couple of points, the market was probably forming a complex corrective wave 2, that would eventually carry the market significantly lower. On Wednesday the market did fall below that level, and today the market moved significantly lower.

The market did end up forming a complex inverted corrective wave 2. After a dip at the open on Wednesday, the rally to 1385 formed wave 1, while Wednesday afternoon’s late rally from 1373 to 1381 was wave 3. Wave 4 took the market down to 1361 Thursday morning, with wave 5 being the rally off that low to 1374. That completed wave 2 from 1392, with waves 3, 4, and 5 forming on the way down to the 1354.65 low.

With a 5 wave sequence from 1392 now completed, this could be the end of the correction. The market then completed a 5 wave sequence off the 1355 low into the day’s close. I would expect the market to now continue higher. It is possible for the market to move lower, but I would expect only slightly lower lows than we saw today.

Support is at 1356, and then 1346. Resistance is at 1367, 1384, and then the cluster between 1387, and 1397.

Wednesday's Market 08/01/12

After a slightly lower opening, the market moved up to 1385, and then fell back to 1378. Another rally took the market to 1384, before a sharp afternoon drop took the market down to 13763. After that the market tried to recover, but only made it back to 1381 before falling back to 1375 near the close.

Yesterday I mentioned 1384 and 1376 as important levels. Except for brief moves above, and below, the market spent the majority of the day trading within those two levels.

The market appears to have completed waves 1, and 2 from 1391.74 this morning. From there, things are a bit more complicated, but it looks like it completed two waves of a second sequence, with wave 2 being a complex inverted corrective wave. I had also mentioned yesterday that a move below yesterday afternoon’s low would probably mean a continuation of the correction from 1392. Today’s move appears to be that continuation.

Support remains at 1367, and 1352. Resistance is 1382 and 1385, and 1393.

Tuesday's Market 07/31/12

The market dropped slightly at the open, falling to 1383 before rebounding to near 1387. The choppiness from yesterday carried over into today, as the market soon fell to 1381. A rally above 1387 was followed by another pullback below 1380. The market rallied one last time to nearly 1385, before falling to the low of the day below 1379 near the close.

It looks like I had the wave structure slightly wrong yesterday. The market did make two moves to the downside as I suggested it might, but it did not carry as low as I thought it might. It now looks like wave 5 from 1391.74 occurred at this morning’s low, and then a larger degree sequence completed at the low near the end of the day.

This wave has formed in such a way, with waves of decreasing length, that the resistance lines are clustered from today’s low, to about 1383.70. The next resistance level would be at 1393, and then 1426. A move above that level, and if the market can hold above that level, would probably result in a move to new uptrend highs.

While my model would allow for very slightly lower lows, a break substantially below, by several points, would most likely mean a rather large move to the downside. Another move to the downside would probably have to result in a complex corrective wave 2, meaning the market could move much lower, perhaps below the 1368 level I am looking at to keep 1497 as the next target.

At the moment I still see the market moving higher. My targets remain either 1426, or 1497. If this level holds, 1497 would be the target.

Resistance is between current levels, and 1383.70, 1393, and 1426. Support is at 1376, 1367, and 1352.