Tuesday's Market 08/07/12

As expected, the market opened higher today, moving quickly above 1400, and then to 1402. After a minor pullback, the market climbed to 1404, and then started to move lower. This pullback found support back near 1402. From that point, the rally continued this time taking the market to 1406. After another small pullback the market moved to the day’s high of 1407.14, which also marked a new uptrend high. The market then pulled back through the afternoon, bringing the market back near 1400 just before the close.

The move higher this morning was expected, but took the market slightly above the level I was looking for. This would seem to invalidate the count I was looking at. The market completed a 5 wave sequence from 1354.65 to 1394.16, a sequence from 1394.16 to 1388.69, which was then followed by a 5 wave sequence from 1388.69 to 1399.63. The move down from that high to yesterday afternoon’s 1393.82 low also completed a 5 wave sequence. Today the market completed a 5 wave sequence from that low to 1407.14, and another into this afternoon’s low.

The five 5 wave sequences from 1394.16 meet the criteria of an inverted corrective wave, which makes it most likely that wave 1 from 1354.65 terminated at 1394.16, which was then followed by a 5 wave corrective sequence that terminated this afternoon at 1400.85. This is best seen on the 15 minute chart. If this count proves to be correct, the market should now move higher into my next target of 1435-1475. This move could be fairly quick, with only very minor pullbacks along the way.

Support is at 1387-1397, and then 1376. Resistance is at 1406, and then 1426.

Monday's Market 08/06/12

The market opened higher today, and then moved steadily higher to a new uptrend high of 1399.54. After a minor pullback, the market rose again, moving slightly higher than the previous high, peaking at 1399.63. The market then continued trading in a very narrow range throughout the afternoon, until just before the close. At that point the market fell slightly below that range, moving down to 1393.82, before rising slightly into the close.

From Friday afternoon’s low of 1389, the market completed a 5 wave sequence to the new uptrend high of 1399.54. After that the market appears to have formed a semi-inverted corrective wave, bringing the market down to 1393.92 near the close.

If this count holds, a 5 wave sequence from 1354.65 will complete at 1400-1401. At that point the market would be due for a correction. Since I see this market moving higher, and the 5 wave sequence described above would be wave 1 from 1355, the possibility of a complex correction is fairly high. This would see the market top at 1400-1401, a small pullback, most likely slightly below today’s low, and then a move above 1400-1401. This would signal the next leg of this move higher is underway.

 The corrective wave from today’s high could carry to 1389, a move below that would mean the market completed a 5 wave sequence from 1355 today, and the correction could continue further.  A move above 1401 would also mean a 5 wave sequence completed today, but that the market is headed higher.

Support remains at 1387-1397, 1384, and 1367. Resistance is at 1406, and then 1426.

Weekend Outlook 08/05/12

The market opened the week by moving to a new uptrend high of 1391.74. This completed a 5 wave sequence from the 1329.24 wave 4 low, meaning the market was due for a pullback. From the 1392 high, the market traded in a narrow range for the rest of Monday, and that range bound trading continued through Tuesday, and for most of the day on Wednesday. On Wednesday afternoon the SPX broke down below that narrow range, dropping to 1373 before moving back into the 1387-1379 range. The market then broke decisively to the downside on Thursday, dropping to 1361 near the open, and then after recovering to 1374, fell to 1354.65. This completed a 5 wave sequence from the 1392 high, and Thursday afternoon found the market climbing steadily back to 1366 near the close. That rally sparked a gap up opening on Friday, with the market hitting 1384, and then climbing to a new uptrend high at 1394.16.

Coming into this week, my count from the 1266.74 low had wave 1 completing at 1335.52, followed by a semi-inverted corrective wave 2 that took the market up to 1363.46, before terminating at 1309.27.  Wave 3 has been an extended wave, with wave 1 of 3 lifting the market to 1320.29. Just as with the larger degree wave, wave 2 of this sequence was a semi-inverted wave, with a high of 1374.81, and then ending at 1325.41. Wave 3 took the market up to 1380.39, before a wave 4 low of 1329.24. With four waves completed, the projection for wave 5 was between 1387, and 1404, which fit nicely with my 1393 projection generated by the sub-waves of the 1267-1335 wave. The sub-waves of wave 3 of this sequence also projected to 1387-1395. Monday’s move to 1391.74 satisfies all the criteria for the completion of wave 5 of 3.

If the move to 1392 completed wave 3 from 1267, wave 4 most likely terminated at 1354.65, and this would put us in wave 5. My targets for this wave have been either 1426, or 1497. The projection using the four waves completed so far would yield a range of 1335-1375 for the wave 5 high.

I view this current 1387-1397 support/resistance level as very significant. Until the market can clear this level, there are several possibilities. The current pullback from 1394 could end at this point, or extend down near 1378. A move slightly above 1394 would complete another 5 wave sequence from 1329, which would then be the termination point of wave 3 from 1267. Wave 4 could then terminate at a point that would more precisely target either 1426, or 1497. There is also an outside possibility that the market will complete a 5 wave sequence from 1267 at these levels, meaning the market could undergo a significant pullback, or even re-test the 1267 low. I see this as a low possibility because it would mean the move from 1267 to 1363.46 was a 5 wave sequence, which is not my current count.

Short term, the market is within the 1387-1397 support/resistance cluster. Support then would be at 1367, and then 1356-1358. Resistance is at 1406, and then 1426.