Thursday's Market 08/09/12

The market moved slightly lower at the outset of today’s trading, before moving higher, first to 1404, and then to 1405.95 after a small pullback. The SPX sold off from there, dropping below 1400, to 1398, before attempting to stage another rally. This rally fell just short of making it back to 1405, and another pullback took the market to 1402 near the close.

Yesterday I mentioned the 1405 level as important for today, and it turned out to be. The first rally to 1405.95 completed the 5 wave sequence from Wednesday’s 1396 low. Another 5 wave sequence completed as the market fell to 1398, and the rally back to 1404.69 also played out as a 5 wave sequence.

The market appears to be looking to stage a breakout in one direction or the other, but short term there are a few danger signs. Since the 1354.65 low last Thursday, the up sequences have been forming with waves of diminishing length, while the down sequences have displayed increasing wave lengths. This usually means the market will break out to the downside. If the market does break out to the downside, I would look for it to move down between 1390, and 1370. There is a cluster of support down to 1387, with support then moving to 1384, and 1376. Those would seem to be likely levels for the down move to terminate. A move to that area would likely mean a subsequent move to 1426 would complete a 5 wave sequence from 1267.

If the market breaks out to the upside, I still look for a move to between 1435, and 1475. That projection should narrow as the wave starts to complete.

Wednesday's Market 08/08/12

I was looking for a move up from yesterday’s close, but the market started to the downside today, dropping to 1396.13 near the open. The market rallied from there, turning positive for the day, and moving up to 1404.14. That was as high as the market could get, turning lower after that, and pulling back to 1399.86. Another rally towards the close brought the market back near 1403, before fading slightly into the close.

The drop to 1396 at the open stayed within the parameters of the 5 wave sequence from Tuesday’s 1407 high, although it was slightly more than I had anticipated. This probably discounted the scenario I laid out yesterday, and bringing back into play the count I outlined on Monday. This results in a 5 wave sequence being completed from 1354.65 at 1407.14. A 5 wave sequence then completed at 1396.13, and possibly 4 waves of a sequence completing to the upside today. The target for this wave 5 is around 1405, below the uptrend high of 1407. A move above that would signal a resumption of the uptrend, with resistance at 1426.

It is possible that the market will move lower, below today’s 1396 low. This would most likely carry back down between 1390, and 1370. If the market does fall between those levels, one more move to the upside would still be required. The target for that would be 1426, or above, which puts us right back at the original 1426 target.

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.