Tuesday's Market 08/14/12

It was another opening gap to the upside this morning, with the market moving above 1410 early on. This was another new uptrend high, and it would also prove to be the high for the day. After dropping back to 1405, the market tried to rally once more, but this rally peaked at 1409.53. The market sold off for most of the rest of the day, with only a slight pause at 1405. This took the market back to 1400 before the market rallied back to near 1404 at the close.

In my weekend update I said I was looking for an initial move to 1410-1414. Although I was a day late, and the wave did not form exactly as I thought, that is the range the market hit today. I would say a 5 wave sequence terminated this morning at 1309.53, and then another sequence to the downside completed at 1400.60. I still see this as the beginning of wave 5 to the upside from 1267. If this plays out, the next target should be 1418-1420.

There is a possible count that makes today’s 1409.53 high the peak of a wave 5 from 1354.65. If this turns out to be the case, I would expect this corrective wave to terminate either near 1395, or 1385-1380. This would possibly change the projection of wave 5 from 1267 to 1426, instead of 1497.

Monday's Market 08/13/12

The market opened slightly higher today, but quickly dropped below 1402. A rally from that point took the market above 1405, but then was met with more selling. By late morning, the market found itself back below 1400, falling to 1397. The midday hours were spent moving steadily higher, and by late afternoon, the market was back near 1405. The market dropped back to 1402, before rallying into the close.

Again the market traded in a narrow range between the 1407, and 1397 support/resistance lines. This continued the trend from last week.

I had expected the market to break out of this range today, but obviously the market needed at least one more day. It now looks like the market completed a 5 wave sequence from last Friday’s low of 1395.62 this morning at 1405.98. A corrective sequence followed, completing at 1397.32. The rally into this afternoon completed another sequence to the upside, which took the market to 1404.65.

My analysis from this weekend remains, with my view being the market completed wave 4 from 1267 Friday at 1395.62. I feel the market will still break out to the upside, with my wave 5 target remaining at 1497. A break below 1395.62 at this point would invalidate this scenario, and likely mean the market would continue lower.

Weekend Outlook 08/11/12

The market traded in a fairly narrow range this week, much less than the previous week’s range. Having closed out the week at 1391, the market opened higher on Monday, reaching a new uptrend high of 1399.63, before pulling back to 1394. Tuesday saw another strong opening, and another new uptrend high of 1407.14. By Wednesday morning the market had fallen back to 1396, and then staged a rally that lasted into Thursday, bringing the market back up to 1406. However, by Friday’s opening, the market had dropped once again to 1396. A move higher from there to 1402 was followed by another sell-off to 1397, and then a fairly strong rally into the close left the market at 1406 once again.

In last Weekend’s Update, I said 1391.74 was the termination point of wave 3 from 1267, with wave 4 possibly ending at 1354.65. I pointed out that this scenario gave a target for wave 5 of 1335-1375, slightly off from the 1426 or 1497 target I was looking for. During this past week I also commented on the fact that with the down waves consisting of waves of increasing lengths, and the up waves composed of waves of diminishing lengths, a move to the downside was possible, and that that down move may bring the current target back into line with the 1426 or 1497targets. Instead, it appears the market has formed a more complex corrective wave, which accomplished the same thing.

1391.74 looks like the termination point of wave 3 of the ongoing move from 1267. The initial move down to 1354.65 now appears to be wave 1 of a corrective wave 4 from 1391.74. Wave 2 of this wave carried the market to the new uptrend high of 1407.14. Wave 3 then completed on Wednesday at 1396, with the move back up to 1406 on Thursday completing wave 4. The ensuing move down to 1395.62 on Friday completed wave 5 of the corrective wave, and wave 4 from 1267.

This scenario projects wave 5 to complete above 1475, with 1497 remaining my target for this wave. If this scenario plays out, I would expect a move higher from Friday’s close, initially to the 1410-1414 level. This projection is based on the sub-wave structure from the partially completed wave from 1395.62. This would complete the first wave of wave 5 from 1267.