Weekend Outlook 09/09/12

The market started the week off to the downside, making a new short term low from the 1426 high at 1396.56. That proved to be the low for the week as the market rallied from that point on Tuesday, spent Wednesday consolidating, and then broke out to the upside on Thursday. The rally continued on Friday, although in more muted fashion, with the market closing out the week at 1437.80, the high for the week.

 

Tuesday’s 1396.56 low completed a 5 wave sequence from 1426, and wave 4 from 1267. The rally from 1397 unfolded in a 5 wave sequence, and could mark the completion of a 5 wave sequence from 1267.

 

I have been posting an alternate count from 667 on the weekly chart for the past week or so. My original count had the move from 667 to 1422 as a 5 wave sequence. The alternate count I have been posting, and the one that seems to be correct, has the move from 667 to 1422 as 3 waves of a 5 wave sequence. Wave 1 terminated at 956.23. Wave 2 was an inverted corrective wave that completed at 1074.77. The move from 1074.77 to 1422.38 was wave 3, and 1422.38 to 1266.74 completed wave 4, which currently puts us in wave 5 from 667.

The move that has most likely just completed, from1266.74 to 1437.80, was wave 1 of 5. Under this scenario, wave 3 should take the market to 1497, and wave 5 should complete above 1560.

Corrective waves are a bit difficult to forecast. It would not be surprising to see the market fall back to 1400, or below before moving higher. However, it is quite possible for wave 2 to be a complex corrective wave, which could substantially limit the move down, with 1426 being the first support level. After that, there is a cluster of support between 1387, and 1397.

 

 

 

Thursday's Market 09/06/12

After trading in a narrow range for the past two weeks, the market finally broke out today, moving sharply higher. From yesterday’s close near 1404, the market jumped quickly to 1420. After a minor pullback, the market rose above the previous 1426 uptrend high, and reached 1430. At that point the market traded in a tight range, moving higher to 1431, before pulling back to 1428. The SPX then moved higher into the close, closing at the high of the day at 1432.11.

 

When the market hit 1396 on Tuesday, I said if the market was going to rally, it would from rally from that point. 1396 marked the end of a 5 wave sequence from the previous uptrend high of 1426. From 1396, the market formed wave 1 of the current sequence, reaching 1409. By the end of the day yesterday, the market completed a 5 wave corrective sequence, setting the stage for today’s rally. The opening move to 1420 appears to be wave 3 of the sequence, which was followed by an inverted corrective wave 4, which ended at 1428.33. The market should now complete wave 5 between 1446 and 1466.

 

When this wave completes, it should finish a 5 wave sequence from the 1267 low. While this would complete a sequence, I think the market will continue higher after undergoing a correction. The next wave could carry to 1497.

While I think the current wave will continue to 1446-1466, a move below 1428 would probably mean the current move is over, and the 5 wave sequence from 1267 has completed.

 

 

Wednesday's Market 09/05/12

The market again traded in a narrow range today. After a mixed open, the SPX found itself moving lower, falling to 1401 within the first half hour. The market staged a rally from there, moving sharply up to 1409 before stalling out. The market dropped to 1403, before recovering to 1407. Another move lower found the index at 1401 once again, before moving higher into the close. After moving back to 1405, the market dropped back near 1403 towards the close.

 

The move lower this morning completed another 5 wave sequence from yesterday’s 1409 high, with the following rally to 1408 also completing a 5 wave sequence from the low. The remainder of the morning and early afternoon were spent forming a rather complex wave back down to 1401.38.

 

My short term outlook remains unchanged. Yesterday the market completed a 5 wave sequence from 1426, and wave 4 from the 1267 low. The market would then currently be in wave 5, which could terminate anywhere from current levels, up to 1466. 1395 is still the level to watch on the downside. A break through this level would most likely mean wave 5 from 1267 has completed, and a more protracted correction is underway. I would still expect the market to move higher.