Wednesday's Market 04/03/2013

Yesterday I wrote this:

“The second scenario would be slightly more bearish. If the market moves slightly lower, between 1560.40, and 1562.90, it is possible that an inverted corrective Wave 2 from 1563.95 has completed. From there, a rise to 1564.70-1565.40 could complete a 5 Wave sequence from 1538.57, and Wave 3 from 666.79. I would then expect a correction, which will hold above 1538.57, followed by one more wave moving above 1565. That would complete a 5 Wave sequence from 666.79 and portend a more severe correction.”

 

After a slightly higher open to 1571.47, the market began to pull back. Soon the SPX found itself at 1562.85. This was within the first range mentioned above. The high from that point was 1564.86. Again, within the range mentioned above. The market then quickly fell below the previous low of 1562.85, and it was down from there, with only feeble rally attempts until it reached 1552. From there the market rallied to 1537 before falling once again. Soon the market hit the low of the day at 1549.80, and then rallied slightly into the close.

Given the narrow ranges that this wave had to fall into, I have to say I was a bit surprised when the SPX actually moved exactly within those ranges. Admittedly, the wave itself is a bit odd looking, but at the moment my best interpretation is that SPX completed a 5 Wave sequence today from 1538.37 at 1564.86, and Wave 3 from 666.79.

 

I will break down the entire wave structure over the weekend, but for now the main sequence turned out to be 1538.57-1561.56-1545.90-1564.91-1546.22-1564.86, and a model value of .9975.

From the 1564.86 high, the market then completed a 5 Wave sequence down 1549.80. This wave again contained an inverted corrective Wave 2, and breaks down as 1564.86-1562.62-1557.36-1553.85-1554.54-1549.80. This sequence gives a model value of .9978.

With Wave 3 from 666.79 most likely completed, I would expect Wave 4 down, followed by a Wave 5 higher to ensue. Wave 4 may have completed today at 1549.80, but could move lower. This wave needs only to hold above the 1538.57 low. Wave 5 will most likely be quick. If Wave 4 did end today Wave 5 should reach 1567, but go as high as 1591. I will be looking for a 5 Wave move higher, and then a break below 1549.80. A break below 1538.57 at this point would mean the sequence from 666.79 has completed.

Thank you.

 

 

 

 

 

Tuesday's Market 04/02/2013

After dropping to 1558.47 on Monday, I was looking for the market to subsequently rally to the 1578 level. The market built on the small rally into yesterday’s close this morning, moving markedly higher at the open. Although it is most likely that the SPX formed Waves 1, and 2 of a 5 Wave sequence that will ultimately bring the index to 1578.24, the failure to reach that level today has opened up several interesting possibilities.

 

 

The market opened higher today, and kept running higher for the first hour and a half of trading until reaching the day’s high of 1573.66. This turned out to be a complex nested inverted wave structure.  You will see a series of 1’s from the 1558.47 low, and then the unwinding of the series moving into the high of 1573.66. The main sequence was 1558.47-1559.46-1569.86-1571.65-1571.03-1573.66. This gave a model value of .9978. This sequence can be seen in blue on the 3 Minute Chart.

 

After reaching that high the market struggled. A small pullback turned into a substantial drop from the highs, eventually reaching 1565.55. This was a more characteristic wave structure, a simple 5 Wave structure containing an inverted corrective Wave 2. This series was 1573.66-1572.43-1572.53-1570.16-1570.41-1565.55. The model value for this series was .9996.

 

The most reasonable interpretation is that these are Waves 1, and 2 of a 5 Wave sequence that will result in the SPX rising to 1578.24, my target for the sequence from 1546.22. If these indeed are Waves1, and 2, I would expect the market to move higher on Wednesday, or at a minimum, hold the 1565.55 low seen today. The market action today also opens up at least two other scenarios worth noting.

If the SPX fails to take out the 1570.11 high seen after the 1565.55 low, a drop to 1557 would complete a semi-inverted corrective Wave 4 from 1570.57, and I would then expect to see the market rally, with the 1576-1578 area remaining my target. A move above 1570.57 while holding the 1565.55 low would take this scenario out of play.

The second scenario would be slightly more bearish. If the market moves slightly lower, between 1560.40, and 1562.90, it is possible that an inverted corrective Wave 2 from 1563.95 has completed. From there, a rise to 1564.70-1565.40 could complete a 5 Wave sequence from 1538.57, and Wave 3 from 666.79. I would then expect a correction, which will hold above 1538.57, followed by one more wave moving above 1565. That would complete a 5 Wave sequence from 666.79 and portend a more severe correction.

In summary, I would still expect the SPX to move to 1578 unless the index falls to 1560-1563, rises to 1565, and then falls below 1560.

Thank you.

 

 

 

 

Monday's Market 04/01/2013

In my Weekend Outlook I said I expected the market to decline today, and gave 1563.50, and 1557.40 as likely termination points for the decline. After a slight move higher at the open, the SPX declined to 1563.77, and after a failed rally attempt wound its way down to 1558.47.

 

The market did open slightly lower, dropping below 1568 before rising just above Thursday’s high of 1570.28 to 1570.57. This then completed a 5 Wave sequence from 1551.90, with that sequence being 1551.90-1564.07-1561.08-1568.30-1564.42-1570.57. This yields a correlation coefficient of .997 for the points (1551.90, 1564.07), (1561.08, 1568.30), and (1564.42, 1570.57).

From that high, the market fell fairly swiftly, first completing a minor sequence with 1570.57-1569.88-1569.79-1568.02-1568.62-1564.89. This gave a model value of .999. That wave then grew into a larger sequence with 1570.57-1564.89-1565.48-1563.84-1564.53-1563.77, and a model value of .992. This low of 1563.77 was very close to my estimate of 1563.50 as a support level. The market did rally, rising to 1566.87, before falling again.

Once again, the previous low turned into Wave 1 of a larger sequence, and the market formed a wave of 1570.57-1563.77-1566.87-1561.87-1562.50-1559.46, which had a model value of .999.

After reaching the 1559 low, the market underwent a more sustained rally attempt. This 5 Wave sequence went 1559.46-1561.10-1559.61-1562.39-1559.87-1564.07 with a model value of .994.

The SPX then went on to complete one more 5 Wave sequence from the morning’s high of 1570.57. With the drop to 1559.46 as Wave 1, and the rise to 1564.07 as Wave 2, the market completed Wave 3 of this sequence at 1558.73. This wave broke down as 1564.07-1562.22-1561.85-1560.24-1560.44-1558.73, and a model value of .997. A rise to 1560.43 completed Wave 4, and a final drop to 1558.47 completed Wave 5.

 

This low again was close to my 1557.40 projection, which I stated was my preferred target over the weekend. There is a possible count that would accommodate one more move lower, actually to the 1557 level, but it appears that 1558.47 will be the low for this wave. Any drop significantly below 1557 would most likely mean my count is incorrect.

With what appears to be Wave 4 from 1546.22 now completed, it is possible to project a target for Wave 5. The sequence 1546.22-1563.95-1551.90-1557.70-1558.47-1578.24 would give a model correlation of 1, and therefore 1578.24 is my target for Wave 5. Another correction can be expected from that point.