Thursday's Market 04/04/2013

Although my analysis on Tuesday concerning Wednesday’s possible market action seems to have been prescient, and I certainly hate to be the one to rain on my own parade, I believe it is more important to get things right, than to be right.

The market followed one of my scenarios quite precisely, but also left a number of questions. As I noted yesterday, the wave shape looks quite odd, and given my count on the 3 Minute chart as of EOD Tuesday, the decline from 1573.66 to 1549.80 looks, and counts, best as a single 5 Wave sequence. I will address this in more detail shortly, but first a review of today’s action.

 

This morning the market continued the rally it began yesterday afternoon, rising to 1562.60. This completed a 5 Wave sequence from 1549.80 with 1549.80-1555.80-1557.34-1560.88-1559.80-1562.60, and a model value of .9999. This wave contained an inverted corrective Wave 2, forming 1555.80-1553.68-1556.17-1554.60-1557.56-1557.34, which has a model value of .9981.

From there, the SPX formed a simple 5 Wave sequence as 1562.60-1552.71-1560.40-1553.83-1556.18-1552.52, this sequence has a model value of .9955. After reaching the 1552.52 low, the market rose again, but failed to reach a new high for the day. This sequence went 1552.52-1554.91-1556.19-1559.42-1556.66-1560.26, and also contained an inverted corrective Wave2. The main sequence had a model value of .9981, and Wave 2 traced out 1554.91-1553.88-1557.77-1556.80-1557.19-1556.19. This sequence had a model value of .99996.

 

Today’s market had the feel of a consolidation day following Wednesday’s big decline. With no clear trend emerging today, the question of where the market goes next remains, which leads back to the first part of this post. One other thing that has bothered me has been the failure of a larger 5 Wave sequence to emerge from the 1538.57 low. There are not usually this many peaks and valleys without some sequence completing. I spent a good deal of time today reviewing the move from that point, and concentrated on the move from 1546.22 to 1573.66. After reviewing that part of the chart, one alteration clears things up a bit. Between 1551.90 and 1570.57 there is a peak visible at 1568.30. It is most likely that a 5 Wave sequence from 1551.90 completed there, and then formed a semi-inverted corrective wave from 1568.30 to 1558.47. This count can be seen in parentheses on the 15 Minute chart. A 5 wave sequence from 1546.22 then emerges as 1546.22-1563.95-1551.90-1568.30-1558.47-1573.66. This sequence has a model value of .9997, and completes at the peak.

If this count is correct, and I believe it is, the first four points from 1538.57 are most likely a series of Wave 1’s. This would indicate a further move to the upside is close at hand. Since several counts are still possible, and going into each one in detail is not helpful. What is helpful at this point is to watch important market levels that will indicate the next market move.

The first level to watch is still the 1565.50 level. A 5 Wave sequence from 1538.57 could still terminate at this point, and the market would then see another move down, which will hold above 1538.57, and one final move higher to a marginal new high.

If the market moves above 1565.50, the nested inverted corrective wave that I have favored for awhile would be the most likely outcome. This would indicate a substantial move to the upside

To the downside, 1547 is the point to watch. The market could complete an inverted corrective wave from 1561.56 at this point. If an inverted corrective wave does complete at this point, I would anticipate two moves higher similar in size to the 1538.57 to 1561.56 advance, separated by a corrective Wave 4. This would put the market in the 1580-1600 range.

If the market moves below 1547, a larger move to the downside has most likely started. If the market follows that up with a move below 1538, we could move substantially lower.

Thank you.

 

 

 

 

 

 

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.