Wednesday's Market 04/10/2013

WOW! What a day for the market. As anticipated, the slight pullback into the close yesterday, proved to be the low. The market started strong, and remained strong throughout the day.

Another gap to the upside took the market to 1576.10 at the open, followed by a two point pullback. That was only the beginning, as the market continued higher, and higher, until it reached 1586.39. This move higher was only interrupted by a couple of small pullbacks. One more pullback set the stage for the final push of the day, which brought the SPX to 1588.85. From there the market saw its most substantial drop of the day, plummeting nearly three and a half points to 1585.33. The market recovered at that point and rose nearly to its previous high before the close.

The first 5 Wave sequence of the day was a familiar wave, with an inverted corrective wave 2. This completed as the market hit 1586.39. From there, the market turned a little choppy, eventually wending its way to 1585.33. This was itself a corrective wave 2 from the 1586.39 high. 

Looking at this entire wave sequence from 1538.57, the market as now completed four waves, and Waves 1, and 2 of Wave 5. Wave 1 was the rise from 1538.57 to 1564.91 on 3/25/2013. Wave 2 was then the semi-inverted corrective wave that stretched from 1564.91 to 1540.29. Wave 3 went from that low, to yesterday’s 1573.89 high. Wave 4 then completed at yesterday afternoon’s low of 1567.97.

Today the market completed Wave 1, and Wave 2 of 5 at 1586.39, and 1585.33 respectively. Waves 3, 4, and 5 of 5 should lead to the end of this sequence. With more waves completed, it is now likely that this wave will carry slightly higher than the 1619 I had previously mentioned. The SPX should now top over 1621.

A likely path for these final waves would be something like 1599-1597-1621. After this wave completes, the market should finally be ready for a correction.

Thank you.

Tuesday's Market 04/09/2013

It turned out to be quite an interesting day. I have been talking about this “semi-inverted corrective wave” scenario since this weekend, and the market seems to be playing out that scenario thus far. The market also gave us a perfect example of a semi-inverted corrective wave today, which I will try to describe in detail. This may make my scenario from 1538.57 easier to understand.

The market opened higher today, hitting 1566.51. After that, the market turned lower, dropping to 1560.92. The market then turned higher, rising to 1565.99, once again hitting that 1565 resistance level that has proved so stubborn. That level held once again, dropping the SPX to 1561.38, before it once again moved higher. The market soon ran into that 1565 level for the third time, but this time it wouldn't hold. After a slight pullback, the market finally broke through that level, and it was up, up, and away. The market quickly ran up to 1573.89, with only small pullbacks along the way. Yesterday I mentioned the 1572 as a likely stopping point, and that level was pretty much on target. The market then fell on cue, falling to 1567.97 near the close.

The up and down movement at the start of trading was the unraveling of yesterday’s Wave 5(Blue) high. When the market hit 1560.92, that wave was completed, and so was Wave 4(Purple) from 1540.29 low. After rising to 1564.30, the market completed Wave 1(Blue) of the next sequence. Wave 2 was the semi-inverted corrective wave I mentioned earlier. This wave ended at 1561.38. The strong upside move from that point completed Waves 3, 4, and 5 (Blue) of that sequence.

This completed a 5 Wave sequence (Purple) from the 1540.29 low and most likely Wave 3 from 1538.57. A 5 Wave sequence then completed to the downside, terminating at 1567.97, which I believe is the end of Wave 4 from 1538.57, which leaves us with Wave 5, and a target of 1619.

As promised, I will try to break down the semi-inverted corrective wave that occurred today. The 5 Wave sequence began at 1560.92, with Wave 1 ending at 1564.30. This is the blue “1”. You will then see a 5 Wave sequence in white that ends at 1561.38. This is the semi-inverted corrective wave. These waves start with a small corrective move for Wave 1, then Wave 2 moves beyond the higher degree Wave 1, which in this case is the blue “1”. Waves 3 and 4 complete within the boundaries of the blue “1”, and the white “1”. Wave 5 then completes the sequence, and Wave 2 of the higher degree wave, or Wave 2 (Blue).

After a semi-inverted corrective Wave 2, Waves 3, 4, and 5 play out in a fairly predictable pattern. Wave 3 usually ends close to Wave 2 of the semi-inverted corrective wave. In this case blue Wave 3 ended at 1565.76, just below white Wave 2, which was 1565.99. Wave 4 is then usually quite shallow, in this case just over a point, and Wave 5 can be projected using the Wave 1 of 1, and Wave 2 of 2 (white) as reference points. In this case Wave 1 of 1 (Blue) was 1562.40. I then take the points (1560.92, 1562.40), (1562.40, 1565.99), and (1565.99, X), where X is the termination point of Wave 5 (Blue). I then find the value of X, for which the resultant correlation is 1. The number that solves the equation for this example is about 1574.82, very close to the eventual Wave 5 (Blue) high of 1573.89. This is the same relationship I used in yesterday’s example, and the way I can project the Wave 5 high from 1538.57.

The 15 Minute chart shows the entire current wave structure. Wave 1 of this sequence came in at 1564.91, and is the red “1”. Wave 2 (Red) is then the entire move from 1564.91 to 1540.29. This is the semi-inverted corrective wave. I believe Wave 3 (Red) ended today at 1573.89. This is very close to the Wave 2 of 2 high 1573.66, very similar to both examples I have given. The short pullback to 1567.97 is then most likely Wave 4 (Red). Again, in both previous examples Wave 4 was very shallow. Wave 5 is then usually a pretty dramatic move. Again, my target is 1619.

Thank you.

Monday's Market 04/08/2013

The rally continued today off Friday’s low, closing the gap down opening. If the count I discussed in my Weekend Outlook is correct, we should see the market rise higher here, before a pullback.

With the completion of a 5 Wave sequence off the 1540.269 low just before Friday’s close, it was not surprising to see the market open slightly lower today. The market dropped to 1548.63 this morning, before resuming Friday’s rally. The market rose to the 1552-1553 area, where it encountered some resistance. After bouncing in a narrow range for a couple of hours, the market finally cleared that level. Once it did, the rally resumed in earnest. The market quickly rose to 1558.65, and after a small pullback, reached 1562.79.

From Friday’s 1540.29 low, the market now appears to have completed 3 Waves . Wave 1 completed at 1554.66, with the pullback to 1548.63 a second wave. The third wave most likely completed near today’s close at either 1562.25, or 1562.79. If it completed at 1562.25, the very minor pullback to 1561.97 could be a fourth wave. This would give a projection for Wave 5 somewhere above 1572.

That would most likely be the completion of Wave 3 from 1538.57 low. This would fit very well with a projection of 1619 for Wave 5 from that low, as I discussed over the weekend. If the market pulls back at the open, I would expect support near 1556. This would be about the same point drop as the move from 1554.66 to 1548.63, and could mean the SPX is forming an inverted corrective Wave 2 from 1554.66. Either way, the market should reach 1568-1572 to complete Wave 4.

Thank you.