Wednesday's Market 05/01/2013

After hitting another all-time high on Tuesday, the SPX backed off that level today. In yesterday’s post I said a 5 Wave sequence had completed from 1536.03, and it was a likely point for the termination of Wave D. If it was, I was expecting Wave E to complete between 1582-1536. My target was 1573, with first level support at 1590.

The market dropped at the open, initially to 1591.48. After a short-lived bounce, the market continued lower to 1587.86. After a five point rally, the SPX headed lower once more, this time dropping to 1584.70. A six point move higher came next, and then one final move lower to 1581.28.

Today’s wave structure was fairly complex, as it seems the market is trying to make this as difficult as possible. To start with, I believe Tuesday’s 1597.57 high was the termination of Wave D. This morning’s initial drop this morning, 1597.57-1591.48-1593.99-1587.86 I see as three separate sequences. An inverted corrective wave followed, 1587.86-1593.11-1584.70-1589.10-1586.60-1590.79. That portion of the wave I am fairly confident about, which gives us either 4 waves of a 5 Wave sequence completed, or the beginning of a nested inverted corrective wave sequence.  I see it as 4 waves, with Wave 5 of that sequence completing at 1584.16. From there, the SPX went on to complete another 5 Wave sequence, of one higher degree at 1581.28. With a 5 Wave sequence completed from 1597.57 and within my target range for Wave E, this could very well be the end of this move lower.

A move above 1590.79 would confirm this, while a move lower would indicate the nested inverted corrective wave sequence is in play, with lower prices expected. 1573 would still be my target.

If Wave E has completed, that would be Wave 2 from 1074.77. We should now see waves 3, 4, and 5 to the upside. I still see significant resistance at 1598, and unless the SPX can break through that 1598-1602 resistance zone, like on this next move, I think it is highly likely that this entire uptrend will from 1074.77 will end there, in some king of triangle formation. If Wave 3 ends around that level, Wave 4 should be a small pullback, and one more move into that zone for Wave 5 will end it.

Tuesday's Market 04/30.2013

The SPX traded on both sides of unchanged at the open, coming off yesterday’s strong move to the upside. Soon the market moved lower, dropping to 1586.50. At that point the rally once again took hold, with the SPX rising to 1592. After some choppy upside movement, the SPX rose to 1596.78 before pulling back. This pullback held at 1593.56, and the market mode one more move higher, to an all-time high of 1597.38.

After the opening pullback to 1586.50, the SPX appears to have risen to a wave 1 at 1592, followed by a corrective wave 2 sequence. Wave 3 occurred at 1596.78, followed by wave 4 at 1593.56, and wave 5 at 1597.38. This sequence may have completed a 5 Wave sequence from 1536.03, which may signal the long awaited end of Wave D. This sequence can be seen as 1536.03-1592.64-1577.56-1596.65-1586.50-1597.38.

With the market action of today, it seems that the SPX is still in, or has just completed Wave D from 1292.66. The other scenarios I mentioned yesterday would seem to be lower probabilities at this point. I am not ready to declare Wave D over. This market has risen in spite of itself, and may continue to do so. I can however make some statements about what I am looking for.

First, if Wave D is to continue, it will have to do so via a complex corrective wave. This would be similar to what we saw between Friday afternoon, and Monday morning; a small dip, followed by a sharp move to clear the 1598-1602 resistance area, and then choppier trading completing the complex corrective wave, and the next 5 wave sequence. I see 1590 as the first support level, so that seems like a logical limit to the pullback.

It is more probable that Wave D ended at 1597.38, with Wave E expected to follow. Since Wave D has now exceeded Wave B, I would expect Wave E to be less than the 61 point decline we saw for Wave C. This wave should end somewhere between 1582, and 1536, with a target of 1573.

Thank you.

Monday's Market 04/29/2013

Apparently the market did not like my suggestion of 1566 for the next price level. It seems I was correct about the length of the next move, just a bit off on the direction.

The market gapped up at the open again today, hitting 1588 before pulling back. The move above Friday afternoon’s high signaled an inverted corrective wave was in progress, and that is what occurred. After the pullback the SPX rose again to 1592, pulled back, moved higher to 1595, pulled back, and then hit the high of the day at 1596.65. The market then fell into the close.

The SPX completed a 5 Wave sequence from 1577.56 at today’s high, which now gives us three sequences completed from the 1536.03 low, 1536.03-1592.64-1577.56-1596.65. This, I believe, puts the market in a precarious position. My current count has the current wave from 1536 as Wave D of an inverted corrective wave from 1292.66 October 2011 high. After this wave terminates, I would expect one more move lower before the market continues higher. If this count is correct, a move to 1598 would complete the sequence from 1536, and possibly be the start of Wave E to the downside. Since Wave D would complete beyond Wave C, I would expect Wave E to be less than the 61 point move from 1597 to 1536.

There are a number of possibilities if the market moves up to 1598-1602 and then moves lower. All of these would indicate a move lower, so I will not go into all the details. If the SPX breaks above 1602, it would appear the market will see higher prices before Wave E begins.

The real problem, as I see it, is if the market moves below 1577.56 without making a new high. This would most likely mean that Waves C, D, and E complete at 1536, with the current 3 waves from that low being Waves 3, 4, and 5 from 1074. Looking at it another way, it would mean the entire wave sequence from that point would be complete, and should now be followed minimally by Waves C, D, and E  from May 2011 1370.58 high. Waves 3, 4, and 5 would then complete an entire sequence from 666.79.

This would mean a larger correction than the less than 61 point move in the first scenario, but still most likely within expectations. There is one possible count however, that would indicate the start of a major correction from today’s high.

I will not get too far ahead of myself, so I will take this one step at a time. For now, a move to 1598, followed by a pullback would probably indicate a minor, less than 61 point correction. A move above 1602 and we should see higher prices before the current wave completes. A move below 1577, without making a new high, would most likely mean a larger correction is underway.

Thank you.