Thursday's Market 05/02/2013

It was another day, another record high for the SPX.

The market opened higher today, rising to 1589.64. After a small pullback the market continued higher, first hitting 1592.82, and then 1597.07. The SPX then traded in a narrow range, less than four points, and hit a new all-time high along the way.

Yesterday I said it was possible that Wave E completed at 1581.28, and that a move above 1590.79 would confirm this.  It looks like yesterday afternoon we saw Wave 1, followed by Wave A of an inverted corrective wave near the end of the trading day. The opening move to 1589.64 then completed Wave B, with Waves C, D, and E ending in a zig-zag pattern. With this Wave 2 from the 1581.28 low was completed, and the next move to 1592.82 completed Wave 3. After a small pullback from Wave 4, the SPX then moved to 1597.07 to complete Wave 5.

This became Wave 1 of the next sequence, with Wave 2 being a semi-inverted corrective wave. As you can see, after a small pullback from the 1597.07 high, the SPX moved above that level, and then pulled back below the initial move lower from 1597. This formed Wave 2. Waves 3, 4, and 5 then completed within the narrow range trading that followed, with Wave 5 completing at 1598.60.

The SPX has now, once again, completed a 5 Wave sequence right at the 1598-1602 resistance level I have been mentioning. With 1581.28 marking the end of Wave 2 from 1074.77, the sequence today may have formed Wave 3, a small pullback could form Wave 4, and one more try at the 1598-1602 level could complete Wave 5. Unless the SPX can break through that resistance level, that would seem to be the likely outcome for this move. The SPX ended the day right at the first support level, with the next support at 1591-1592. I would expect a drop into this support level if this scenario plays out.

The waves at this point are difficult to discern, and if the SPX should fall below the 1581.28 low, I would say a further correction to 1530 is likely.

If the SPX is going to break through this resistance level, tomorrow may be the day. After reaching 1598.60, the market pulled back. Very short term; the SPX completed a 5 Wave sequence within the first support zone. This sequence contained an overlapping wave structure, when I would have expected non-overlapping waves if the pullback were to continue. This is the setup for a wave A of an inverted corrective wave. This would result in a powerful move above the resistance level, and lead to higher prices. This would be the mechanism to finally break through this level.

A lot of maybe’s and could be’s , I know, but until the SPX either moves above 1598-1602, or below 1581, there is a lot of uncertainty.

Thank you.

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.