Wednesday's Market 05/22/2013

It was an interesting day for the markets, to say the least. A sharp rise to another all-time high, followed by the biggest decline we have seen in over a month.

The SPX opened higher, rose to 1684, and after a minor pullback, hit 1687.18. But it was all downhill after that. The SPX dropped to 1673, tried to rally, but after hitting 1683 started a steady decline that dropped the index to 1648.86. The SPX then rose to 1655 into the close.

As I mentioned yesterday, I expected a move above 1677 to lead to higher prices. It did, as the SPX rose to 1687, although you had to be quick to catch that move. At 1687 the SPX completed a 5 wave sequence from 1662.67, and has finally completed a sequence from 1581.28. This completes Wave 3 from 1074.77. A pullback had been expected once Wave 3 ended, and it looks like we saw the majority of it today. At this point it appears that only 3, and possibly 4, waves of this corrective sequence have completed. I expect to see another move down, with a target of 1641. I would then expect one more move to new highs before a more substantial correction occurs.

Thank you.

Tuesday's Market 05/21/2013

I thought that yesterday afternoon’s 1663.52 low completed an inverted corrective wave from 1661.49. As it turns out that was Wave 1 of E from that high.

The SPX did move higher at the open, but managed only to get to 1672 before turning lower. The index moved below 1663.52, falling to 1662.67 before reversing course once again. The SPX moved steadily higher until it hit another, you guessed it, all-time high at 1674.07. After a minor pullback the SPX moved higher again, surpassing 1674.07, and rising to 1674.93. From there we saw another pullback, this time taking the SPX to 1668.70 near the close.

As I mentioned above, yesterday’s 1663.52 low completed only Wave 1 of E. This morning’s rise was Wave 2 and the decline from that high resulted in Waves 3, 4, and 5 completing. This did complete the inverted corrective wave, and from there the SPX moved higher. The SPX completed a sequence at 1674.93, and then what appears to be a corrective sequence to 1668.70.

The current market set-up is quite interesting. My expectation has been that the SPX should complete a 5 wave sequence from 1581.28, which would be followed by a small correction, and then another 5 wave sequence higher to complete the sequence from 1074.77. The market has continued to complete sequences, and then go on to form larger degree sequences while moving higher. The first of these sequences completed at 1635.01, the second at 1661.49, and now the SPX has started forming another sequence. Waves 1 and 2 of the current sequence have completed, with Wave 2 being the recently completed inverted corrective wave. It is possible that today’s rise to 1674.93, and decline to 1668.70 were Waves 3, and 4. If this is correct, Wave 5 of this sequence should complete between 1675 and 1677. This would appear as a diagonal triangle. I would then look for a move below 1668 to confirm this scenario.  This would then be the start of the corrective sequence lower.

If the SPX moves above 1677, it would be most likely that today’s rise to 1674.93 was simply wave 1 of 3. This would indicate a further move higher before a correction.

Thank you.

Monday's Market 05/20/2013

Hard to believe. Another all-time high for the SPX. At times it seems like this will never end, but we all know it will. Sometime. If today was not the start of a small pullback, it should be coming soon.

After another gap open, the SPX hit 1658.31 before pulling back. The SPX then moved higher to 1660.74 before another minute pullback. From there the market moved steadily higher, hitting 1672.84. That was followed by a somewhat larger pullback to 1663.52. This 9 point pullback was similar in magnitude to the 11, and 12 point pullbacks we saw last Wednesday and Thursday.

The rise from Friday’s 1648.60 low to 1672.84 completed in a 5 wave sequence. The drop to 1663.52 would then seem to complete an inverted corrective wave from Wednesday’s 1661.49 high. We should now see one more move higher to complete the sequence from 1581.28.

To review, 1581.28 was the termination point for Wave 2 from 1074.77. Once the SPX completes a 5 wave sequence it will complete Wave 3. At that that point I would expect a correction, followed by another move higher to complete Wave 5. That is the point at which I would expect a more substantial correction.

So far, from 1581.28, the SPX completed 5 waves to 1635.01, and then a higher degree sequence at 1661.49. The three aforementioned pullbacks formed the inverted corrective Wave 2, and should be followed by waves 3, 4, and 5 higher. Because of the structure, it would be possible to complete this sequence without making a new high.

If the SPX moves to 1668, and then falls below 1663.52, I would expect a pullback has begun. Should the SPX move above that level, 1677-1681 could be the next stop.

Thank you.