Friday's Market 05/24/2013

Today looked like a mirror image of yesterday, with a gap down open, followed by a steady move higher. The move lower was expected, however the unexpected part was that yesterday’s low held. That could be an important indication of what is to come.

The SPX gapped lower at the open, dropping initially to 1640.12, and then chopped its way lower to 1636.88. From there the index moved higher, reaching 1645.78 shortly after noon. After a small pullback to 1642.45 the market continued higher, reaching 1649.61 before the next pullback. This pullback took the market to 1645.14, and was followed by a steady move higher into the close, slightly eclipsing the 1649.61 high at 1649.78 just before the close.

From this morning’s 1636.88 low the action seems fairly straightforward. The SPX completed a 5 wave sequence higher at 1645.78, followed by the completion of a higher degree sequence at 1649.61. After the ensuing pullback, the SPX then moved above that 1649.61 high, indicating the index is still completing a higher degree sequence to the upside.

The fact that today’s move lower did not take out yesterday’s low, and the action subsequent to that, forced me to re-evaluate my count from the 1687 high. I see two main possibilities at the moment, and I will start with what I see as the most likely one. The move from that high can be counted as a 5 wave sequence; 1687.18-1674.28-1683.10-1665.38-1670.33-1635.53. Wave B of this sequence, 1674.28-1683.10, was a semi-inverted corrective wave. This count would indicate that 1635.53 was the low of this corrective wave, which in my count is Wave 4, and should be followed by Wave 5 to new all-time highs. If this count turns out to be correct, the action from that low appears to be a nested wave structure, which usually results in a rapid move.

The alternate count at this point is Wave A at 1672.96, with the move up to 1683.10 as the first wave of an inverted corrective wave. Wave B of that wave would be yesterday’s drop to 1635.53, and Wave C the recovery to 1655.50. Wave D would be this morning’s drop to 1636.88. This Wave would complete between 1654 and 1659.

If the SPX can get above 1660, it is most likely that the correction has completed, and we will move to new highs soon. If this move stalls below 1660, the market should make new short term lows. It should be an interesting week.

Thank you.

Thursday's Market 05/23/2013

As strange as it sounds, the SPX did NOT make an all-time high today.  

The SPX gapped lower this morning, and within minutes the index had fallen to 1635.53. From there the SPX bounced to 1647, and after a small pullback, continued higher to 1654. The index then fell back to 1645, before heading higher to 1655.50, thus closing the opening gap. After that the SPX drifted lower into the close, dropping to 1648.82.

In yesterday’s post I indicated the market may move lower, giving a target of 1641. This would have completed a 5 wave sequence from the 1687.18 high as 1687.18-1672.96-1660.80-1648.86-1655.43-1641. Today’s lower opening exceeded the lower limit for this count, which most likely means that today’s 1635.53 low only completed wave 3 of the sequence. This was confirmed as the move from 1660.80 completed a 5 wave sequence at that low. This was followed by a 5 wave sequence higher to 1655.50, which should be wave 4 of the sequence. If this count is correct, wave 5 of this sequence should complete between 1632 and 1623. This should in turn complete Wave 4 from 1074.77, and set the stage for one more move to new highs before a larger correction develops.

So, for the short term, I am expecting a move lower to 1632-1623, followed by a move to new highs. If the SPX moves above 1661 from this point, I would expect the market to continue higher to new high territory.

Thank you.

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.