AAPL 05/27/2013

Since reaching an all time high of 705.07 last September, AAPL fell nearly 50% to 385.10, before rebounding to 465.75. It appears that AAPL is in a long term downtrend, which is only partially completed.

The initial move from 705.07 to 505.75 can be seen as the first impulse wave down. I see the rebound to 594.54 as Wave A of an inverted corrective wave. Wave B carried AAPL down to 385.10, and was followed by Wave C to 465.75. This count implies that we should next see Wave D lower, before another rebound comparable to the 90, and then 80 point rebounds we saw for Waves A and C. That would complete Wave 2 from 705.07, and require Waves 3, 4, and 5 to the downside. The next target for this count would be near 318.

The other possible count would be that Waves 1, 2, 3, and 4 have completed to the downside, with one more move down needed to complete the sequence. The Wave 5 low for this count would be near 280. This count would also project Wave 3 of 5 to complete at 318.

With both counts suggesting a move to the 318 level, that would seem a likely next stopping point.

Weekend Outlook 05/26/2013

It was quite a week for the markets. The euphoria of the previous week carried over, as new all-time highs were recorded on both Monday and Tuesday. That euphoria came to a screeching halt after another all time high on Wednesday, however, as the indexes fell precipitously into Thursday morning. The markets then entered a trading range, and finished the week at a cross road ahead of the long weekend. This could be a mere pause as the markets digest the recent extreme move to the upside, or the beginning of a more extended correction. My bias up to this point has been towards a mere pause before one more move higher, but after an extensive review, the evidence seems to be mounting that a larger correction has started.

After ending the previous week in rarified air, the SPX continued to move higher this week, hitting an all time high of 1672.84 on Monday, and following that with another all time high of 1674.93 on Tuesday. The markets moved lower on Wednesday after hitting another all time high of 1687.18, falling to 1655.59, with a gap down open on Thursday bring the SPX down to 1635.53. This proved to be the low of the week, as the SPX rose to 1655.50 off that low. Another gap down open on Friday took the SPX to within a point and a half of that low, before again moving higher.

As I mentioned on Friday, the move down from 1687 can be counted two ways. The first as a completed 5 Wave sequence at 1635.53, which would be consistent with the SPX now moving higher to possible new high ground. The second count has a wave 1 completing at 1672.96, and is followed by a partially completed inverted corrective wave 2. Again, my preference up to this point has been to see this as a pullback before the SPX makes one more high. If the SPX can move above 1660 this count would remain in effect. It is becoming more and more likely that this is the start of a larger correction.

This entire move from 1343.35 to 1687.18 has been quite difficult to follow. I have been counting this move as the unwinding of a series of nested waves from the 1074.77 low. Although this count has allowed me to track the market moves fairly well, it has always seemed over complicated, and gives wide ranges for my projections. Looking at this move over different time frames, and taking into account the totality of the wave count from 666.79, there is an alternate count for that move that may ultimately work better. The start of this count remains the same; Wave 1 completed at 1448, and was followed by an inverted corrective Wave 2, which ended at 1485.01. Wave 3 then completed at 1597.35 and Wave 4 at 1536.03. A 5 wave sequence from 1343.35 then completed at 1661.49. This was then followed by an inverted corrective Wave 2, which finished at 1662.67. The move of 1684.16-1682.91-1687.18 then completed the entire sequence from 1343.35.

One of the issues with viewing the current move down as being complete is the fact that it is difficult to project the SPX moving above 1660 given the current wave structure. Most projections only have the SPX moving into the 1655-1660 area. This is not to say that it cannot happen. Again if the SPX does move above 1660, it is likely that we will see new highs.

If the SPX moves into the 1655-1660 area, and then pulls back, it would seem likely that an inverted corrective wave from 1672.96 has completed. If that happens, then my projections start to converge around the 1540 level. If a 5 wave sequence completed at 1687.18 as discussed above, this could be the last wave of an inverted corrective sequence from 1422.38. This would take the form 1422.38-1266.74-1470.96-1343.35-1687.18-X. This would project the current wave to complete above 1542. In addition the secondary support level indicated by the sub-wave structure is 1550 (the primary support level is 1654). Lastly, if an inverted corrective wave completes at 1655-1660 from 1687.18, it would project the entire sequence to complete at 1542.

Although this market can still go either way, at this point I can give some parameters that would signal a breakout in either direction. Above 1660, the SPX should move to new highs. A move back below 1635 should mean this downtrend should continue to 1542.

Thank you.

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.