Tuesday's Market 05/28/2013

The market apparently put aside any bearish sentiments over the long holiday weekend, and began the week on its familiar bullish note.

After finishing last week with back to back gap down opens, it began this one with a gap up open. After initially moving up to 1668, the SPX climbed higher, with barely a pullback until it reached 1674.19. At that point it began to pullback, and continued to pullback, until it reached 1655.03. There the pullback ended, and the SPX rose to 1663 before the close.

It is now apparent that last Thursday’s 1635.53 low was the end of the correction from 1687.18. It appears that the SPX has been forming a nested inverted corrective wave structure since then. Wave 1 ended Thursday at 1655.50. Wave 2 of the 5 wave sequence ended today at 1655.03. Wave A of 2 ended Friday at 1636.88 and Wave B this morning at 1674.19. The pullback from there completed Waves C, D, and E, to finish Wave 2. This rally should now carry the SPX to new all-time highs.

There is near term resistance at 1665. A move into that area, followed by a move below 1655 would likely end this rally.

The more likely scenario is a move above 1665 (another gap up open?), and a continuation of this move. I would look for a move to 1679, and ultimately a move to 1692-1702.

Thank you.

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.