Wednesday's Market 05/29/2013

Not very long ago the market was going straight up, with barely a correction. It has now seemed to turn into a market that makes large moves in opposite directions from day to day. The medium term direction of the market is still unclear, with either a rise above 1700, or a steeper correction into the mid-1500’s the next likely move.

The day started with a gap down to 1646, quite the opposite of what I was expecting. After a rebound to 1653, the SPX continued lower to 1640.05. A rally was next, as the index rose to 1648, pulled back to 1642, and then rallied to 1654. The SPX then moved lower into the close, dropping to 1647.69 with only a small 4 point bounce along the way.

Going back to the 1687.18 high, the SPX completed a sequence lower at 1635.53. The index then completed sequences higher at 1655.50, lower at 1636.88, and higher once again at 1674.19. Now the SPX has completed a sequence lower at 1640.05. This series of sequences can be seen as the completion of Wave 4 at 1635.53, followed by Waves 1, 2, 3, and 4 at 1635.53-1655.50-1636.88-1674.19-1640.05. This would project a Wave 5 high of 1702-1710.

This series can also be counted as a Wave 1 down to 1635.53, and 3 waves of an inverted corrective wave at 1635.53-1655.50-1636.88-1674.19. Today’s move lower would have completed the first wave of a 5 wave sequence that would eventually become the 4^th wave of that inverted corrective wave. This would indicate a move into the 1500’s. Like everyone else, I am waiting for a break of 1635.53 to indicate a move lower.

On a shorter time scale, we can look at the move off today’s 1640.05 low. It appears that the SPX completed Wave 1 at 1648.38, and was followed by an inverted corrective wave 2 that terminated at 1647.69. This would imply that the market should at least open higher tomorrow. The first target for this wave would be 1659, and the 1665. 1665 would also be the first resistance level set up by the 1674.19-1640.05 decline.

Although the medium term picture is ambiguous, short term I would look for a move to 1659, a small pullback, and a move to 1665.

Thank you.

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.