Monday's Market 07/22/2013

Last Thursday the SPX hit an all-time high of 1693.12. Following that high, the index turned lower, falling to 1687.10 before rebounding. After climbing back to 1691.53, the SPX then fell into the close. After opening to the downside on Friday, the SPX rallied for most of the day, but traded in a narrow range, staying below Thursday’s high. The rally continued this morning, as the index gapped higher, hitting another all-time high of 1695.05. That was followed by a small pullback, followed by another rally which carried above the previous high, as the SPX reached 1697.61. The index pulled back during the mid-day hours, and then moved higher into the close.

I have been stating since last week that I believed the current rally would carry us first to 1718, and then above 1776. It has been awhile since I covered my longer term count, and felt it was time to cover that once again, as it would clarify my current target of 1776.

Starting from the 1074.77 low on the Daily chart, you can see my current count. Those who follow me will know that I often talk of inverted or semi-inverted corrective waves. If you are familiar with Elliott Wave Theory, these complex corrective waves are similar to extended waves. Just as with an extended wave in EWT, a 5 wave sequence containing an inverted corrective wave produces 9 waves.

The Daily SPX chart from that 1074.77 low shows Waves 1, 2, and 3 completing as 1074.77-1292.66-1158.66-1422.38. From the 1422.38 high, the index then completed an inverted corrective wave as 1422.38-1266.74-1470.96-1343.35-1687.18-1560.33. As you can see on the chart, the SPX has now completed 8 discernible waves. My model, of course, is based on a mathematical relationship between waves, and the inverted corrective wave I described above meets this criteria. The target for the last wave, Wave 5 of the sequence, can then be determined using my model. This results in a minimum target of 1776.

Looking at the 15 Minute chart from the 1560.33 low, we can see that the SPX has now completed 4 waves, at 1626.61-1604.57-1684.51-1671.84. I have labeled 1626.61 as Wave 1, and the other waves are denoted with an “X”. The reason is that these waves could be waves 2, 3, and 4, or the beginning of a complex corrective wave. The wave structure should become clearer after the next pullback. Given the 4 waves completed thus far, 1776 would satisfy the parameters for a 5 Wave sequence.

From the 1671.84 low on the 3 Minute chart, the wave structure has been a bit more complex. After reaching 1677.14, the SPX formed an inverted corrective wave, which ended at 1684.57. It appears that a lesser degree sequence is forming from there, with another wave 1, and inverted corrective wave 2 completed. My target for Wave 3 from 1671.84 is 1718. At that point, the market could see a pullback. A move to around 1700 would then give a target for Wave 5 at the 1776 level.

Given the current wave structure from 1074.77, it seems likely that the SPX will move higher to 1718, then pullback, then move higher once again to a minimum of 1776.

Thursday's Market 07/18/2013

Continuing the move up off yesterday’s 1678.12 low, the SPX moved higher at the open, moving up past 1684 at the outset. After a small pullback, the index continued higher, hardly pausing until it surpassed the previous all-time high, and rising to 1693.12. From there, the SPX started giving back its gains, finally falling to 1687.10. Another rally followed, however this one failed to reach new highs, failing at 1691.53. The index then dropped to 1687.52 before rising slightly into the close.

Yesterday I stated that it appeared the SPX had now completed 3 Waves from the 1560.33 low, 1626.61-1604.57-1684.51.Tuesday’s pullback to 1671.84 could be the fourth wave. From that low, I then counted 4 waves, 1677.14-1672.99-1684.75-1678.12. Given that count, it was likely that the index would move higher.

Today’s action formed a 5 wave sequence from 1678.12 to the high of 1693.12. The decline from that point was interesting, with a 5 wave sequence completing at 1688.28. It then appears that a rather rare corrective wave 2 completed at 1691.53. Technically this is often referred to as an expanding triangle, and it went 1689.05-1688.10-1689.36-1687.10-1691.53. Waves 3, 4, and 5 from 1693.12 then completed as 1687.99-1689.37-1687.52. This should now complete waves 1, and 2 of 5 from the 1671.84 low. My target for this wave remains at 1718. If that target is met I am eventually looking for a high above 1776 before a substantial correction.

This seems to be the point that tends to occur within each wave where there is an extreme amount of uncertainty. I do have some concerns due to some technical aspects of the market, but my count still indicates we will see higher prices.

If the market moves below 1671.84 at this point, my current count would be wrong, and lower prices may be on the way. For the moment, I will continue with my current count. Again, I expect the current wave to reach 1718, and ultimately we should see prices above 1776. A move below 1672 would change my view.

Thank you.

Wednesday's Market 07/17/2013

It certainly has been an interesting couple of days for the market. As of the close on Friday, I was still looking for a pull back of around 9-10 points, followed by another move higher. It would now appear that pull back actually occurred on Friday, and was only the 5 point move from 1677.41 to 1672.33. That was followed by a move higher that culminated at the open on Monday at 1681.99. After another pull back to 1677.89, the SPX made a final move to 1684.51.

This last move to 1684.51 most likely completed a 5 Wave sequence from 1604.57. From that high on Monday, the SPX dropped to 1671.84 on Tuesday. My current count would indicate that the SPX completed a 5 Wave sequence from the 1560.33 low at 1626.61. The most likely count from that point is an unfolding inverted corrective Wave 2 from that high. So far, the index has completed 3 of the 5 waves at 1604.57-1684.51-1671.84.

From Tuesday’s 1671.84 low, the index appears to have formed 4 waves of a sequence thus far. After an initial move higher to 1677.14, the SPX pulled back to 1672.99. The index then opened higher this morning, reaching 1683.07 after the first few minute. After pulling back to 1678.58, the SPX continued higher, finally reaching 1684.75. This completed the third wave from 1671.84. The action turned choppy after that, with the SPX pulling back to 1678.64, rallying to 1683.46, and finally pulling back to 1678.12.

If my count is correct, the SPX should now continue higher. This wave could unfold in several ways, but if it unfolds in a simple 5 Wave sequence, my target at this point would be 1718. This move from 1560.33 has been difficult to follow, so it is prudent to use caution going forward. If the SPX falls below 1678.12, my count would be in danger, and a move below 1671.84 would mean it was wrong.

Thank you.