Wednesday's Market 07/24/2013

The market gave it a valiant try, but fell just short of managing a new all-time high. After the sell-off into yesterday’s close, the SPX gapped up again at the open, reaching 1698.38, less than a half point from the previous all time high. The index was quickly turned away from those lofty levels, as the SPX sold off rapidly, dropping into negative territory, and hitting 1687.56 before attempting to rally. The rally would not last long; as after rising to 1691.67, the SPX began to fall again, this time moving down to 1682.57. Following that, the index bounced around in a narrow four point range for the rest of the day.

Yesterday I noted that 1696.26 completed a 5 Wave sequence from 1671.84. With the drop yesterday afternoon, followed by the move above that 1671.84 high, the index completed a sequence from the 1604.57 low. This can be counted as 1604.57-1684.51-1671.84-1696.26-1691.52-1698.38. This most likely is the third wave from the 1560.33 low. There are still several ways in which this wave can complete, but my minimum target of 1776 remains intact.

From today’s 1698.38 high, the SPX fell to 1687.56 for wave 1 of this pullback. The small rally unfolded in three waves to 1691.67, and is most likely part of an inverted corrective wave 2. The drop to 1682.57 and small bounce from there may have completed this wave 2. The appearance of in inverted corrective wave indicates that there is still more downside to come before this pullback completes.

There is considerable support within a couple of points either side of 1680, and then 1655 after that.

Tuesday's Market 07/23/2013

It was another record setting day for Wall Street, as the SPX reached another all-time high of 1698.78. The market gapped up at the open again today, and hit that record within the first few minutes of trading. After that it was what for this market qualifies as a steep decline, as the SPX dropped to 1691.13 after the first hour and a half. The market tried to rally after that, rising through most of the afternoon, with the index climbing back to 1696.26. The SPX then sold off during the last hour, dropping to 1691.52 before rising into the close.

Looking at the waves from yesterday’s 1697.61 high, I count a 5 wave sequence down to 1693.01, a sequence up to 1698.78, followed by 3 waves down at 1694.05-1695.58-1691.13. This completed a semi-inverted corrective wave from the 1697.61 high, which was a little unexpected. From 1691.13, the SPX completed what appear to be 3 waves higher, before the late afternoon sell-off.

The appearance of the semi-inverted corrective wave, followed by what appear to be only 3 waves higher, leads me to believe that 1696.26 is the completion of a wave from 1671.84. This could be Wave D of an inverted corrective wave from 1626.61. If this is true, I would expect a pullback to around 1684. This could also be a smaller degree wave 1 from 1671.84. This will be determined by whether or not the SPX moves lower from here.

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.