Wednesday's Market 07/31/2013

Since making a low at 1676.03 last Friday, the SPX has traded generally higher, but in a quite choppy fashion, seemingly awaiting the release of today’s FED minutes. With many people believing that the release of those minutes would decide the direction of the stock market, the lack of conviction the past few days should have surprised no one. The difficulty has been trying to decipher the shorter term waves to anticipate the longer term direction. I have been consistent for quite some time that the market was headed higher, with a minimum target of 1776.

As was the case yesterday, the SPX headed higher at the open, moving to 1692 before pulling back. Another move higher brought the index just below 1697 by mid-morning. At that point the SPX started to sell-off, falling back to 1689. With the release of the FED minutes, the volatility increased, with the SPX undergoing a series of sharp swings. The first was to the upside, with the index spiking to 1694. The second was a quick drop to 1686. That was followed by another sharp move higher to 1698, then a drop to 1685 to end the day.

Since Friday’s 1676 low, I count 3 waves to the upside, and 3 waves to the downside. The first 5 waves, 1691.85-1681.86-1693.19-1682.42-1698.43, do not meet the criteria for a 5 wave sequence, an indication that the market will move higher. The last 5 waves, however, 1681.86-1693.19-1682.42-1698.43-1684.94, do appear to complete a sequence. Looking at the three moves lower, the first wave was 10 points, the second 11 points, and the third 13 points. For each wave, the length increased as the starting point became higher. This seems to complete an inverted corrective wave from 1691.85. So the market has most likely completed Wave 1 at 1691.85, and Wave 2 at 1684.94 of a 5 Wave sequence higher, which most likely will carry above 1776.

There of course is still the possibility that I am wrong, and the market will head lower from here. If the SPX moves below 1676, the next support level is 1657.

Monday's Market 07/29/2013

On Thursday the SPX completed a 5 Wave sequence higher to 1690.94. On Friday morning the index moved lower, eventually finding itself at 1676.03. Last week I said that it appeared that the SPX had completed a 5 wave sequence from 1604.57 at 1698.38. With the action on Thursday and Friday it seems that I was a little ahead of myself, as that high now appears to have completed a sequence from 1671.84, but not 1604.57. The moves on Thursday and Friday can then be seen as the completion of an inverted corrective wave from 1684.51. This wave took the form 1671.84-1698.38-1680.07-1690.94-1676.03. That would then complete 4 waves from the 1560.33 low. The optimum target for wave 5 would then be 1778, very close to my ongoing minimum target of 1776.

This morning the SPX started to the downside, reaching 1687 before bouncing back to 1691. The selling then continued through the morning, dropping to a low of 1681.86. After that the index started to rally, rising to 1686 before a small pull back. The rally then continued to 1688.50 by mid-afternoon, which was followed by a larger pull back to 1684.

From the 1676.03 low, the SPX completed 5 waves higher to 1691.85. This was followed by a 5 wave sequence lower to 1681.86. From that low it would appear that the index is forming a more complex wave to the upside.

This has been a very interesting wave, and it should continue to be through the end of the week for obvious reasons. Things can change quickly in a market like this. A move below 1676.03 would indicate my count is incorrect, and may signal a further move to the downside. I am still looking for a move above 1698.38 to confirm the continuation of the current move. My target to the upside remains a minimum of 1776.

Thursday's Market 07/25/2013

The SPX moved lower this morning, continuing the pull back from yesterday’s 1698.38 high. The index fell to 1690.31 before rebounding, a rebound that took the SPX into positive territory at 1687.05. That in turn led to another move lower, which found the index eclipsing the previous low by a fraction, stopping at 1680.07. The SPX moved steadily higher from there, rising to 1689.42 before pulling back to 1685.04. From there the index again moved higher, making it to 1690.94 before fading into the close.

As I indicated yesterday, the SPX was in the process of forming an inverted corrective wave 2 after the wave 1 drop to 1687.56. This corrective wave did end yesterday at 1686.43, with waves 3, 4, and 5 completing this morning at 1680.31. This turned out to be only wave 1 of a higher degree wave, with wave 2 carrying to 1687.05, followed by waves 3, 4, and 5 completing just below the previous low, at 1680.07. From there the SPX appears to have completed a 5 wave sequence higher at 1689.42. After a small pull back, the index completed another 5 waves at 1690.94.

The SPX seems to have completed a wave 1 at 1689.42. The pull back appears to have occurred in three waves, and with another 5 wave sequence completing above the 1689.42 high, it is likely that the index has not yet completed the current move higher. If the SPX move above 1698.38, the probabilities for a continuation of the uptrend will increase. At this point it looks like my 1718 is still in play on the upside.

If the SPX moves below 1680.07, the most likely stopping point would be 18-20 points below the high from 1680.07, which is currently 1690.94. This would give a target between 1671 and 1673. Otherwise support is still at 1680, and then 1655.