Monday's Market 08/05/2013

Last Wednesday I said that it appeared that an inverted corrective wave had completed at 1684.94, and that it was likely that the market would move higher. Move higher it did, as the SPX gapped higher at Thursday’s open, and continued to rise until hitting 1707.85, finally clearing the 1700 level. On Friday the SPX moved lower to begin the day, dropping to 1700.68 before rebounding to reach a new all-time high at 1709.36. 

This morning the index opened lower, falling to 1703.55. Again the SPX rebounded, but today it failed to reach a new high, falling short at 1709.04. The index then dropped to 1704, and then bounced back to 1707.83 before the close.

Since the opening minutes on Thursday, when the SPX spiked above 1702, the SPX has traded in a narrow 9 point range between 1700, and 1709. The most prominent features of this range bound trading have been the 7 point drop at Friday’s open, and this morning’s 6 point drop to open the day. Since the inverted corrective wave ended at 1684.94, my count has a 5 wave sequence completing at 1707.85, another at 1700.68, a third at 1709.36, and a fourth at 1703.55. From 1703.55, the SPX has completed 3 sequences at 1709.24, 1704.32, and today’s close at 1707.24.

For the near term, it appears the SPX is forming another inverted corrective wave from 1707.85. This would complete at 1703. If 1703 holds, the SPX should rally, with 1718 being the likely target. I still see this rally eventually carrying the index to a minimum of 1776.

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.