Wednesday's Market 08/14/2013

Similar to yesterday, the SPX moved slightly higher at the open, and then quickly rolled over. After falling to 1691, the index bounced back to 1694 before falling further. This downside action, with small bounces continued until the SPX had fallen to 1684.92. From there it bounced to 1689.50 before falling once again into the close, holding just above the 1684.92 low.

This market has been frustrating since the 1709 high in the sense that it had not completed a clear 5 wave sequence from that point. Although the SPX had reached a level where an inverted corrective wave from 1626.61 had likely completed, it was difficult to know exactly where in the count the market was. Compounding that fact, the inverted corrective wave could possibly have completed in two distinct ways, one requiring a 5 wave sequence from 1709, and the other needing 3 waves from that high. Today, for the first time, I can count a 5 wave sequence from that high.

I chose to show the 5 Minute chart today since it shows the whole structure from 1709. The SPX first completed a wave 1 at 1704.32. This was followed by an inverted corrective wave 2 that completed at 1700.18. Wave 3 completed at 1688.38, and was followed by another inverted corrective wave, this time for wave 4, which completed at 1696.81. Wave 5 then completed today at 1684.83.

This sequence completed within the area needed to complete an inverted corrective wave from 1626.61. 1676 is the lower limit of this completion zone, so if the SPX falls below that level, I would be looking for further downside. It is still possible that this only completes Wave C of that inverted corrective wave, which means we should see a rally, followed by another pullback similar in magnitude to this one. A move above 1709 would signal a resumption of the uptrend, which should carry to a minimum of 1776.

Tuesday's Market 08/13/2013

The SPX opened slightly higher this morning, hitting 1692.99 before quickly changing direction. After that initial move higher the index fell to a new short term low at 1682.62. The bulls finally gained some momentum, as the SPX changed course again, and rose sharply into mid-afternoon. It reached a high of 1696.81 before turning choppy, and drifted lower into the close.

Although the count from 1709 high has been difficult to say the least, it would still appear that the SPX has completed a complex corrective wave at 1683. This still supports a move to new highs, with my target remaining at a minimum of 1776.

The short term count from today’s low appears to indicate a move higher, and if so, would project to above 1705. It looks like this may be the markets best chance of breaking out to new highs. If it fails to do so, the bears may get another chance to take it down further.

I am still looking for a move above 1709 to confirm a resumption of the uptrend. Below the 1683 level, support is at 1676, and then 1668.

Monday's Market 08/12/2013

The market kept to the same script we saw much of last week; an opening gap down to start the day, followed by a slow drift higher into the close. Although the patterns were similar, there was one key difference worth noting. In all the instances last week, with the exception of last Monday, the initial move to the downside did not hold as the low of the day. Today it did. It is also worth noting that today’s action was identical to last Monday’s trading action; a gap down to open, followed by a lower high, a higher low, and then another lower high. That pattern led to a move lower into today. Last Monday, however, the market was coming off overbought levels at the 60 minute time frame, while today the SPX hit oversold with a positive divergence.

As I mentioned above, the SPX gapped down at the open today, and took out the 1684.91 low along the way. The index rallied almost immediately from that point, rebounding to 1691.49. After that, the SPX moved lower, dipping to 1686.34, before rebounding into the close.

The move below 1685 took the 1604.57-1698.38-1676.03-1709.24-1684.91 inverted corrective wave scenario I had talked about over the weekend out of play. Last Friday, the Dow made a new short term low, while the SPX did not. That index seemed to complete an inverted corrective wave with the last three waves forming a zig-zag from the 15655.75 high. Today, the SPX hit a new short term low, while the Dow did not. It would appear that the SPX has completed an inverted corrective wave in the same fashion. As I noted over the weekend, the move from the recent 1684.51 high has been difficult to follow. Over the weekend I treated 1698.38 as the end of the wave from the 1604.57 low, but it now appears that wave carried all the way to 1709.24. The inverted corrective wave can then be counted as 1604.57-1709.24-1684.91-1700.18-1683.35. This seems to be supported by the fact that the move from 1709.24 to 1683.35 appears to have completed with 3 waves.

It is still possible for the market to move further to the downside, with support at 1676, and then 1668. I still expect the SPX to move higher, with a minimum target of 1776. A move above 1709 would likely confirm that.