Thursday's Market 08/15/2013

After finally completing a 5 wave sequence from 1709 yesterday, the market took little time deciding on its next move. After a small bounce yesterday afternoon, the SPX gapped down n a big way this morning. The index fell below 1670 at the open, and continued lower until it reached 1659. The SPX tried to recover from that point, but could only make it to 1668 before turning lower once again. The index finally hit the low of the day at 1658.59, after tumbling nearly 27 points. From that point the index moved slightly higher to 1664.58, and then ended the day trading within that narrow range.

I mentioned yesterday that the SPX had finally completed a 5 wave sequence from 1709 at 1684.83. The drop today was then part of an inverted corrective wave that ended at 1667.60, with the index then completing a higher degree sequence from 1709 at 1658.59. This move invalidates my longer term count from 1560.33, which I had been viewing as a Wave 1 to 1626.61, and was being followed by an inverted corrective wave. The next most likely count has three waves completing from 1560.33 to 1709.24, with wave 4 in progress now. This count would still project a wave 5 high in the 1776 range I have been mentioning.

The next possibility is that the SPX completed 5 waves from 1560.33 to 1709. This would open up several options, but generally point to a low above 1560, with an ensuing high around 1776.

The SPX hit extreme oversold readings today, and so it would not be surprising to see a bounce at any point, but it is likely that there will be some more movement to the downside.

Support is at 1651, and the 1621, with resistance at 1669, and then 1685.

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.