Friday's Market 09/06/2013

An unexpected consequence of today’s market action was the somewhat surprising reprisal of the semi-inverted corrective wave from 1687 scenario. I had discounted this over the past several days based on the minimum projection of 1693 for the wave from 1627. Today’s development once again makes this scenario possible, if not probable. I originally presented this scenario in this post: http://5wavemodel.blogspot.com/2013/08/fridays-market-08162013.html.

The SPX gapped higher to open the day, hitting 1661.81 before backing off. The sell-off was pretty steep, with the index shedding over 21 points in less than half an hour. After dropping to 1640.62 the SPX began to recover. The index rallied to 1661.46, then pulled back to 1657.63. Another push higher took the SPX to 1664.83, where it began to sell-off once again. The index fell to 1654.45 just before the close.

It would now appear that this morning’s 1661.81 high marked the end of a 5 wave sequence from Tuesday’s 1633 low. My call of yesterday’s 1659.17 high being the end of that sequence would seem to have been premature. Following that high, the SPX fell to 1640.62, which is where the unexpected consequence comes in. That low completed an inverted corrective wave from last Wednesday’s 1641.18 high. This wave completed as 1628.05-1651.35-1633.41-1661.81-1640.62. This makes it at least possible that the SPX could complete a 5 wave sequence from 1627.47 within the 1680-1687 range necessary for the semi-inverted corrective wave scenario to remain in play.

I had been counting the wave from 1627.47 as a wave 1 to 1641.18, a semi-inverted corrective wave 2 that completed at 1628.05, followed by a wave 3 to 1651.35, and a wave 4 to 1633.41. This would have projected wave 5 to complete at a minimum of 1693. If the SPX moves above 1687, it invalidates this scenario. It is now clear that the semi-inverted corrective wave was a wave A of 2.

It would have been better for this scenario if the SPX had stopped at today’s second high of 1661, and then pulled back. This would have projected a wave 5 right into that 1680-1687 range. If wave 3 of the sequence from 1627 was indeed today’s 1664.83 high, the market would need to correct further than the 1654.45 low we saw just before the close. However, it does appear that the SPX completed a 5 wave sequence from 1665 at 1654.45. If this is wave 4, it would again project a wave 5 above 1687.

The other scenario I have discussing has the SPX in the process of completing a 5 wave sequence from 1560.33 as 1709.24-1627.47-1745-1680-1773. I discussed this scenario in detail here: http://5wavemodel.blogspot.com/2013/09/wednesdays-market-09042013.html.

It appears that the SPX has at least one more move higher in mind, with 1680-1687 setting up to be the battleground. A move into that area, followed by a break to the downside would indicate a move to 1530-1560 is underway. A move above 1687 and the SPX should continue higher to 1745.

I will try to address this in more detail over the weekend.

Thursday's Market 09/05/2013

The SPX opened virtually flat this morning, but quickly resumed its march higher, as the market rose to 1659. From there the index traded in a narrow range, dropping to 1654.55 by late morning. The SPX rose from that point to 1658 just before the last hour of trading. The index then slipped into the close, dropping below the previous low to 1654.49 just before the close.

It appears that today’s high of 1659.17 completed a 5 wave sequence from the 1633.41 low. The SPX looks to be in the third wave down from that high, which would indicate some further down side may be ahead. Short term support is at 1651, 1648, and then 1640.

Given my outlook for a move to 1745, it is also possible for the three waves down to be part of a complex correction. If this turns out to be the case, I would expect a move to the 1669 resistance area before a pullback.

 While the very short term direction of the SPX is difficult to discern at the moment, I am still looking for higher prices, with 1745 as my first target. At this point, only a break below 1627 would change this.

Wednesday's Market 09/04/2013

After opening slightly higher than Tuesday’s close, the SPX dipped briefly into negative territory before moving higher once again. The index climbed steadily to 1655.72 by mid-afternoon, before finally taking a breather. The SPX pulled back to 1652.51, then bounced back to 1655.35, before pulling back again to 1651.22 before the close.

Yesterday I presented three scenarios, of which the first one was the SPX holding above 1633, and then eclipsing yesterday’s 1651.35 high. I noted that if this scenario played out, I would expect the index to test the 1709, and possibly surpass it.

The larger scenario I presented yesterday was that the SPX was forming a semi-inverted corrective wave from the 1687 high. For this scenario to be correct, the SPX cannot surpass that 1687 high. I also noted that the current wave structure from the 1627.47 low pointed to a minimum target of 1693 for this wave. Given today’s action, it appears that 1693 would be the next minimum target, which would nullify the semi-inverted corrective wave scenario. The optimal target for this wave would be 1745, which makes a different scenario most likely.

As those who have followed me may remember, I had been looking for a minimum target of 1776 for the wave from the 1560 low. That would complete an entire 5 wave sequence from the October 2011 low of 1074.77. Using the optimal target of 1745 for this wave, it is possible to extrapolate a 5 wave sequence from 1560.33 as 1709.24-1627.47-1745-1680-1773. This fits quite nicely with my 1776 target.

On a shorter term horizon, the initial move to 1641.15 this morning appears to be a wave 1 from yesterday afternoon’s 1633 low. The SPX then completed an inverted corrective wave that went 1637.16-1655.72-1652.51-1655.35-1651.22. This also completed right at the 1651 support level. If this count is correct, the SPX should continue higher at this point. Resistance is at 1669, and then 1685. Support is at 1651, and then 1621. A move below 1634 would put this count in jeopardy, and a move below 1627 would invalidate it.