Monday's Market 09/09/2013

The SPX gapped higher at the open, hitting 1663, and then 1666.15 after a small pullback. After reaching 1666, the index paused, dropping 4.5 points before resuming the move higher. The SPX rose steadily until late afternoon, rising to 1672.4, before spending the last part of the day trading sideways, between that high and 1670.01.

On Friday I said that it appeared the SPX had completed a 5 wave sequence at 1664.83, and another to the downside at 1654.45, indicating another move higher was likely. With today’s move higher, that seems to have been the correct interpretation. The move to 1666.15 this morning looks to be a wave 1, which was followed by an inverted corrective wave 2, which completed this afternoon at 1670.01. This would mean that SPX should make at least one more move higher.

By way of review, I have been looking at two possible scenarios for this wave. The first is that this is part of a complex correction from 1687 that would go something like 1687.18-1560.33-1709.24-1627.47-1685?-1540? This scenario would require the current wave to complete between 1680 and 1687. I erroneously stated on Friday that the SPX would need to drop further than Friday afternoon’s 1654.45 low for the current wave, as I have been counting it, to complete within that range. I apologize for that, as this wave from 1627.47, as currently constructed, could complete above 1683.

The second scenario has 1687.18 as a top, 1560.33 as a bottom, and a 5 wave sequence underway from that point that would go 1709.24-1627.47-1745-1680-1773. This had been the preferred sequence, as until Friday it looked as though the wave from1627 would complete above 1687. However, after I identified the inverted corrective wave on Friday, and the possibility of the SPX completing this wave between 1680 and 1687, both scenarios are at least equally likely, with perhaps a slight edge given to the first scenario.

There are a couple of reasons for this. First, there is a good possibility that this wave will complete within the 1680-1687 range. Second, if this wave does end there, the first support zone is setting up to be in the 1645 area. That would seem to be a pretty severe drop if the SPX were setting itself up for new highs. Also, many of the technicals are reaching overbought levels again.

As I said on Friday, the battleground is shaping up to be in the 1680-1687 range. If the SPX gets above 1687, I would be inclined to think that this market will continue higher. If the index gets into that 1683-1687 range, and then pulls back, it is likely that it is headed lower, most likely below 1560.

Shorter term, I am looking for the SPX to make one more move higher, to above 1683, and that should be followed by a pullback, as it would complete a sequence from 1627. Resistance is at 1685, with support at 1669, 1651, and then 1621.

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.