Thursday's Market 09/12/2013

The SPX opened slightly higher this morning, moving up to 1689.29 before pulling back. After falling to 1685.71, the index turned higher, reaching 1689.97. After that, the SPX spent the rest of the day working its way lower, falling to 1682.30, and then bouncing to 1687.39 before falling back to 1681.96 just before the close.

Today’s 1689.97 high appears to complete the sequence from the 1654.45 low. The possible inverted corrective wave 4 I mentioned yesterday seems to have been incorrect, with the SPX actually completing a smaller degree wave sequence from 1678.29 to today’s high. From 1627.47 the market has now completed a sequence to 1641.18, which I see as Wave 1, followed by a complex corrective Wave 2 which completed at 1640.62.

From there I had been counting 1664.83 as Wave 3, 1654.45 as Wave 4, with Wave 5 possibly completing above 1683. With a 5 wave sequence from 1654.45 having now completed, it is possible that the SPX has reached at least a short term high. However, the entire move from 1640.62, Wave 2 from 1627, until today’s low at 1681.96, looks technically like a single wave. This would fit the inverted corrective wave scenario I spoke of yesterday, or the move from 1640.62 to 1654.45, was of a lesser degree than the move from 1627 to 1641.18. At the moment this scenario seems more likely.

This is supported by the move from 1664.83 to today’s low counting as an inverted corrective wave of some degree. This would mean the SPX should move higher off today’s 1681.96 low. This wave could possibly carry to 1676.70, but would more likely move higher from the open.

If the SPX moves below 1676.70, it would be most likely that a top from 1627 has been put in at 1689.97, and a pullback would then be expected. I think it more likely that the SPX will continue higher from this point, with 1745 remaining a likely target.

Support is at 1685, 1669, and then 1651.

Wednesday's Market 09/11/2013

The SPX opened to the downside this morning, slipping to 1680.90 before bouncing back to 1683.29. Another dip took it to 1678.70, just above the 1678.29 Wave 4 low I had mentioned yesterday was a critical level to watch. From there the index moved steadily higher, topping at 1688.13. Another dip took the SPX down to 1685.09, before a final push higher into the close took the index to 1688.59.

Although on the surface this appeared to be a fairly typical trading day, it is noteworthy for several reasons. The SPX fell to 1678.70, but remained above the critical 1678.29 level, which means my current count has not been invalidated. The index also rose above 1687.18 May 22^nd high. This means that the semi-inverted corrective wave, which would have indicated a move down to below 1560, is no longer applicable. This does not mean the market cannot go down, of course, simply that the given scenario no longer is possible. Lastly, the SPX did not enter the 1690-1697 range that would likely have completed both a 5 wave sequence from both 1654.45, and 1627.47.

Looking at the wave structure from 1683.77, which I see as Wave 3 from 1654.45, it now looks like the SPX has completed a complex corrective wave from that point, to today’s 1685.09 late afternoon low. This is unusual since Wave 2 was also a complex wave. Normally only wave 2 OR wave 4 is complex, but rarely both. If this is indeed the case, it has the effect of raising the upper limit for wave 5 to 1708. This would be above the upper limit of wave 5 from 1627 as I currently have it. If the wave from 1654 does complete above 1700, it would open the possibility that the wave from 1627 is also undergoing a complex wave 4, even though wave 2 was a complex wave. If so, the market could undergo a small correction, and then target Wave 5 from 1627 at 1745, the other target level I have been mentioning. This seems to fit quite nicely.

If this works out, the SPX should put in a near term top between 1700 and 1708, undergo a pullback that should hold above 1668, and then move up to 1745.

1678.29 remains a critical level, as a drop below that could mean the SPX has made a short term top. The probabilities now favor a move to new highs, with a target of 1745. That, of course, is not the same as saying that the market cannot go down. The SPX has now risen over 60 points from the 1627.47 low, and some short term indicators are now in overbought territory. Support is at 1685, 1669, and then 1651.

It would be nice to see new all-time highs, as that would increase even further the probability of an additional move higher, it looks like that confirmation signal may have to wait. At the moment I would look for at least a short term high from 1690 to 1708. Exactly where that top occurs may give further insight into the longer term outlook and wave structure.

Tuesday's Market 09/10/2013

The SPX gapped up again this morning, and barely looked back. After hitting 1681 shortly after the open, the index continued higher until it reached 1683.77. From there the SPX pulled back 5 points, and then worked its way back to the intra-day high, and then surpassed it at the close.

I have been outlining two scenarios lately, one which has the market moving to new highs, 1745, and the other which has the SPX resuming its downtrend to below 1560. I have stated that the 1680-1687 range would be the battleground, and today the index found itself within that range. A top in this area would point to a continuation down to below 1560, while a move above 1687 would indicate a move to new highs.

  I have been looking at two wave sequences, with the first being from the 1627.47 low. Wave 1 of this wave completed at 1641.18, and was followed by a complex corrective wave that completed at 1640.62. Wave 3 completed Friday at 1664.83, and Wave 4 at 1654.45. This gives a target for Wave 5 above 1683. The second is from the 1654.45 Wave 4 low. Wave 1 of this 5^th wave completed at 1666.15. After a complex corrective Wave 2, this ended yesterday at 1670.01. At the moment it appears that the move above 1683 today only completed Wave 3 of this sequence. The pullback to 1678 then looks like Wave 4, but the SPX has yet to complete Wave 5.

The upper limit of the wave from 1627.47 is 1699, and I can now give a target range for Wave 5 of this sequence as 1690 to 1697. It now appears quite likely that the wave from 1627 will complete between 1690 and 1697, above 1687, and would indicate a move to new highs. I will be looking for a move above 1687 to confirm this scenario. If the SPX moves below 1678.29, the Wave 4 low, before moving above 1687, my short term count from that low is probably wrong, and the more bearish scenario would be in play.

A move above 1687 would indicate new highs, while a move below 1678, without moving above 1687 would most likely mean a move to below 1560.