Tuesday's Market 10/08/2013

I apologize for my dearth of posts lately. It has been a hectic month. I will try to get up to speed.

In my previous posts, I had stated that I was looking for a move to 1745, followed by a pullback to possibly 1680, and then another move higher to 1776 to complete a 5 wave sequence from the October 2011 low of 1074.77. That obviously to this point has not come to pass. The SPX fell short of my 1745 target, topping at 1729.86, and now has retreated to 1655. I still believe the sequence from 1074.77 has not completed, and the market should make at least one more move to new highs to complete that sequence.

The completion of this wave appears to be even more complex than I had originally thought. The above chart shows my original thought for this wave. This had the first three waves of the sequence completing as 1292.66-1158.66-1422.38, which was then followed by an inverted corrective wave 4 which completed at 1560.33. I was then looking for 5 waves to complete above 1776 to complete wave 5 from 1074.77.

Instead, it appears that the first 3 waves were not waves 1, 2, and 3 of a sequence, but rather Wave 1, Wave A of an inverted corrective wave, and another Wave 1. The move that completed at 1729.86 was the end of a 5 wave sequence from 1158.66, and thus Wave B of the inverted corrective wave. As I have stated in the past, Waves C, D, and E can then complete either as a zig-zag formation, or with Wave D carrying above Wave B (1729.86), to be then followed by Wave E. If this turns out to be the case, the SPX would then still have to complete Waves 3, 4, and 5 to the upside to complete the sequence from 1074.77.

So that would be the current long term count, which leaves us with the shorter term count. The SPX looks like it completed a 5 wave sequence from the 1729.86 high today. Wave 1 completed at 1720.20, and was followed by an inverted corrective wave to 1703.85. The move lower to 1674.99 then completed the third wave. After bouncing up to 1695.55 for the fourth wave, the move today to 1655.03 would complete the sequence.

A lot of information I know. For now, I believe a 5 wave sequence from 1729.86 has completed, or is about to complete. An initial target for this next move higher would be 1700, with resistance at 1668, and then 1685. I would like to see a move above 1668 to confirm the low is in place, and if the 1651 support level does not hold, I would need to re-evaluate the count.

Weekend Outlook 09/21/2013

It was another interesting week for the markets, as all eyes were on the FED. Monday opened with the SPX gapping higher, up to 1703.74. The index then traded sideways up until the announcement Wednesday afternoon. Immediately following the announcement the SPX ran up to 1729 on Wednesday, and followed it up with a slightly higher high on Thursday at 1729.86. It was all downhill after that, as the SPX relinquished most of its gains by the close on Friday, dropping back to 1709.

As I mentioned last week, the SPX has now entered the range to complete 5 wave sequence from the 1627.47 August low. However, there are some indications that the market will make at least one more move higher before it actually completes that sequence.

I have been looking at a target of 1776 to complete a sequence from the October 2011 low of 1074.77. By my count the SPX is now in the third wave of a sequence from 1560.33 that will eventually complete that sequence. The first wave of this sequence completed at 1709.24, and the second at 1627.47. From that low, my count has four waves completed as 1641.18-1640.62-1664.83-1681.96. The fifth wave of this sequence has been difficult to follow on a short term basis, but a look at the longer term count can possibly clarify things to some extent.

Since the minimum target to complete the longer term wave from 1074.77 is 1776, the shorter term waves would also need to project into the same area. If the third wave completed at 1729.86, and this pullback has already carried down to 1708.89, the maximum target for wave 5 would be 1765, short of the 1776 target. For this reason, I would still expect another move higher, perhaps to 1745, before this wave ends. A move to 1745, followed by a pullback to around 1700, still seems to be the most likely scenario.

There a two possible short term counts for this wave which would project into the 1776 range.  The first is my original count, with 1703.74 being wave 1 of wave 5 from 1627. This would allow for the SPX to move slightly lower and still project to 1745. The second involves wave 1 ending before 1703.74, which was then followed by a complex inverted corrective wave. This scenario does fit better from the technical side. The complex corrective wave would have to have ended at Friday’s 1708.89 low, so if the SPX moves lower on Monday, this scenario would be out the window.

It still appears most likely, from my analysis that the SPX should move higher, possibly to 1745, and then be followed by a pullback to near 1700. One final move higher to above 1776 would then complete the entire sequence from the 1074.77 low.

Wednesday's Market 09/18/2013

The SPX opened slightly higher, and continued slightly higher into mid-morning. At that point it turned slightly lower, dropping below yesterday’s late afternoon low, and nullifying my very short term count. The index continued moving lower until mid-day, when it started moving higher in anticipation of the FOMC statement. After the release of the statement, the SPX moved sharply higher, making a new all-time high, and reaching 1729. After that, the index moved lower into the close.

As I mentioned, the move lower this morning made my very short term count from 1681.96 incorrect. I still see this as a wave 5 from the 1627 low, which has now moved above the minimum target level. It would appear that this wave has not yet completed, and I continue to look at the 1745 optimal target level as a possibility. I would expect the current wave to end before reaching 1776. Should the market move above that level, the possibility exists that the entire wave from 1074.77 is completing.