Tuesday's Market 10/15/2013

The SPX started the day to the downside, continuing the pullback from yesterday’s 1711.03 high.  After dropping to 1701.03, the index started to move higher, and made the high of the day at 1711.57. This was slightly above yesterday’s high, and right at the 1711-1713 level I pointed to in yesterday’s post as a possible high. This did not happen exactly as I thought, but the level turned out to be correct none the less. From there the SPX started to sell off, dropping back below 1700 to 1695.93 an hour before the close. The last hour saw the SPX rise to 1704.46 before settling back to 1698.06.

Continuing the count from last Wednesday’s low of 1646.47, today’s high would appear to be wave B of an inverted corrective wave, followed by wave C at 1695.93. If the move to 1704.46 was wave D, wave E would project to 1690. If D has not ended, the market should be higher from here before starting wave E down.

Considering today’s nearly 16 point drop from 1711.57 to 1695.93, another count has presented itself. The three largest pullbacks since 1646.47 have been 1662.47-1654.81, or slightly less than 8 points, 1703.44-1692.13, or 11 points, and 1711.57-1695.93, or 16 points. This may have completed an inverted corrective wave, and would point to a target of 1745.

I continue to see this market moving higher, with a target for this wave of 1745. Considering everything that is going on in Washington at the moment it is difficult to have absolute conviction on anything, but my wave count points to higher prices. There may be a continuation of the pullback before the index moves higher, but I would expect this to remain above 1685. A move below this level would mean my current assumptions are wrong.

Resistance is at 1703, and then 1723, with support at 1685, and then 1669.

Monday's Market 10/14/2013

Last Friday the SPX opened slightly lower, and then rallied to 1703.44. After a slight pullback, the index tested that high, but failed to surpass it. This was right at the 1703 resistance level. After failing to move above that resistance, the SPX opened sharply lower this morning, dropping to 1692.13 a few minutes after the open. This represented the largest pullback since this move higher began at 1646.47. That proved to be the low for the day, as the index continued to move relentlessly higher from that low, with the SPX moving above the 1703 resistance level, and continuing higher to 1711.03. From there the index moved slightly lower into the close.

The action today, after the 1692.13 morning low, looks like 4 waves higher, with an inverted corrective wave 2. I would project wave 5 of this sequence to end between 1711 and 1713. If my count from the 1646.47 low is correct, this should complete wave B of an inverted corrective wave 2. I have wave 1 as being the move from 1646.47 to Wednesday’s 1662.47 high. Wave A of the inverted corrective wave was the move from that high to 1654.81. The SPX has been in wave B of 2 since that point. If this is correct, the index should move slightly higher, to between 1711, and 1713, and then experience a pullback. Since this has not yet completed a 5 wave sequence from the 1646.47, I still expect the index to move higher, with 1745 being a likely target. If the SPX moves above 1713 without a pullback, another count may come into play that would target a high near 1740.

Starting last Monday, I have been mentioning that my longer term count from 1074.77 still requires some work to the upside to complete. As a picture is sometimes easier to visualize than words I have included a chart showing how I see this wave completing. This should not be taken as target prices or times, but simply the waves need to complete the sequence. By my count, the SPX is in Wave D of 2 from 1074.77. Again, these waves can complete in several ways, so these are not meant to be targets.

It is interesting to compare this chart to the chart from October 2002 until October 2007. The two are strikingly similar, and again, serves as a visualization as to how this wave will complete.

Thursday's Market 10/10/2013

After testing the 1651 support level yesterday, and completing a 5 wave sequence to the downside from the 1729.86 high, the SPX rallied from that level, moving to 1662 during the afternoon. With a small pullback to finish the day on Wednesday, it looked like the market was set to rally. Rally it did today, gapping higher at the open, and reaching 1682 by mid-morning. It soon reached the 1685 resistance level, and then traded sideways until the last hour of trading. The SPX hit 1692.48, pulled back slightly, and then rose into the close.

I had set an initial target near 1700 for this move to the upside, which the market has nearly reached. From the 1646.47 low yesterday, it looks like the SPX completed the first wave higher yesterday at 1662.47. It appears that the pullback yesterday afternoon may have been wave 2, with wave 3 occurring this morning as the index rose to 1685.43. The sideways actions followed by the rise to 1692.48, and then the pullback to 1688.91 looks to then have completed an inverted corrective wave 4. This means a wave 5 would be expected next. Given the above scenario, the optimal target for wave 5 would be 1745. Some of you may recall 1745 as my target for the last uptrend. That time the market fell short of the target, but it is interesting how numbers seem to re-appear time after time. We’ll see if the SPX makes it to that level this time.

Since my longer term count has changed, the 1776 minimal target for the completion of the sequence from 1074.77 no longer applies. However, after the 1745 target I am expecting one more move higher, so we may still see that number.

Short term resistance is at 1703, and then 1723. Support remains at 1685, 1668, and then 1651.