Wednesday's Market 10/16/2013

The SPX opened higher this morning, jumping above 1710, and then continuing higher until it reached 1721.75. After that the index worked lower into the afternoon, falling to 1715.19 before rising near the high of the day towards the close.

The higher opening this morning supports the alternate count I discussed yesterday that an inverted corrective wave completed yesterday at 1695.93. The late afternoon rise to 1704.46 then completed a wave 1, with the pullback becoming wave A of an inverted corrective wave. Wave B of this wave completed at today’s high of 1721.75, very close to the 1723 resistance level I have been mentioning. The meandering pullback into the afternoon completed waves C, D, and E, and thus wave 2 from yesterday’s 1695.93 low. This means the SPX should now complete waves 3, 4, and 5 to the upside.

Looking at the count from the 1646.47 low, it does look like an inverted corrective wave completed from 1662.47 to 1695.93. I have added this count to the chart, which is denoted by the use of parentheses. This count continues to point to higher prices, and my target remains 1745. 1723 would be the last resistance level suggested by the previous wave structure, and if that level is cleared the SPX should be headed to new highs. Support is at 1703, and then 1685.

While it is difficult to pinpoint the exact high of this move at the moment, I have been looking for it to be above the previous high of 1729.86, with an optimal target of 1745. 

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.