Friday's Market 10/18/2013

The SPX opened higher this morning, gapping up to 1738.69, and then continuing on to 1741.21 after a brief pullback. My count from Tuesday’s 1695.93 low has been a bit messy, with it now looking like wave 1 from that low completed at 1721.75. An inverted corrective wave 2 was next, and ended yesterday at 1725.93. Today’s higher open then completed wave 3. This was followed by a pullback to 1735.74. From there, the SPX rose steadily to complete wave 5. The index completed waves 1, 2, and 3 to the upside, which was then followed by an inverted corrective wave 4. This completed at 1742.82. Wave 5 then carried the index to a new all-time high at 1745.31.

This appears to complete a sequence from the 1695.93 low, which in turn completes a sequence from the 1646.47 low. I have been pointing to the 1745 level as a possible termination level for this wave, and it appears to have done just that. I would now expect the SPX to move lower, possibly down to 1680.

Looking at the longer term count, the SPX looks to have completed Wave D of an inverted corrective wave 2 from the October 2011 high of 1292.66. A move to 1680 would complete that corrective wave, and then be followed by waves 3, 4, and 5 to the upside.

Many have noted the continuing divergence between the SPX and the Dow recently. I have also been analyzing the Dow charts in an effort to account for the divergence. I have the two indices on the exact same count, with one important difference. Both, by my count, are in, or have just completed wave D of an inverted corrective wave. As I have discussed before, these waves can resolve themselves in several forms. Wave D on the SPX has now moved beyond Wave B. Thus I would expect Wave E to complete above the level of Wave C, or 1646.47. Another form the last three waves of this corrective wave can take is a zig-zag. It appears this is what is taking place on the Dow. Wave D does not look like it will move beyond Wave B, and this means that Wave E should complete lower than Wave C. In this scenario the Dow could make a new near term low, falling below 14719.43, while the SPX should hold above its previous low of 1646.47. It should make for an interesting market.

I will try to elaborate on all of the above over the weekend. 

Thursday's Market 10/17/2013

The SPX opened to the downside this morning, falling to 1714.12. It appears I was a bit premature yesterday in calling for the completion of an inverted corrective wave at 1715.19. I would now say that 1715 was only wave C of that wave, with the bounce to 1722 being Wave D. The lower opening today would then be Wave E, and completed the inverted corrective wave 2 from Tuesday’s 1695.93 low. After the opening drop, the SPX rallied, moving to 1729.64. This looks to complete Wave 3, and was then followed by a drop to 1725.96 that would seem to complete Wave 4. The index rallied once again off that low, rising to a new all-time high of 1733.45 before fading into the close.

With 4 waves seemingly completed from the 1695.93 low, all that is left now is the completion of wave 5. This wave should complete above 1741, with an optimal target of 1746. This is very close to my ongoing target of 1745 for the completion f the wave from 1646.47. Yesterday I said I was leaning towards an alternate count for that wave, which now seems to be playing out. It is possible that 3 waves completed at 1662.47, as opposed to the single wave I had been counting. These 3 waves may have completed as 1646.47-1654.69-1651.02-1662.47. This was followed by an inverted corrective wave 4, which went 1654.81-1703.44-1692.13-1711.57-1695.93. This count yields an optimal target of 1745. Thus it appears quite likely that the sequence from 1646.47 will complete between 1741 and 1752, with 1745-1746 being the optimal target.

If this wave does complete within that range, I would then expect the SPX to move lower. As a rough estimate, I would be looking for a low near 1680. This fits well with my longer term count from 1074.77. I still do not see this as the end of this longer term sequence, but a continuation of the converging upward trend that has been in place since the 1560.33 low.

Support remains at 1723, and then 1703. A move below 1714 at this point could signal the end of this move.

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.