Wednesday's Market 10/23/2013

The SPX gapped down at the open this morning, dropping below 1742. After staging a small rally, the index continued lower, dropping back to 1742, rallying to 1746, and finally reaching a low of 1740.50. This completed a 5 wave sequence from yesterday afternoon’s 1758.16 high. As has been the pattern lately, the SPX reversed course by late morning, and started working its way higher. The index rallied to 1746.66, fell back to 1742.51, and then rallied again to 1748.39 by mid-afternoon. The SPX then fell back to 1744.72 before moving higher into the close. This may have formed waves 1-4 of a sequence to the upside.

This would be interesting because it would give a target for wave 5 of 1750-1751. After yesterday’s pullback to 1747.58 after the 1759.33 high, the SPX completed three waves to the upside at 1755.51-1751.91-1758.16. If a sequence from today’s low completes at 1750-1751, it would complete an inverted corrective wave from the 1747.58 low. This would indicate a continuation of the move lower to follow.

I am still looking for the SPX to move lower. There are several support levels between 1719 and 1661 that would fit the target range for this low. Short term, it looks like the SPX may open higher, to 1750-1751, to complete an inverted corrective wave from 1747.58. This would set the stage for another move lower, with support at 1719.

Tuesday's Market 10/22/2013

Well that was a big miss. I had been looking at yesterday’s 1747.79 high as the completion of a 5 wave sequence from the 1646.47 low. That certainly was not the case. While today’s move above that high would normally point to the continuation of the current trend, I will remain cautiously neutral at the moment, as there is a chance that a sequence from 1646.47 concluded today.

The suspense did not last long this morning, as the SPX gapped higher at the open and surpassed yesterday’s high within the first minute of trading. From there the index rose above 1751 before a very small pullback. After that the SPX shot up to 1759.33. It appeared this spike higher would be short lived, as the index quickly reversed course and dropped back near the opening levels to 1747.58. The SPX then chopped higher through the afternoon, making it above 1758 before falling back to 1754 near the close.

Looking at the waves from yesterday’s 1747.79 high, the SPX completed 3 waves to the downside at 1740.67 as I mentioned yesterday. This was followed by a single sequence to today’s high of 1759.33. The index then completed a sequence lower with the ensuing drop to 1747.58. After that low was put in, it appears the index completed 3 waves to the upside.

Re-evaluating my count from 1695.93, I still see wave 1 completing at 1704.01. This was followed by an inverted corrective wave 2 that completed at 1714.12, with wave 3 then completing at 1729.64. I had been counting wave 4 at 1725.93, with wave 5 completing at 1747.79. If that count is correct, the 3 waves down yesterday from that high, and the drop today from 1759.33 would complete an inverted corrective wave, meaning another move to the upside would be in order.

It is also possible that from wave 3 mentioned above, an inverted corrective wave 4 followed. This would have ended at yesterday’s low of 1740.67. Today’s high of 1759.33 would then be wave 5. This would be unusual since normally there is only one complex corrective wave in a sequence, but with wave 2 being a complex wave also, this would make two. But this has been a strange market, so it cannot be ruled out.

A move above today’s high would mean the first scenario is correct, a drop below today’s low of 1748 the second. My next resistance level would be 1776. This is a level at which the sequence from 1074.77 could possibly complete. At the moment I see this as a low probability, but it is worth noting.

Support is at 1723, and then 1703.

Monday's Market 10/21/2013

The SPX started off to the upside this morning, hitting another all time high of 1745.88. After a small pullback that closed the gap up open, the index hit another all time high, and the high of the day at 1747.79. This means my short term count from last Tuesday’s 1695.93 low was wrong. My original count from that low, which I changed on Friday, actually turned out to be correct. The high of 1747.79 then completed the sequence from that low, and a sequence from the 1646.47 low. From today’s high, the market completed a sequence down at 1741.71, a sequence up at 1745.41, another sequence down at 1740.82, and what appears to be another sequence up at 1744.52.

With a 5 wave sequence seemingly completed from the 1646.47 low, the SPX is at a decision point. A breakout to the downside here will likely signal a change in the short term trend, while a break above today’s high will most likely mean a continuation of this short term upward move. I have been looking for a top from 1646 to occur near 1745, and then be followed by a move lower to possibly 1680. This would fit my longer term outlook as I outlined over the weekend. A move above these levels would not alter that long term count, but would change some of the target levels. If the SPX does move higher, I will update my targets.

Support is at 1723, 1703, and then 1680.