Tuesday's Market 10/29/2013

The market continued its incessant climb today, hitting a fresh all time high once again. It seems that nothing can derail this freight train, or even slow it down. But the SPX is reaching some critical levels from my point of view, and this could get interesting very soon.

There is not much one can say about today’s market. The SPX gapped higher to a new all time high, pulled back a few points, and then moved steadily higher to close at another all time high of 1771.90. I have been expecting some sort of pullback, but so far none has been forthcoming. For some time now I have been pointing to 1776 as a minimum level for the completion of a sequence from the October 2011 low of 1074.77. Things seemed pretty clear when the SPX reached the 1560.33 low back in June, but things have been a bit muddled since. After the index reached 1710, and then fell to 1627, I described an ending scenario that would go something like 1745-1680-1776 to complete the sequence. The SPX fell short of that 1745 level, with the next top reaching only 1730. This complicated matters, and I began looking at a more complex end to this sequence. If this current move carries above 1776 this scenario may come back into play. If the SPX rises above 1796 this becomes a real possibility. A move above 1776 would also bring one other count into play that would suggest an end to the sequence from 1074.77.

For the moment it still seems likely that this market will eventually find a short term top, pullback, and then move to new highs. But a move above 1776, followed by a move below 1740, could signal a longer term top has been put in.

FOMC meeting days have been interesting, and this should be no exception.

Monday's Market 10/28/2013

The SPX hit another all time high today, something that has become commonplace these days. The market has once again entered a stage where it seems that it will never go down, a stage it has been in several times during this bull run. The market will, of course, go down, but it has become a dangerous game to try to pinpoint when. I have underestimated this latest rise in the market, with my 1745 target having been taken out several days ago, with very little pressure to the downside. I was early in calling for a possible downward move, as it has become apparent that 1745 was not the completion of this sequence from 1646.47.

This sequence is reminiscent of the rise from 1627 to 1730. Both contained choppy upside moves, with very few pullbacks of any consequence. Looking at the end of that move, from the 1704.95 high on September 16^th, the action is quite similar to the action from the recent 1759.33 high. Both highs were followed by a small pullback, followed by new highs which formed in a very narrow upward biased channel. The previous move was then followed by another small pullback, and then a sharp move to new highs that proved to be the precursor of a nearly 85 point pullback. This is noteworthy as both have occurred leading into an FOMC meeting.

Looking at this sequence from the 1646.47 low, the most predominant feature is the inverted corrective wave which formed between 1703.44 and 1740.50. Those have been the only significant pullbacks of this rally. The most likely scenario is that the move from 1646.47 to 1703.44 was wave 1 of this sequence. The inverted corrective wave would then be wave 2. From that low, it is possible that wave 3 ended at 1758.46, wave 4 was the small pullback to 1752.45, and the SPX is now in wave 5 of that sequence. The target for this scenario would be between current levels and 1773. It is also possible that the move from 1740.50 to current levels is wave 3, which would be followed by a pullback, and then one more move higher. This would be similar to the scenario I described above.

For now, a move below 1740.50 would most likely signal an end of this sequence. Until then it is difficult to fight the momentum. 

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.