Monday's Market 11/25/2013

The market opened this holiday week with a gap higher to a new all time high. The holiday mood was short-lived, as the SPX moved down from that early morning high, and never recovered. The index completed three waves down from that high at 1803.89, and then tried to recover. With an hour and a half of trading left, the SPX clawed back to 1807.47, but then quickly moved to new daily lows at 1800.58 before recovering slightly into the close.

From last Wednesday’s 1777.23 low, the SPX had completed four waves of a 5 wave sequence to the upside last Friday. The gap open to 1808.10 completed the fifth wave. Today the index completed a sequence down from that low.

Widening out to the bigger picture, my count has the SPX now in wave 5 from the October 2011 low of 1074.77. Wave 4 of this sequence completed at 1560.33. From 1560, the index has also completed 4 waves, with that wave completing at 1746.20. From that low, the SPX completed the third wave today at 1808.10, and possibly the 4^th wave at today’s low of 1800.58.

I have been targeting this wave to complete above 1828, and so far nothing has occurred to change that. In fact, if today’s low was wave 4, the target for wave 5 would be between 1828 and 1845. It is still possible for the index to move lower, possibly to 1789, with the 1828 remaining intact.

My expectation is the SPX should put in a bottom between here and 1789, and then make one more move higher to between 1828 and 1845. That should complete a 5 wave sequence from the 1074.77 low. 

Thursday's Market 11/21/2013

The pullback of the previous three days was all but erased today, as the SPX gapped higher at the open, and barely looked back. Yesterday I said that inverted corrective wave had completed at the 1773.23 low, suggesting a move higher. Just as decline yesterday was foreshadowed by a nested inverted corrective wave scenario, the set up for today’s rally began in the last hour of trading yesterday. From that low, the index formed a small 5 wave sequence to 1780.95. After a small pullback, the SPX formed another small wave higher, followed by three small waves lower. This formed a 1-2-3-4-5(1)-A-1-A-B-C sequence. The sharp rise this morning completed wave D, and the small pullback that followed, wave E, completing the first inverted corrective wave, and wave 2. Three more waves to the upside, 1790.61-1789.34-1793.38, completed waves 3, 4, and 5, and in turn wave B of the initial inverted corrective wave that began yesterday. A swift three wave decline followed, completing waves C, D, and E, which completed that initial corrective wave, and wave 2 from yesterday’s 1773.23 low.  Three quick moves higher completed the sequence from the low at 1793.71, right at the 1794 resistance level.

After reaching that resistance level, the SPX underwent the largest pullback of the day, all of 3 points. This decline occurred in three waves, suggesting another inverted corrective wave was underway. After pulling back to 1790.60, the index began to rise again. The rally from 1790.60 eventually carried the index to 1797.16. This was a 5 wave sequence with an inverted corrective wave 2. Wave D of this corrective wave lifted the SPX to 1795.71, with wave E testing that 1794 support at 1794.10. After reaching 1797.16, the index pulled back again, this time to 1794.35. This would be within the range of completing the inverted corrective wave from 1793.71, and wave 2 of a sequence higher.

I am looking for this sequence from 1773.23 to complete somewhere above 1803. This would complete the third wave from 1746.20 low, and after a brief pull pack would then project wave 5 above 1828.

Wednesday's Market 11/20/2013

The SPX gapped higher at the open, hit 1791.83, and then turned lower.  After closing that opening gap, the index turned higher, moving to 1795.73, slightly higher than yesterday’s high. I thought this would confirm a continuation of the up move, but I turned out to be wrong. From that high, the SPX formed a 5 wave sequence lower to 1789.21. Things then turned choppy, but set up the downside breakout to come. After that initial sequence lower, the SPX set up a nested inverted corrective wave. An inverted corrective wave is a corrective wave in which the second and fourth waves, generally corrective waves, are more powerful than the usual first, third, and fifth normally impulsive waves. The result is generally a corrective wave that completes beyond the end of the previous impulse wave.

After dropping from 1795.73 to 1789.21, the index formed three waves higher, which were waves A, B, and C, of the first inverted corrective wave. This was followed by another wave 1 to the downside, and another A, B, C higher. Wave D of this second inverted corrective wave broke out of the narrow trading range, and then bounced to 1791.50 to complete the corrective wave. The SPX then saw waves 3, 4, and 5 which took the index sharply lower. This then completed wave D of the second inverted corrective wave, and again was followed by waves 3, 4, and 5, taking the index sharply lower once again, all the way down to 1777.23.

From 1795.73, a 5 wave sequence was completed at 1777.23. I had thought an inverted corrective wave from 1773.44 had completed yesterday, but my count for this wave seems to be mistaken. I would now say that today’s low is a better choice for the completion of this wave, with it forming 1760.64-1801.34-1784.72-1795.73-1777.23.

My longer term outlook remains unchanged. I am still looking for the index to move higher, with a minimum target of 1828.