Wednesday's Market 02/05/2014

It was another choppy day for the markets, as the SPX remained range bound for the second straight day. Yesterday afternoon the index had completed 5 waves down from the 1758.73 high at 1749.58, and then rebounded to 1757.07 onto the close. I expressed my reservations about a continued move to the upside, and this morning the SPX started the day lower, falling to 1749. After a small bounce the SPX fell further, dropping to 1744. The index then rallied sharply, rising to 1754 before reversing course and dropping to a new low from the 1850.84 high at 1737.92. This completed a higher degree sequence from 1758.73 high.

From there the SPX rebounded, rising to 1746, dipping back to 1740, and then steadily rising until it reached 1755.79 by early afternoon. This looks to be a 5 wave sequence from the morning’s 1737.92 low. The index then fell to 1749.92 before recovering into the close.

Yesterday I said the move from 1739.66 to 1758.73 looked to be 3 waves. There is another, more complex count that shows it as 5 waves. Using that count, it looks like 4 waves have now completed from Monday’s 1739.66 low, 1758.73-1737.92-1755.79-1749.92. You will notice that the second wave, 1737.92, completed below 1739.66, and the third and fourth waves completed between 1739.66 and 1758.73. This is exactly what I would expect to see in a semi-inverted corrective wave. Given the 4 waves that have completed, the fifth wave projects to 1776, quite close to the 1773 level I have been mentioning. And so, it appears that the count I have been looking at, namely a move to 1773, followed by another leg to the downside, possibly to 1679, is still on track.

Tuesday's Market 02/04/2014

In the wake of yesterday’s market rout, I was expecting a move higher today, and that move started from the opening bell. After quickly running up over nine points at the open, the SPX then settled into a slightly upwardly biased choppy range for the next two hours. The index pulled back to 1745, and then rallied again to 1754. Another pullback took the SPX to 1748, at which point it rallied once more to 1753, and was followed by another pullback to 1748. A more prolonged rally took the SPX to the high of the day at 1758.73 by early afternoon. The choppiness then returned, as the index bounced between 1750 and 1757 into the close.

From yesterday’s 1739.66 low, it looks like a Wave 1 higher occurred at 1752.19, and was followed by an inverted corrective Wave 2 that completed at 1747.84. A five wave sequence then looks to have completed at 1758.73 which may be a Wave 3, with a 5 wave sequence lower then completing at 1749.58.

I have been looking for a move from the 1739.66 low to a minimum of 1762, with an ideal target of 1773. This would complete an inverted corrective wave, and would be followed by another move lower to 1679. That remains my preferred count, but some red flags were raised today. First, the SPX failed to reach the 1762 threshold. Second, given the four waves completed from the low, Wave 5 would project to complete below 1762. While this could simply mean that this bounce will continue a bit longer, it could also suggest that there is something else going on. An alternate count puts the SPX still in Wave D of 2 from the 1850.84 high, which means the next leg down could start from this point.

Monday's Market 02/03/2014

On Friday I posted that I was looking for the SPX to move higher, to 1800, before the next leg of this ongoing decline got under way. That did not happen, as the index rose slightly at the open, and then went into free fall throughout the remainder of the day. This means that my short term count was incorrect, but actually increased the probability that the medium term count is correct.

I have modified my count beginning with Wednesday’s 1770.45 low. That low would be Wave B of 2 from the 1850.84 high. That would make the rally on Thursday to 1798.77 Wave C of 2 from that high. From that point the SPX dipped, and then recovered slightly into the close.  I now count that as a Wave 1, followed by a Wave A of an inverted corrective Wave 2. Wave B then was the steep drop on Friday morning, and was followed by Waves C, D, and E into the afternoon, which completed the Wave 2 inverted corrective wave. The SPX then dropped again, in three waves, into Friday’s close. This can then be counted as Waves 3, 4, and 5 from Thursday’s Wave C high of 1798.77. This 5 wave sequence appears to have been only the first wave of a larger degree sequence from that high. The small rise this morning completed Wave A of an inverted corrective Wave 2. This wave would eventually carry the index down to 1751 with Wave D, and completed at 1757. It then looks like Waves 3, 4, and 5 completed into the close. With a 5 Wave sequence now completed from the Wave C high, it is likely that Wave D completed today at 1739.66.

While my short term counts have been suspect, the major points I outlined last Tuesday have remained intact. I had a possible scenario as 1800-1801, a drop to 1744 followed by a bounce, and then a final move lower to 1679. On Thursday the SPX hit 1798.77, and was followed by a decline to 1739.66. I would now expect a rally to complete Wave E, and Wave 2 from 1750.84. I am looking for a minimum of 1762, with an ideal target of 1773 for this rally. From there I am still looking for a further decline to 1679.