Friday's Market 02/07/2014

Well, today obviously did not go as I had expected.  After the SPX completed a 5 wave sequence from 1739.66 yesterday afternoon, it seemed probable that the index would resume the downtrend from the 1850.84 high. That did not happen, as the SPX moved to 1788.25 near the open, pulled back to 1777, and then moved steadily higher throughout the remainder of the day, topping out at 1798.03.

Looking at today’s move, it appears to be one complete 5 wave sequence, 1788.25-1786.63-1795.47-1793.98-1798.03, which included an inverted corrective Wave 2, 1777.28-1788.63-1786.77-1788.6-1786.83. If you recall, I had counted yesterday’s high as the completion of a semi –inverted corrective wave from 1739.66 low, and the completion of Wave E which completed an inverted corrective Wave 2 from the 1850.84 high. I had mentioned that the SPX could move higher and still support this count, the index moved above the upper boundary for this count, making it invalid.

With that count invalid, I must now re-evaluate my count. This takes me back to the January 29^th 1770.45 low. This is the termination point of Wave C of the inverted corrective Wave 2 from 1850.84. From that point I have counted 5 complete 5 wave sequences, 1798.77-1739.66-1773.46-1771.33-1798.03, which brings us to today’s high. This series is interesting because it meets the criteria for a 5 wave sequence. So the entire move from the 1770.45 low can be viewed as an inverted corrective wave. This can be either all of Wave C of the inverted corrective wave from 1850.84, or it could mean that the SPX completed 3 waves from 1850.84 as 1835.23-1849.31-1770.45, which was then followed by an inverted corrective Wave 4. Both of these counts suggest that the downtrend should now resume.

Of the two scenarios listed above, the first would still target 1679, while the second would present a very bearish case, targeting much lower than 1679. If the SPX continues higher from this point, the probabilities increase that the index is headed to new highs. It is also important to note that I still consider 1850.84 the completion of a sequence from 1074.77, and both of these scenarios are consistent with that view. 

Thursday's Market 02/06/2014

Yesterday I described the current wave structure from Monday’s 1739.66 low as a semi-inverted corrective wave, with a target of 1776. This would be Wave E of an inverted corrective Wave 2 from the 1850.84 high, which I had targeted to complete at 1773.

Wave D of this semi-inverted corrective wave ended yesterday afternoon at 1749.92. The first wave of Wave E also occurred yesterday afternoon at 1755.56, as well as Wave A of the second wave, which turned out to also be an inverted corrective wave. The SPX opened higher, reaching 1762 shortly after the open. After a short pullback, the index kept moving higher, finally reaching 1770.54 by late morning. The SPX then traded in a narrow range through early afternoon, hitting 1770.78. This was Wave B of 2, and was followed by a minor pullback to 1766.47 for Wave C. Wave D carried the index to 1773.21, with Wave E following, taking the SPX down to 1770.55, and completing Wave 2 from the 1749.92 low. Waves 3, 4, and 5 followed quickly thereafter, as the index drifted higher into the close at 1773.46-1771.33-1774.06.

This would seem to complete Wave 2 from the 1850.84 high, with a resumption of the move lower probable. My target for this entire move to the downside is 1679. While it is possible for the SPX to move higher from the current point and still keep this wave count intact, I am not expecting that.

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.