Tuesday's Market 02/11/2014

It was “another day, another twenty points to the upside” for the SPX. I will be the first to admit that my count since the SPX reached 1740 has been somewhat suspect. Following today’s action it became readily apparent that I needed to re-evaluate my count from the 1850.84 high. I have spent much of the night doing just that, and have adjusted my counts accordingly. Although my count from 1850.84 has changed, my outlook remains the same. I continue to count 1850.84 as the completion of a 5 wave sequence from the October 2011 1074.77 low. This does not, however, complete a sequence from the 666.79 low.

I still think the bull run from the 666.79 low has further to go, and I was expecting a correction to 1679 before a resumption of the move higher. Although there are several different scenarios from 1850.84, I will save that for a later date. At the moment I will concentrate on the shorter term count from that point.

From 1850.84, the SPX made an initial drop to 1835.23. I still consider this Wave 1. After bouncing higher to 1849.31, the index fell sharply over the next two weeks to 1737.92. This has been the perplexing move, as the fell steeply at points, and then went into very choppy periods. I had some trouble deciphering and tracking all the moves. I now believe this entire move was one single 5 wave sequence. So from the 1850.84 high, I have 1835.23 as Wave 1, the bounce to 1849.31 as Wave A of an inverted corrective Wave 2, followed by Wave B of 2 to 1737.92. It appears that Wave C completed at 1798.03 and Wave D at 1792.01. Today’s high of 1823.54 falls within the range to complete Wave E, and thus Wave 2, although 1831 would be the upper boundary for this wave.

This count still implies further downside, and I will keep my target of 1679. A move above 1831 would invalidate this count, and at that point I would have to consider the next move to new highs started at the 1737.92 low.

Monday's Market 02/10/2014

It was a relatively quiet day for the markets, following Friday’s big gains. The SPX opened slightly lower, and moved down to 1793 before rebounding to 1798. Another move lower took the index to 1792, and that proved to be the low for the day. From that point the SPX rose to 1797 by noon, paused until mid-afternoon, and then resumed the push higher to 1799.94. From there the index pulled back to 1797, bounced to 1799, pulled back again to 1797, and then moved back to 1799.77 near the close.

The move today looked like a small continuation of the wave that started last Thursday afternoon, and carried over into Friday. The SPX is still within the range to complete a complex corrective wave from January 29^th’s 1770.45 low. In fact it is right at the 1800-1801 resistance level I had talked about on the 28^th.

Tomorrow should be an interesting day. I am still inclined to see the move from 1770.45 to now as a complex corrective wave. This implies that the SPX will move lower from this point. In my mind this is still but a pullback in an overall bull market. My downside target remains at 1679.

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.