Thursday's Market 02/13/2014

The markets headed lower this morning, with the SPX gapping down, and dropping almost immediately to 1809.22. The negative bias did not last long, as the index quickly reversed, and closed the opening gap by mid-morning. Just before noon the SPX hit 1824.65, where it paused momentarily, and pulled back to 1821.75. Once again the selling soon dried up, and the index continued higher, moving ahead to 1830.25 by mid-afternoon. Another pullback to 1827.29 followed, and then the SPX chopped higher into the close, reaching 1830.15.

Looking at the count once again from Monday’s 1791.83 low, I have made a slight change since yesterday. I had originally been looking at the initial move from 1791.83 to 1799.94 as a single wave. I am now counting this as three waves. This fits the rest of the sub-wave structure better, and shifts the Wave 1 high from 1826.55 to 1822.27. The move from that high to today’s 1809.22 low can then be counted as a 5 wave sequence. This turned out to be the first wave a very complex inverted wave structure. 5 waves can be counted from the 1822.27 high to the 1821.75 low which occurred shortly after noon today. This would be Wave A of the inverted wave, with Wave B carrying the SPX to 1830.25. I have been mentioning 1831 as the upper boundary of my current count from 1850.84. This level held, as the index dropped back, completing Waves C. D, and E, and Wave 2 at 1827.29. The choppiness into the close carried the index once again to just below the 1831 level, and completed Waves 3, 4, and 5 from 1791.83 at 1830.15.

If my current count is to remain intact, the SPX will need to stay below 1831. From the 1850.84 high I have 1835.23 as Wave 1. Wave 2 is being counted as an inverted corrective wave which looks to have completed today as 1849.31-1739.66-1798.03-1791.83-1830.15. My downside target remains at 1679.

Wednesday's Market 02/12/2014

The SPX opened higher once again this morning, reaching the high of the day early on at 1826.55. This week long rally has been pretty impressive, with the SPX rising from 1737.92 to 1826.55, that would be 89 points for you Fibonacci fans, with but one lone 11 point pullback being the only blemish on a nearly vertical move. Although impressive, this rally can also be viewed as a classic short covering rally. As the index neared, and the fell from, the 1850, many people, including myself, started calling for a correction. The depth of the correction varied by analyst, but most were looking for some sort of pullback. This view was reinforced as the SPX continued to decline, eventually falling below 1740. This marked the largest decline since the May-June 2013 move from 1687.18 to 1560.33. With ample warning it is likely that many people had shorted, or at the least moved to a neutral position. Once the index started moving higher, traders could not get back in fast enough, leading to this impressive rally. The question now is whether there are enough buyers left to push the markets higher, or has this sharp rise only solidified the buy the dip mentality. Perhaps this will lead to continued complacency if the markets start to move lower once more.

That, unfortunately, is a question that can only be answered in time. My view continues to be that the SPX will move lower, with a target of 1679. But getting back to the market, I will start with the move from Monday’s 1791.83 low. The move from that low to Monday’s high of 1799.94 looks to be a Wave 1. The index then pulled back to 1797.31 into the close, and then started off Tuesday morning by rising to 1806.45. I see these as Waves 2, and 3. Wave 4 would turn out to be an inverted corrective wave, which topped yesterday at 1823.54, and then completed near yesterday’s close at 1818.38. Wave 5 then completed this morning at 1826.55. From there, the SPX pulled back to 1815.97 in a 5 wave sequence, and then bounced back to 1822.27 in three waves, before pulling back into the close.

My current count then has Wave 1 from 1850.84 completing at 1835.23, with the entire action from that point being an inverted corrective wave completing as 1849.31-1737.92-1798.03-1791.83-1826.55. This move could move slightly higher, but 1831 is the upper boundary for this count, and any move above that would greatly increase the likelihood that a complete sequence completed at the 1737.92 low, with the SPX now on its way to new highs. I will address that scenario if 1831 is surpassed. Until then I will continue to look at 1679 as the next target.

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.