Wednesday's Market 02/26/2014

The SPX moved higher at the open today after completing the semi-inverted corrective wave at 1842.43 yesterday. That seems to have been only Wave A of a larger degree semi-inverted corrective wave. That wave completed today at 1842.43-1849.23-1843.47-1844.7-1840.91. That would indicate that at least the short term bias is to the upside. This may still be only part of a corrective wave from the 1840.19 low. If this move carries above 1858.71 the SPX is likely to move higher. A break below 1840.19, would likely been this correction has further to go, but I would still look for a break of 1835.60 to totally confirm this.

Tuesday's Market 02/25/2014

The last two days have been interesting in terms of wave structure. From Monday’s 1858.71 high, the SPX dropped to 1854.69. After an inverted corrective Wave 2, the index opened lower this morning to complete Wave 3 at 1847.66. After a small bounce to 1849.94 for Wave 4, Wave 5 completed at 1843.49. The SPX was not finished moving to the downside however, as the index want on to complete a larger degree wave as 1843.49-1845.34-1840.79-1842.42-1840.19. Waves of this structure often reverse sharply after moving beyond Wave 4, which in this case was 1842.42. This was no exception, as the SPX climbed to 1847.60 once clearing that level.

After pulling back to 1843.56 the SPX continued higher, this time reaching 1852.91. The index then went into an extended pullback throughout the remainder of the day. The SPX first formed a 5 wave sequence that completed at 1845.24, and then formed an inverted corrective wave then terminated at 1845.15. From there, the index made another small move lower to 1842.43.

Looking at the wave formation from the 1840.19, the SPX formed three waves to the upside, 1847.60-1843.56-1852.91. With the subsequent move below the second wave low of 1843.56, the move from 1852.91 to 1842.43, this could be interpreted as the beginning of an inverted corrective wave, which would indicate lower prices to come. But taking into consideration the fact that the 5 wave sequence lower from 1852.91, and the inverted corrective wave that followed both completed between 1847.60 and 1843.56, the first two waves from the 1840.19 low, it opened the door to another interpretation, namely the formation of a semi-inverted corrective wave. When the small drop from 1845.15 to 1842.43 completed within my model’s parameters, this was confirmed.

Generally these formations are followed by a very sharp move in the direction of Wave 1, which in this case is up. If this interpretation is correct, I would expect the SPX to move slightly above 1855, undergo a shallow pullback, and then continue higher.

If the SPX moves below 1842.43, this interpretation is wrong, and the index should move to new short term lows. A move above 1858.71 would confirm this scenario.

Monday's Market 02/24/2014

The SPX opened higher today, hit 1845.50, had an ever so slight pullback, and then continued higher to 1851.55. From there the index pulled back to 1849.24, and then rose steadily until it reached 1858.71. After that the SPX dropped to 1856, bounced slightly, and then gained momentum to the downside into the close.

Picking up the count from the weekend, I will make one small change to the short term count from 1824.58. As I discussed over the weekend, a 5 wave sequence completed at 1842.79. The change would be the move from there to 1846.13. It now appears that from 1842.79, the index formed an inverted corrective wave, and then completed a higher degree sequence at 1846.13. That high would be Wave 3 from 1737.92. Wave 4 then completed near Friday’s close at 1835.60. The move today can then be counted as 5 waves from that low, 1845.50-1844.09-1851.55-1852.15-1858.71. This would appear to be the 5^th wave from the 1737.92 low.

Assuming a 5 wave sequence from 1737.92 has completed, this could either be Wave 1 of 5 from 1560.33, or Wave E of an inverted corrective Wave 2 from 1560.33. In the first case I would expect support at 1815, and then 1775. In the second case, I would be looking at a target of 1743. To confirm one of these two scenarios is in play, I would like to see the SPX fall below 1835.60.

A rise above 1858.71 at this point would mean either that Wave 1 is still ongoing, or that Wave 2 has completed. If Wave 1 is still underway, it is possible that the index has just completed the fourth wave from 1824.58, or the Wave 2 low. 1846.13 would then be Wave 1 of 3, with either waves 2, 3, and 4 completed into today’s low, or an inverted corrective wave under formation. With the similarity in the pullbacks from 1846.13 to 1835.60 and 1858.71 to 1847.96, this is a possibility. On a move above 1858.71, 1873 would be the next resistance.