Tuesday's Market 03/18/2014

It was another higher open for the SPX this morning, having come off the inverted corrective wave I identified yesterday. The index rose to 1867.36 before taking a slight pause, and then proceeded to 1872.06. This completed a 5 wave sequence from 1856.31. After falling to 1867.10, the SPX chopped its way higher to the high of the day at 1873.76. This completed a 5 wave sequence from 1867.36. The index then made 5 waves lower into the close, completing that sequence at 1870.52.

Looking at this wave from the 1839.57 low, the SPX completed a sequence at 1862.30. From there an inverted corrective wave to 1856.31 followed. The index then completed another sequence at 1872.06 and another at 1873.76. I mentioned yesterday that a more complex corrective wave from the 1862.30 high could be forming, and it appears that is the case. I count an in inverted corrective wave from that high as 1856.31-1872.06-1867.10-1873.76-1870.52. If that is the case, the SPX should continue higher from these levels.

It does appear that the SPX is headed for new highs, but I still remain somewhat cautious. The wave structure from 1839.57 that I outlined above is bullish, but I will take this one step at a time. Yesterday I mentioned the 1874.40 level as being significant, and that is still the case. I will also mention one additional level that may prove important, and that is 1877-1880. A move into that level, followed by a pullback, could be a danger signal. Again I would look at the 60 Minute MACD(13,34) for an indication of the end of this wave. A negative crossover from that level could mean this market has further to go on the downside. This should prove to be an interesting day.

Monday's Market 03/17/2014

The SPX opened higher this morning, bouncing sharply off Friday’s 1839.57 low, and reaching the high of the day of 1862.30 within the first hour of trading. I had mentioned 1861 as a level that might determine whether this bounce would be just that, a bounce, or the start of a move to new highs. I had thought that this would be a small correction that would lead to the next move down, but with the index moving above 1861 the odds now favor the start of a new move higher.

The simplest count for today’s SPX action is a Wave 1 to 1862.30, followed by an inverted corrective wave as 1854.61-1857.96-1853.17-1861.15-1856.31. This is supported by the oversold readings on the RSI(5) for Waves A, C, and E. I would have expected the MACD(13,34) to cross the zero line at Wave E, but it fell just short of that level. This may indicate that this is only the start of a more complex corrective wave, but at the moment this would qualify as a Wave 2.

I am still not completely convinced that the SPX is headed to new highs. There are still several possibilities that would result in the index moving lower, so I will remain cautious at the moment. I would first like to see a move above 1874.40. This was the start of Wave D of the inverted corrective wave I was looking for, and until that level is surpassed it is still possible that the SPX is still in Wave D. The 60 Minute MACD(13,34) might be a good indicator to watch for now. A negative crossover just above the zero line before the SPX gets above 1874.40 could be a bearish signal.

Friday's Market 03/14/2014

Yesterday the SPX continued to move lower from the 1882.35 high. The first move from this high dropped the index to 1854.38, where it completed a 5 wave sequence. The SPX then rebounded in what I see as three waves, lifting the index to 1874.40. The initial drop yesterday to 1845.81 completed a five wave sequence from 1874.40. The SPX bounced to 1852.98 off that low before making a new low at 1841.86, and then moved slightly higher into the close.

This morning the SPX started off slightly lower before higher to 1852.44. This completed an inverted corrective wave from yesterday’s 1845.81 low. After hitting that high, the index moved slightly below yesterday’s low to 1840.36, bounced to 1851.64, and then made a final push lower to 1839.57, completing a sequence from Thursday’s 1874.40 high.

Looking at the entire move from the 1882.35 high, it appears that the SPX completed a Wave 1 at 1854.38. The three waves higher from that point to 1874.40 were the first three waves of an ongoing inverted corrective wave. With 5 waves now completed from 1874.40, there is a good chance that the fourth wave of that inverted correction, or Wave D, completed today at 1839.57. I would now expect the SPX to move higher to complete Wave E, and Wave 2 from 1882.35. From that point I would be expecting a resumption of this downturn.

If the SPX is indeed entering Wave E of 2 from 1882.35, there are several parameters that will define this wave. Since Wave A was greater than Wave C, Wave E can be expected to be greater than Wave A, which was slightly less than 14 points. Adding that to today’s low yields 1853.57, and gives the minimum price for this wave. The ideal price for this wave would be 1858. The maximum level for this wave is 1861. If the SPX moves above 1861 I would have to at least consider the possibility that 1839.57 marked the end of this move.