Thursday's Market 05/15/2014

The SPX opened lower today, continuing the slide from yesterday afternoon.  The index worked its way below 1874 after the first half hour, and then chopped steadily lower until it bottomed at 1862.36 by mid-day. After shedding nearly 40 points in less than three days, the SPX tried to recover through the afternoon, gaining ten points from the low near the close.

From Tuesday’s all time high of 1902.17, the decline had been straight forward. The SPX first completed a 5 wave sequence yesterday morning at 1891.46. The index then completed an inverted corrective wave just before the close yesterday at 1888.87. Today the index followed that inverted corrective second wave with a strong move to the downside that ended at 1862.36. With three waves completed from the high, the expectation would be for a slight move higher, followed by another move to the downside to complete the fifth wave. It does appear that the SPX completed a 5 wave sequence from the low to 1872.49. A 5^th wave down from this point would give a target of below 1837.

This, however, may not play out as outlined above. Looking at the SPX from the 1891.33 high, I counted a 5 wave sequence that ended at 1867.02. The ensuing run-up to 1902.17 also completed in 5 waves. These two waves combined with the 3 waves down from 1802.17 gives us the sequence 1891.33-1867.02-1902.17-1891.46-1888.87-1862.36, which works as a semi-inverted corrective wave from 1891.33. The three points, (1891.33, 1867.02), (1902.17, 1891.46), and (1888.87, 1862.36) have a correlation of .9994. This would indicate that the SPX should now move higher, with a first target around 1909. This fits with my longer term count that the SPX is in Wave 5 from the 1560.33 low, with a target above 1957, which will in turn complete a 5 wave sequence from the 1074.77 low.

This market has been extremely choppy and complex from that 1560.33 low, with a multitude of possible ways this thing could end. This choppiness could continue for awhile, creating maximum confusion before an eventual correction. For some time every move lower has been accompanied by the doom and gloom faction calling for a market crash, while every move higher has heard calls of SPX 2200 and higher. Both are possibilities, but for me the fact that every market move elicits such diverse reaction lends credence to the continued choppiness scenario. For the moment it is best to look at this market wave by wave, while continuing to look at 1957 as the minimum upside target. Until some confirmation to the contrary changes that, I will use that as my primary scenario, and try to give points where alternate scenarios may complete.

Given today’s set-up, I am looking for a move higher, to near 1909. If the SPX drops below today’s low of 1862.36, the SPX could be headed below 1837. If the index does move higher, there is a danger area between 1893 and 1895 that could trigger another pullback similar to the one we have seen the last few days.

Thursday's Market 05/08/2014

The SPX opened slightly lower this morning, dipping to 1874.55 in the first few minutes. Following that dip the index continued the rally off yesterday’s low. The SPX ran up to 1887, fell back to 1883, and then moved higher to 1889. This has been a pretty impressive rally, with the SPX moving up 29 points from yesterdays low. After hitting 1889 the index started to pull back. The SPX moved steadily lower throughout the afternoon, dropping to 1870.05 before bouncing into the close.

This morning’s run up was unexpected form my point of view, but may actually turn out to be more bearish than if the decline had continued this morning. After reviewing my charts, this appears to be a semi-inverted corrective wave from the 1880.58 low. This means today’s high was the completion of the second wave from the 1891.33 high. The decline from today’s high looks to be a 5 wave sequence, and possibly the third wave from 1891. If the bounce into the close was the fourth wave, the fifth wave would now project to the 1775 support level.

Resistance is still between 1892 and 1902, and the 1923.

Wednesday's Market 05/07/2014

The SPX responded to yesterday’s weakness with a gap up opening, which took the index back to 1876.01 within the first few minutes of trading. A sharp reversal followed, and the SPX soon found itself in negative territory for the day. This downturn took the index to 1859.79, which turned out to be the low of the day. The SPX started to move higher once again, hitting 1869.12 before taking a pause. After pulling back to 1865.29 the index then continued higher to 1876.46. A choppy pullback followed, this time taking the SPX to 1868.43 where it reversed again, and then moved higher into the close with only one four point pullback along the way.

Continuing the count from the recent 1891.33 high, I have Wave 2 completing on Monday at 1885.51. Wave 1 of 3 then completed yesterday at 1876.03, and what looks like Wave 2 of 3 at 1881.27. Wave 3 of 3 then completed at yesterday’s low of 1867.77. That would make today’s opening move higher to 1876.01 Wave 4 of 3, and the ensuing drop Wave 5 of 3, which I have completing at 1861.10. This now completes three waves from 1891.33.

From 1861.10, a 5 wave sequence can be counted as 1869.12-1868.43-1875.37-1871.75-1878.83. The second wave was an inverted corrective wave which completed as 1865.29-1875.52-1869.61-1873.99-1868.43. This would now seem to complete four waves from 1891.33, with only the fifth wave down to come.

With four waves now completed, the fifth wave should complete between 1844 and 1830, with an optimal target of 1838. If the SPX does move higher, resistance is between 1891 and 1902. After 1902 the next resistance would be 1923.