Monday's Market 05/19/2014

The SPX started the day by moving lower; a gap down, and then a continuation down to 1872.42. This was a larger pullback than I had anticipated, as I had thought that Wave 4 from 1862.35 had either completed, or was close to completing near Friday’s close. From there the index rose in a somewhat choppy fashion to 1881.66. I had given 1887 as the target for the completion of Wave 5, but the pullback this morning altered that target. It now looks like 1881.66 completed Wave 5. The SPX pulled back slightly from that point before climbing to 1884.89. Another choppy pattern developed through the afternoon, which ended at 1882.58. A final move higher pushed the index to 1886 just before the close. It appears that the SPX completed a larger degree wave from the 1862.35 low to today’s 1886 high as 1881.66-1879.60-1884.89-1882.58-1886.

The SPX still seems to be indecisive, leaving open several possibilities. As I mentioned on Friday, there is resistance at 1893-1894. A move to that level, followed by a pullback, could result in a drop back to the 1850 level. As I also noted on Friday, sometimes a sequence will terminate slightly below a resistance level so the next move can gap over that level. A move above 1894 most probably means a run up to 1924-1925.

With the completion of a 5 wave sequence today there is one other possibility. The choppiness of late is either result of nested waves, which is my current count, which should result in a more extended wave, or the result of complex corrective waves forming. With this in mind a pullback from these levels to 1852 would complete one of those complex corrective waves, and clear up some of the uncertainty in the wave counts. As far as that goes, a move to 1893-1894 followed by a pullback to 1863 would clear things up even more. I continue to this as the 5^th wave from 1560.33, which should conclude above 1957 and complete the entire wave from 1074.77.

For the moment resistance is at 1893-1894, and then 1924-1925. Support is at 1852.

Friday's Market 05/16/2014

The SPX worked slightly lower in the first few minutes of trading, dropping to 1866.99 before bouncing to 1871.77. That bounce was followed by another move lower to 1864.82. A slightly better rally followed, with the index moving up to 1873.04 before dipping back to 1868.14. An even better rally followed this dip, with the SPX hitting a high of 1878.28 before falling back into the close.

After completing a 5 wave sequence at 1872.49 after yesterday’s 1862.36 low, the SPX started the day off by completing three waves down from 1872.49. This can be counted as Waves A, B, and C of an inverted corrective wave. The rally off the 1864.82 occurred in 5 waves, and completed Wave D. Another 5 wave sequence lower to 1868.14 then completed Wave E, and Wave 2 from yesterday’s low. The rally from that low looks like Wave 1 at 1871.01, an inverted corrective Wave 2 at 1875.54, and Waves 3, 4, and 5 completing in quick succession at 1877.39-1877.23-1878.28.

This completes 3 waves from yesterday’s 1862.36 low. Wave 4 may also have completed with the slight pullback before the close. If so, this would give a Wave 5 target of around 1887. As I pointed out yesterday, there is a danger zone between 1893 and 1895. Completing a sequence just below that level could set up a gap above that resistance level, but that is getting too far ahead.

Yesterday’s 1862.36 low continues to be a critical level. A break below that level would likely lead to much lower prices.

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.