Tuesday's Market 05/20/2014

After reaching 1886.00 yesterday, the SPX started the day off to the downside. After just over 30 minutes of trading the index had fallen to 1877.47. From there the SPX started to rebound, bouncing back to 1882.91. After that it was downhill all the way, as the index dropped steadily throughout the afternoon, reaching a low of 1868.14 before moving higher. This took the SPX to 1875.89, but started giving back some of those gains into the close.

Looking at the wave structure from yesterday’s 1886.00 high, I count the drop to 1877.47 as a Wave A down. The move back up to 1882.91 was 5 waves, and can be counted as Wave B. The decline throughout the afternoon also looks like 5 waves which completed Wave C at 1869.05. I can also count 5 waves up to 1875.89 for the fourth wave, or Wave D. The move down from that high does not look like a completed sequence, but rather 1 wave down followed by an inverted corrective wave completing just before the close. This implies a further move to the downside.

The 4 completed waves, 1877.47-1882.91-1869.05-1875.89, give a fifth wave target near 1852, the same level I mentioned yesterday as a possible end point for this wave. If the SPX completes this wave at this level it would complete an inverted corrective wave from the April 22^nd 1884.89 high.

If my short term count is wrong, and the SPX moves higher from here resistance is still at 1893-1894, and then 1924-1925.

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.