Friday's Market 07/18/2014

I will apologize in advance for this being a brief update. It was a very long day at the paying job, with another one on tap for tomorrow. I did however; want to comment on today’s market.

Yesterday I outlined two possible scenarios, one bearish, and the other bullish. The bearish scenario would come into play with a break below 1952.86, which did not happen. At least not today that is. Looking at the SPX from yesterday’s 1955.59, there was a small move to 1959.95 before the close, and then a slight dip. Today the SPX opened higher, and completed a 5 wave sequence from the slight dip (1957.68) at 1974.06. After reaching that point, the index chopped its way to 1971.80, and then completed another sequence higher at 1979.81. This was followed by a small pullback to 1976.64. The three small pullbacks, 1959.95-1957.68-1974.06-1971.80-1979.91-1976.64, can then be counted as an inverted corrective wave. The result is a Wave 1 to 1959.95, followed by an inverted corrective Wave 2 that completed at 1976.64. This would suggest a continuation of the advance from 1952.86.

From 1952.86 Wave 1 completed at 1969.84. Wave 2 was the very complex semi-inverted corrective wave that completed yesterday at 1955.59. In my model, waves are proportional dependent on the starting point of the wave. With the shortness of Wave 1 from 1955.95 to 1959.95, it seems likely that Wave 3 will be longer than that, and Wave 5 longer still. Wave 1 from 1952.86 was about 17 points. The current wave from 1955.59 is already over 24 points, and should eventually be even longer. If this is Wave 3, it would project Wave 5 to be extremely long. Given this it seems likely that the entire move from 1969.84 to 1955.59 was a Wave A of an even more complex corrective Wave 2. This would have the effect of tempering the length of the entire wave from 1952.86. I will keep an eye on this going forward. I will try to update again over the weekend at some point.

Thursday's Market 07/17/2014

Today was a decidedly down day for the SPX. From yesterday’s 1983.94 opening high, the SOX completed a 5 wave sequence down to 1965.95. Although this fell exactly within the range I gave yesterday, I had expected 5 waves from 1982.45. This nullified my scenario from yesterday, and with the subsequent breach of the 1964-1966 support area, forced a re-evaluation of my count from the 1952.86 low.

I still have a sequence completing at 1969.84 from that low. Today’s 5 wave sequence from 1983.94 to 1965.95 completed an inverted corrective wave from 1969.84. This formed as 1959.63-1982.52-1965.34-1983.94-1565.95. With the bounce to 1975.99 that followed, the market action from 1952.86 can be counted as the first 3 waves of an inverted corrective wave, 1969.84-1965.95-1975.99. This would suggest the SPX is still in a corrective wave from 1985.59. A break below 1952.86 would confirm this. I would still be looking for this wave to complete above 1937.

Until the SPX moves below 1952.86, I will still keep my count of 1952.86 as the end of a corrective wave, and 1969.84 as Wave 1 of a continuing advance.  Under this scenario the 5 waves from 1969.84 can be seen as Wave A of a semi-inverted corrective wave1975.99 as Wave B, With Waves C, D, and E completing at today’s low of 1955.59. At the moment this scenario seems like the lower probability, but this market has liked surprises.

Wednesday's Market 07/16/2014

Today started with a gap up which saw the SPX reach 1983.94 within the first ten minutes of trading. That turned out to be the high for the day as the index reversed quickly and gave back most of its gains, falling back to 1975.67. The SPX tried to rally back into the afternoon, but after reaching 1982.45 it reversed again, fading into the close.

I have relabeled the advance which began yesterday afternoon. It now appears to have been only part of a 5 wave sequence which concluded with this morning’s high at 1983.94. From that high it looks as if the SPX completed a sequence down to 1975.67, and then a sequence higher to 1982.45. I continue to see this as an incomplete advance from 1952.86, with the first wave of the sequence ending at 1969.84. The SPX then looks to have completed Waves A, B, and C of a continuing inverted corrective wave, with Wave C completing at 1959.63. The SPX now appears to be in a complex Wave D. There a many ways this can complete with the given wave structure, but I will outline the two most obvious ones at this point. I have added support and resistance levels from these two scenarios on the 5 Minute Chart. Again, these are simply the two most obvious of many short term scenarios.

Yesterday morning’s 1982.52 high can be counted as Wave 1 of D. The decline to 1965.34 can then be counted as Wave 2 of D, or Wave A of an inverted corrective Wave 2 of D. This morning’s high is then Wave 3 or B, the 1975.67 low Wave 4 or C, which then leaves us with the advance to 1982.45. If this turns out to be Wave D of 2, the Wave E low can be projected to be 1964-1966. 1982.45 may also turn out to be Wave 1 of 5 of D from 1959.63. If the first 4 waves of Wave D have completed as outlined above, 1982.52-1965.34-1983.94-1975.67, Wave 5 would project to 1986-1987.

To recap, with the given wave structure, there is support at 1964-1966. This would complete Wave 2 of D, and clear the way for a further advance. Resistance is at 1986-1987, which would complete Wave D of 2 from 1952.86. I would then look for a decline to perhaps 1975 to complete Wave E, and Wave 2.

Both of these are very narrow ranges, which opens the possibility that the SPX may clear them. A break above 1986-1987 would be bullish, and a break below 1964-1966 would not only be bearish, but might put my current count from 1952.86 in jeopardy.