Friday's Market 07/25/2014

 The SPX reversed the trend of the previous two days by gapping down at the open instead of up. But unlike the last two days, there would no closing of the gap today. Within ten minutes the index had dropped to 1978.37, and then tried to rally. After reaching 1983.17 the SPX moved lower again, this time falling to 1974.37. After that the index moved slightly higher, trading sideways between that low and 1979.95.

2 Day Chart:

The SPX is currently in Wave 5 from 1074.77 with a minimum target of 1776, and an optimal target of 2041-2046. Wave 5 began at 1560.33.

4 Hour Chart:

This chart shows the progress of Wave 5 described above. Four waves have completed, along with Waves 1, and 2 of 5. Wave 5 target is between 1957 and 2064.

10 Minute Chart:

With Waves 1 and 2 completing at 1882.35 and 1952.86, this chart is tracking Wave 3 of 5 from 1952.86. Currently four waves of Wave 3 have completed, with a Wave 5 target of 2003-2060, and an optimal target of 2018.

5 Minute Chart:

It was an interesting day, and as I remarked yesterday the SPX did leave us with something to think about this weekend. Yesterday afternoon the index completed Wave E from 1989.06 at 1985.79, and then bounced to 1989.06 before the close. That bounce, coupled with the drop this morning, and the ensuing rally to 1983.17 completed an inverted corrective wave as 1985.79-1989.06-1978.37-1981.39-1980.41-1983.17. Another 5 wave decline followed, completing at 1974.37. Looking at the 5 Minute Chart from 1986.24, the SPX completed sequences at 1981.27, 1989.06, 1985.79, 1983.17, and 1974.37. By putting these together, and then pairing them off, one gets the points (1986.24, 1981.27), (1989.06, 1985.79), (1983.17, 1974.37). These points have an R^2 value of .990955, and thus complete a sequence. Given this it appears that the entire move from 1986.24 to 1974.37 has been one complete corrective wave. The count from the 1965.77 low now becomes Wave 1 at 1971.20, Wave 2 at 1973.37, Wave 3 at 1986.24, and now Wave 4 at 1974.37. The change in wave structure also requires a change in the target price, which I would now put at 1987-1990.

There is another possibility I will discuss. Looking at the waves from 1965.77 to 1986.24 on the 5 Minute Chart, I have been counting this as three waves, 1971.20-1973.37-1986.24. With one minor wave addition this counts as a complete 5 wave sequence. 1971.20 would be Wave 1, what I have labeled as  Wave A would be Wave 2, Wave B would be Wave 3, and Waves C, D, E, 1, 2 would an inverted corrective Wave 4. There is a small wave between Waves 2 and 3, and I count this as a Wave 1, and a Wave 2, Waves 3, 4, and 5 complete that sequence. This gives 1965.77-1971.20-1969.51-1975.51-1979.62-1989.06. This would give an R^2 value of .999781. This second scenario would require the move from 1965.77 to 1986.24 to be a complete 5 wave sequence.

Considering this for the moment as a completed 5 wave sequence, and looking back at the 10 Minute Chart, another larger wave sequence may also have completed today. Recall Wave 1 on that chart completed at 1969.84. A sequence then completed at 1955.59, another at 1979.91, and a third at 1965.77. Assuming another sequence completed at 1986.24 as explained above gives the fourth sequence, and I described how another sequence completed from that point today at 1974.37 for the fifth. Taken together these waves can be seen as1969.84-1955.59-1979.91-1965.77-1986.24-1974.37. This gives the points (1969.84, 1955.59), (1979.91, 1965.77), (1986.24, 1974.37). These points have an R^2 of .99323, which would complete a sequence.

Yesterday I mentioned that if the current wave were to complete short of 2003, I would expect a pullback of about 14 points, which was the extent of Waves 2 and 4 of the wave from 1952.86. The wave that completed today from 1986.24 was about 12 points (1986.24-1974.37).

Given the possibilities, it seems most likely that the SPX completed an inverted corrective Wave 2 from 1969.84 as seen on the 10 Minute Chart. If so this would likely alter the targets for this wave. This does not change my view that the SPX still has at least a couple of waves higher to complete before the wave from 1074.77 ends. 

Thursday's Market 07/24/2014

Today was almost an exact duplicate of yesterday. After a higher open, the SPX reversed course, dropping into negative territory. After that the index reversed course once again, moving up to a new all time high by late morning. After establishing that new high, the SPX drifted mostly lower throughout the afternoon.

2 Day Chart:

The SPX is currently in Wave 5 from 1074.77 with a minimum target of 1776, and an optimal target of 2041-2046. Wave 5 began at 1560.33.

4 Hour Chart:

This chart shows the progress of Wave 5 described above. Four waves have completed, along with Waves 1, and 2 of 5. Wave 5 target is between 1957 and 2064.

10 Minute Chart:

With Waves 1 and 2 completing at 1882.35 and 1952.86, this chart is tracking Wave 3 of 5 from 1952.86. Currently four waves of Wave 3 have completed, with a Wave 5 target of 2003-2060, and an optimal target of 2018.

5 Minute Chart:

Wave 4 of 3 completed at 1965.77. This chart tracks Wave 5 of 3. As is shown on this chart, four waves of the 5 wave sequence from 1965.77 have completed. The target for wave 5 is 1998-2008. This chart is also tracking the progress of Wave 5. I am counting yesterday’s 1989.06 as the completion of Wave 1. I further identified yesterday afternoon’s 1984.81 low as either Wave 2, or Wave A of a more complex corrective Wave 2. From that 1984.81 low, the SPX completed a 5 wave sequence at today’s 1991.39 high. Another 5 wave sequence followed, this time to the downside, and completed at 1987.03. The index first moved higher to 1990.24, and then lower to 1985.79, before moving higher into the close.

The 5 waves from the 1989.06 high can be seen as 1989.06-1984.81-1991.39-1987.03-1990.24-1985.79. The points (1989.06, 1984.91), (1991.39, 1987.03), (1990.24, 1985.79), have an R^2 value of .994393, meaning that this sequence counts as a complete sequence, and most likely Waves A, B, C, D, and E of an inverted corrective Wave 2. There is one caveat to this; Wave E (1985.79), did complete below the Wave 1 high (1989.06). In many instances of the past several weeks this type of corrective wave has turned out to be only Wave A of a larger corrective wave. If this is the case I would not be surprised if the SPX moved slightly lower from here, but the decline should be similar in size to Wave A, perhaps 3-5 points.

One other thing to keep in mind is that a similar thing may be happening from the 1952.86 low as seen on the 10 Minute Chart. My target for this wave is 2003-2060, while the target generated so far by Wave 5 of this sequence from 1965.77 is 1998-2008. The sequence from 1965.77 can complete below 2003, which would not complete the sequence from 1952.86. If this does happen, I would expect a decline similar to the ones seen between Waves 1 and 2, and Waves 3 and 4, both of which were around 14 points. The SPX will no doubt give us something to think about over the weekend. 

Wednesday's Market 07/23/2014

The SPX gapped higher again this morning, but this time quickly reversed and closed the gap within the first twenty minutes of trading. The index reached 1987.46 before falling back to 1982.44. The rest of the morning saw the SPX moving higher, making it to 1989.23. A decline to 1984.81 followed, with the index rallying back to 1988.73 before the close.

2 Day Chart:

This chart shows the main wave from 1074.77 that I have been tracking. So far the SPX has completed four waves of the 5 Wave sequence. Wave 1 completed at 1292.66, Wave 2 at 1158.66, and Wave 3 at 1422.38. Wave 4 was an inverted corrective wave, which completed as 1422.38-1266.74-1474.51-1343.35-1687.18-1560.33. The points (1422.38, 1266.74), (1474.51, 1343.35), (1687.18-1560.33) give an R^2 value of .995468. Given the waves already completed, a Wave 5 target can be extrapolated. The minimum value for this target is 1776, which has already been surpassed, with an optimal target of 2041-2046. The range for this target is admittedly large, so tracking the smaller degree waves should help narrow the range.

4 Hour Chart:

As shown on the 2 Day Chart, Wave 4 from 1074.77 completed at 1560.33. The 4 Hour Chart picks up the count from that point. Once again, it appears that the SPX has completed four waves of this sequence. Wave 1 completed at 1709.36, with Wave 2 being an inverted corrective wave that completed at 1646.47. Wave 3 completed at 1850.84 and Wave 4 at 1737.92. Again, with four waves completed, a Wave 5 target can be generated. This target is 1957-2064. Additionally, from the Wave 4 low of 1737.92, Waves 1, and 2 of 5 have completed, at 1882.35, and 1952.86, with Wave 2 being a very complex inverted corrective wave.

10 Minute Chart:

1952.86 is then the starting point on the 10 Minute Chart. So far, this wave also has completed four waves. Wave 1 ended at 1969.84, and was followed by another complex corrective wave, this time a semi-inverted one, which completed at 1955.59. Waves 3 and 4 can be seen as completing at 1979.91, and 1965.77. The target arrived at for this sequence is 2003-2060, with an optimal value of 2018.

5 Minute Chart:

With Wave 4 on the 10 Minute Chart completing at 1965.77, the 5 Minute Chart shows the progress of the wave from that point. This wave has also completed 4 of the 5 waves at 1971.20-1973.37-1986.24-1981.27. This structure gives a target for Wave 5 of between 1998 and 2008. When this wave completes, it will mark the end of the third wave from 1937.92 as seen on the 4 Hour Chart. I would then expect another shallow decline for Wave 4 and then one final move higher for Wave 5. This should complete the entire sequence from 1074.77 as seen on the 2 Day chart.