Wednesday's Market 07/30/2014

After opening higher, the SPX reached 1978.90 before changing direction. The index quickly declined to 1962.42 before rebounding to 1976.24.

Yesterday I mentioned that I was waiting for some very short term waves to resolve themselves. Part of that began today with the open into the 1978 area I had indicated might be important. This seems to have completed a Wave D from 1979.95. This can be seen as the red A, B, C, and D on the 5 Minute Chart. Wave E has a target of 1945-1955. This target calls into question my count from the 1985.59 high, or Wave D in yellow on the 4 Hour chart. Since this target indicates that the previous low from that high, 1952.86 may be taken out. If that occurs it seems likely that the corrective wave from 1985.59 has not yet completed. I would still expect this wave to remain above 1937.

If this plays out I will explain the implications in more detail. For now, it looks like 1945-1955 is the next target. I would then be looking for a bounce to 1969.

Chart of the Day:

Tuesday's Market 07/29/2014

I had thought that the SPX had put in a bottom last Friday at 1974.37. That was not the case. After an afternoon rally on Friday, the index failed to follow through on Monday, moving down sharply to 1967.31. A strong rally followed that drop, lifting the SPX to 1984.85. That rally ended this morning, and the SPX moved lower once again, first to 197.53, and then 1970.34.

My longer term view remains unchanged. The SPX, in my view, still needs to complete several waves up to complete the sequence from 1074.77. The shorter term outlook is not as clear. The simple view would be to see the move lower from Friday’s rally as part of an inverted corrective wave from 1986.24. There are several very short term waves that have not been resolved in my opinion, and so I am hesitant to be overwhelmingly bullish. For several reasons I still think the SPX is in a complex corrective wave from either 1986.24, or 1969.84, although it is likely that the index has put in the low of this corrective wave.

It does appear that a wave completed today at 1970.34. The SPX should move higher at the open tomorrow, possibly to 1978. And now that I’ve written all that, I have just seen a quite elegant solution. A complex inverted corrective wave may have bottomed at 1970.34. If the SPX can move above 1978, it should continue to rally.

Charts of the Day:

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.