Thursday's Market 10/01/2015

Following through on yesterday afternoon’s rally the SPX opened to the upside, reaching 1927.21 before reversing direction. After dropping to 1909.00 the SPX rebounded slightly to 1922.02 before continuing the downward move to 1900.70. That turned out to be the low of the day as the index once again staged an afternoon rally, moving back up to 1924.52.

The opening surge to 1927.21, within the 1921.50-1935.32 range mentioned yesterday looks to have completed the 5 wave sequence from 1880.38 I outlined yesterday. This means that from the 1935.32 high the SPX completed a sequence down to 1880.38, and then a sequence up to 1927.21 that completed today. This can be seen on the 5 Minute Chart. This chart should be viewed as something of a “working copy” simply meant to track sequences, so the labeling will not match up to the other charts. This scenario implies that the SPX should now continue downwards towards my 1748 minimum downside target.

The above scenario is my preferred count, but there are a couple viable alternatives that are worth mentioning. All of these scenarios imply that the current action from the 1880.38 low is corrective in nature, with the only difference being the targeted high of the move.

 

The first alternate counts the move to 1899.48 as the first wave, but then counts the move to 1871.91 as three waves, 1899.48-1880.93-1888.85-1871.91. These can be counted as waves A, B. and C of an inverted corrective wave. The rally to 1916.60 would be wave D, and the decline to 1897.05 wave E to complete the second wave from the 1871.91 low. The third wave would have ended today at 1927.21, and the fourth today at 1900.70, with the fifth in progress. The target for this wave would be 1930-1935.

For the second alternate I need to start from last Friday’s 1921.50 low. The rise to 1935.32 would then be counted as Wave A of an ongoing semi-inverted corrective wave. The 1880.38 low would be Wave B, and Wave C would have completed today at 1927.21. Wave A of D would be today’s 1900.70 low, with Wave B of D likely taking the SPX above 1935, so that Waves C, D, and E of D could carry the index back into the 1935.32-1921.50 range. Wave E would then complete slightly above 1935.32. In rare cases these waves can take on slightly different forms which may result in the SPX moving higher than anticipated.

 

So the most likely scenario is that the corrective wave completed today at 1927.21, but there is a possibility of the SPX moving slightly higher without affecting my longer term 1748 target level to the downside.

Wednesday's Market 09/30/2015

It has been an interesting couple of days following Monday’s steep move to the downside.  After Friday’s 1935.32 high the SPX broke sharply lower on Monday completing a 5 wave sequence at 1880.38. The choppy trading after that low looked to be the start of an inverted corrective wave, but turned out to be the another formation of the favored wave of this correction, the semi-inverted corrective wave. This wave completed at 1899.48. The index then moved lower once again, falling to 1871.91 in what can be counted as 5 waves, with the second once again turning out to be a semi-inverted corrective wave. From that low the SPX moved slightly higher to 1880.85 before a slight pullback into Monday’s close. Notice that the bounce to 1880.85 was slightly above the initial 1880.38 low from 1935.32.

So since 1935.32 the market fell in 5 waves to 1880.38, rallied in 5 waves to 1899.48, fell in 5 waves to 1871.91, and then rallied to 1880.85. From 1880.85 the SPX had a small pullback, and then rallied sharply this morning, moving up to 1914.31. The index then underwent another semi-inverted corrective wave to 1900.65, rallied to 1904.37, and the fell to 1897.05. Notice again that 1897.05 is slightly below the initial rally from 1880.38 to 1899.48.

 

Again from 1935.32 the SPX moved lower to 1880.38, rallied to 1899.48, and then fell below the initial low to 1871.91. After that the index rallied 1880.85, which is between 1880.38 and 1899.48, and then formed an inverted corrective wave which terminated at 1897.05 which is once again between 1880.38 and 1899.48. So from the 1880.38 low the SPX has completed Waves A, B, C, and D of another semi-inverted corrective wave. Wave E would have a target above 1925, slightly above today’s closing level. Notice that this is also slightly above 1921.50 which I have labeled as Wave (C). If this wave does end between 1921.50 and 1935.32, it would appear that the SPX is forming yet another semi-inverted corrective wave from 1921.50, and thus the index would still be in Wave (D). If true the SPX should then complete a corrective wave within the 1921.50-1935.32 range, and then move above 1935.32 to complete that wave. At the moment it looks like the wave would complete only slightly above that 1935.32 level. That would then complete Wave (D) and clear the way for Wave (E) to begin.