Thursday's Market 06/14/12

Yesterday I said the decline from 1327 was setting up a bullish wave structure that usually indicated a strong rally.

The market opened higher today, reaching the 1318 resistance line. A pullback from that point took the market below the 1316 support level to 1314. Shortly afterwards the market once again rose above the 1318 resistance, and the rally was on. The initial move took the SPX to 1323, and after a brief pause, the market continued to just below 1327. After another small pullback, the market got above 1327, where it finally came under some selling pressure. The market fell to 1321, and then jumped to 1333. Another pullback to 1323 followed, and then the market turned higher into the close. It made it back to 1331 before dipping into the close.

The initial rise to 1318 this morning was wave 1 from 1310.51. This was followed by an inverted corrective wave 2, with the 5 wave sequence completing at 1327.44. That appears to be wave 1 of the next move higher. The drop to 1321 was wave 2, with the action from there a bit more complex. The unusual action from 1321is best seen as a wave 1, followed by an inverted corrective wave 2, and then wave 3. It is possible wave 4 of the sequence has been completed as well, giving a projection for wave 5 between 1344, and 1354. This is line with our wave 3 projection from 1310 of 1343. The market could experience a slight sell-off at that point, bringing the market back into the mid 1330’s, before completing wave 3 from 1306 at 1354.

It is getting a bit complex, I know, but basically I am looking for a move to 1343-1344, a slight pullback, and then another move to 1354. This would complete wave 3 of 3 from the 1267 low.

A couple words of caution. There seems to be a danger area right at 1335. If the market can only make it to 1335, and then fall below 1321, we may be putting in some sort of top. If we exceed 1336, that option is eliminated. Support remains at 1316-1318, and then 1297. Upside targets, once we clear 1336, are 1343, followed by 1354.

Thank you for your interest.

Wednesday' Market 06/13/12

It was another very interesting day for the markets. It started with another gap opening to the downside, stopping right between the 1318, and 1316 support levels. After a slight bounce, the SPX made a temporary bottom at 1315.26. The market then rallied and neared 1327 before falling back to 1320. Another rally pushed the index to the day’s high, just over 1327.

Up until this point, the market was behaving pretty much as expected. I had been watching 2 wave sequences for my projections, one from 1306, and the second from 1315. The sequence from 1306 had completed 4 waves before today, with wave 4 terminating at 1315. My projection for wave 5 was above 1327. The second sequence was wave 5 of the first sequence, and I thought wave 1 had been completed Tuesday at 1324.31. This sequence had a projected wave 3 at 1327, and a wave 5 projection of 1329-1333. I thought today’s first move near 1327 was wave 3. I expected wave 4 to move back near 1318, and wave 5 to come in between 1329, and 1333. This would have completed both sequences. What I thought would be wave 4 came up a little short of expectations, and what should have been wave 5 only made it back to 1327. This does satisfy the main sequence from 1306, and I either misinterpreted wave 5, or it came up short of our target.

From the 1327 high, the market sold off sharply, completing a 5 wave sequence near 1316. It appears that became wave 1 of another sequence, which terminated at 1310.51. This wave has the characteristics I have mentioned before, with an extended wave 1, followed by a rapid, short. 2-3-4-5 sequence. As I have said before, with this type of wave, a move above wave 4 usually precipitates a sharp reversal. As you can see on the chart, the small rally to end the day moved above wave 4.

At this point nothing has changed to eliminate my original scenario of 1335 being wave 1 from 1267, 1335 to 1306 being the corrective wave 2, and now waves 1, and 2 of wave 3 of that sequence being completed. My target for wave 3 from 1306 is 1354. For now I will stay with this scenario.

Because of the inconsistent wave action today, it is, of course possible that the market will break below 1306. Should that happen, a move to the support levels below 1300 seems likely.

Resistance is still the 1316-1318 area, with support at 1297, and 1290.

Thank you for your interest.

Tuesday's Market 06/12/12

One of the scenarios I mentioned yesterday had wave 3 from 1336 terminating near 1306, with wave 5 ending slightly below that. I said if that scenario played out, the correction from 1336 was most likely over.

The market opened higher today, moving up to our resistance line at 1316. The market turned lower from there, moving slightly below yesterday’s low, bouncing slightly, and then making another slightly lower low at 1306.62. At that point the market rallied sharply, rising swiftly to 1320.75. The mid-day hours were spent in a fairly narrow trading range, bounded by our 1318, and 1316 support/resistance lines. Nearing the last hour of trading, the SPX broke above 1318 once again, bounced off of it twice, then rallied into the close. This last rally carried the market above 1324. This 1324 level has been a persistent point of support, and resistance since before the 1267 low. It is interesting that it has appeared once again. Perhaps this time the market will put that level behind it for awhile.

The action this morning, in my view, was the completion of a 5 wave sequence from 1336, and the end of the correction phase from that point. It appears the market has completed 4 waves up from 1307, with wave 5 expected to terminate between 1329, and 1333.

That should complete a 5 wave sequence from 1307, but I believe the market is headed to the upside. To the downside, the 1307 level is significant. Should the market fall below that level, the correction from 1336 could continue.

Thank you for your interest.