Monday's Market 07/09/12

After completing a 5 wave sequence from 1374.81 on Friday, I was looking for a move higher today. Instead the market moved lower, moving just below Friday’s low of 1348.03. That low turned out to be wave 1 of another sequence lower, which played out today.

The market opened lower, and continued down through the morning. The first low came at 1347.44, and after a rally to 1352, the market out in a slightly lower low at 1346.65. This completed the 5 wave sequence, and the market rallied from that point. It rose to 1353, before falling back towards the previous low, but held at 1347.67. The market then rallied into the close, rising above 1353, before fading into the close.

As I stated above, the action today appears to be the completion of a sequence from the 1375 high. While it is possible for the market to form another sequence from that high, I feel this would only result in slightly lower lows. It does not appear that a 5 wave sequence has completed from today’s low, so I still think the market is headed higher.

Near term I have targets of 1356, or 1368. The 1356 target would be near the 1357-1358 resistance level. This would be wave 3 from today’s low, with another move higher expected after that. If the market moves much below today’s 1346.65 low, the market could be in the midst of a more prolonged corrective wave.

In summary, I am looking for a move higher, with an initial target of 1356, or 1368. This should signal a resumption of the uptrend from 1267. If the market falls below 1346 by a couple of points, this correction could be headed down to 1323-1323, or even 1313-1315.

Weekend Outlook 07/08/2012

The SPX entered this week having come off a strong two day rally from 1313 to 1362. The rally continued at the open on Monday, as the index reached 1366.35 before pulling back to 1355.70. The market then continued the rally, and by midday Tuesday, the index stood at 1374.81. This completed a 5 wave sequence from 1313, and what I currently see as wave 3 from 1306.62.

From that point the market turned lower, dropping to 1370 Tuesday afternoon, and then falling to 1363 Thursday morning. Thursday afternoon saw the market trying to recover, making it back to 1374 before falling into the close. Friday the market opened sharply lower, and continued down from there, as the SPX fell to 1348.03. The market then rallied back to 1356 into Friday’s close.

I continue to see 1266.74 as the completion of a 5 wave sequence from 1422.38. This means the market is now forming a 5 wave sequence to the upside, which should eventually take the market back above 1422. From 1267, the market has thus far completed 2 waves of that 5 wave sequence. Wave 1 terminated at 1335.52, and wave 2 at 1306.62. Wave 3 from 1267 is now in progress, and my current count has wave 3 of 3 terminating at 1374.81. Wave 4 of 3 may have terminated on Friday at 1348.03.

Although I am still quite confident that the market is still working on a 5 wave sequence up, and that sequence should carry above 1422, the shorter term count is less clear. My current count would require the current correction to continue down to about 1318, but I view that as highly unlikely. It is more likely that some kind of complex corrective wave is forming, and the market is set to move higher from the 1348 low put in Friday.

My long term targets remain the same. I see 1393, or 1475-1480 as the termination point of wave 3 from 1267, with wave 5 completing at 1426, or 1497.

Even though the short term wave structure could resolve itself in several ways, it is still possible to follow the individual 5 wave sequences, giving us an idea of where the market is headed. Looking at the corrective sequence from 1374, I see a 5 wave sequence which contained waves of diminishing lengths, which ended at 1348, right at a support level generated by the up sequence from 1309 to 1374. The move up Friday afternoon carried above the wave 4 high of 1353.11. This would point to the market moving higher from 1348. I would expect this wave to carry first to 1378, and then possibly the 1393 level I have been target for some time.

Resistance should be at 1357-1358, 1367, and 1378. Support should be at 1349, 1333-1336, 1323-1326, and 1313-1315.

Friday's Market 07/06/12

It was another down day for the market, as the sell-off from Tuesday’s high continued. The market gapped to the downside, very quickly reaching the 1356 level I mentioned yesterday as the initial downside target. After a brief pause, the selling continued. When the market hit 1349, it tried to rally, but that was brief. After moving up to 1353, the market dropped to the low of the day at 1348.03. The market then rallied to the close, making back right to the 1356 level.

The sell-off from Tuesday’s 1374.81 high is best seen as a 5 wave sequence to 1348.03. The drop to 1363 on Thursday was wave 1, followed by an inverted corrective wave 2, and then waves 3, 4, and 5 bringing the market to 1348. The afternoon rally carried the market back above the wave 4 high of 1353.11, which could be a positive going into Monday.

It now appears that the wave 3 high from 1306.62 occurred at 1374.81, and not at 1365.35. Although it appears likely the market will continue to rally on Monday, a further correction would fit the model better. It is possible that a different wave structure has been unfolding since 1336 high from 1267. For now I am still looking at 1393 or 1475 as targets for wave 3 from 1267. Support is at 1338, 1326-1323, and then 1315-1313. Resistance remains at 1356-1359, 1367, and 1393.

I will address this in more detail over the weekend.