Thursday's Market 07/12/12

Yesterday I offered several scenarios for today’s market. The first involved a slight move higher into the low 1340’s followed by a move to the downside. This would have completed an inverted corrective wave 4 from 1374.81, and then wave 5. Another scenario had the market moving sharply lower if it broke 1336. This would be wave 5 down from 1374.81. My target was 1318, with support at 1323-1326, and then 1313-1315.

The market did open lower, dropping to 1331 in the opening minutes of trading. The market continued lower for the first hour and a half of trading, hitting a low of 1325.41. The market did find support at that level, and rallied for most of the remainder of the session. First the SPX moved up to 1334, and after a small pullback continued on to 1339. After another pullback, the market made a slightly higher high at 1339.93, and then fell back to 1334.41 near the close.

Today’s initial drop to 1325 broke down into a 5 wave sequence. The ensuing rally contained a 5 wave sequence to 1334, and another to 1339. I have been targeting 1325, and 1318 for some time, and today’s low of 1325 does offer a possible 5 wave sequence completed from 1375. However, looking more closely at the sub-waves of the sequences, it seems most likely that the move down today was wave 4 of an inverted corrective wave 4 from 1375. The rally after that were waves 1-3, and most likely 4, of wave 5 of that inverted corrective wave. If this turns out to be the case, wave 5 of that inverted corrective wave should terminate at 1341-1342, and then we should see wave 5 down from 1375. This wave should terminate at 1318-1325, with 1318 being preferable.

Thus, the perfect scenario for the conclusion of the 5 wave sequence from 1375 would be a move from here to 1341-1342, followed by another drop to 1318. Since the market rarely accommodates perfection, there are a couple of things I will be keeping my eye on. First, if the market rallies beyond 1342, I would assume the 5 wave sequence from 1375 ended at 1325. The uptrend should then continue. T o the downside, 1309, and 1306 are important levels. If the market moves below them, our count would be incorrect. As the market approached the 1375 high, I mentioned a possible count for the completion of a 5 wave sequence from 1267. I discounted this possibility because the market moved beyond the limits of my model. If the market moves below 1306, this may still be a possibility.

Support remains at 1323-1326, and then 1313-1315. My target remains at 1318. Resistance is at 1337, and then 1357-1358.

Wednesday's Market 07/11/12

The market opened modestly lower, but soon rebounded to 1345. Another drop to 1338 followed, after which the market traded in a narrow, up trending range, which brought the market back to 1343.66. The market then underwent another sell off, which took the SPX to the low of the day at 1333.25. At that point the market rallied, bringing it back to 1344.26, before fading into the close.

It appears the market completed wave 3 from 1374 yesterday at 1336.27. The moves from then seem to be either a semi-inverted corrective wave 4, or wave 4 from 1374, followed by waves 1, and 2 of one lesser degree. If this is a semi-inverted corrective wave, we will see a move slightly higher, near 1346, which would complete wave 4 from 1374, with wave 5 following, with a target of 1318.

If wave 4 has already completed at 1345, the move down should start, again with a target near 1318. If the market moves above 1346, it could continue higher, with resistance at 1357-1358, and 1367. A move below 1336.27 means the move down from 1374 is continuing, with a target of 1318.

The key levels for today are 1346, and 1336. A break of either of those levels should give us the short term direction of the market. Longer term, the market should still work lower, although I still view this as a corrective move, with higher prices to come.

Tuesday's Market 07/10/12

The market started the day to the upside on Tuesday, quickly moving up to 1361.54. Yesterday I thought this move would be wave 3 from Monday’s 1346.65 low, but I was wrong. I missed a small wave from 1347, and this move turned out to be wave 5. The market then turned lower, breaking through the 1357-1358 resistance level, and then moving down close to yesterday’s low. After hitting 1348 the market tried to rally, but could only make it back to 1352 before falling again. The selling continued, pretty much unabated, through the afternoon, until the SPX reached 1336.27. A rally off that low brought the market back to 1342.70 shortly before the close.

The action today, after the morning rise, was somewhat unexpected. This market has not been easy to follow as of late, and today was no exception. Longer term, I see still see a continuation of the uptrend at some point, the only question being when. I mentioned over the weekend that a move down to 1325, or 1313, would actually fit better with longer term projections. At the time I saw this as a low probability, with the expectation of a higher move this week.

The move today looked like a completion of 5 waves from 1346, and then 5 waves down to 1336. This would make three waves from 1375, with wave 5 projecting to 1313. So this move still fits within expectations. As I said before, this market has been difficult to read lately. The market could rally further from today’s low, but I see one more move down as probable. Support is at 1326-1323, and 1315-1313, with a target of 1313.

Resistance is at 1357-1357, and 1367. If the market moves above 1361.54, the market may have completed 5 waves down from 1375, and we may see a continuation of the uptrend.