Friday's Market 08/03/12

With the market completing a 5 wave sequence from 1392 to 1355 yesterday, it appeared the correction was from that point was over, and that was confirmed at this morning’s opening. The market surged to 1385 in the opening minutes, and then continued higher, peaking above the previous 1392 uptrend high at 1394. From that point the market worked its way slightly lower, dipping below 1389, before recovering into the close.

With the confirmation of 1355 as the end of a corrective wave, it would be easy to say that the market is now headed to my next target of 1426, or 1497. However, nothing about this market over the past couple of months has been easy, or obvious. The market has continually done the opposite of what seems apparent. When the market peaked at 1392, I said the depth of this correction would determine the next target level. A correction that terminated above 1368 would point towards the 1497 target, while a move to 1350-1330 would target the 1426 level. The correction ended at 1355, which once again leaves the target somewhat in flux. The target using that 1355 bottom would be between 1435, and 1475. While a top somewhere between these levels would land within the margin of error for either1426, or 1497, it is also possible that something else is going on. It almost seems as if the market has not yet made up its mind on where it wants to go, and is perhaps buying time before making that decision.

The level at which today’s move ended is also interesting, coming as it did between the 1387-1397 resistance level. With the wave structure as it is, there is a possibility for a pullback ending above 1378, and then a high slightly above today’s high of 1394. This would complete another 5 wave sequence from the 1329 low, which then would be wave 3 from 1267. This would still terminate within my target for that wave, and would allow the market to then make a decision on the next move. That would be determined by the depth of the correction.

If the market can clear this 1387-1397 resistance zone, the market would most likely be in wave 5 from 1267. I will discuss this in more detail over the weekend.

Thursday's Market 08/02/12

The market opened sharply lower this morning, falling to 1361 in the first minutes of trading. The SPX staged a pretty strong rally off that low, almost making it back to 1374, but the rally ended there. Another steep drop followed, this time taking the market down to the low of the day at 1354.65. Unlike the earlier rally, this one started slowly, but then gained momentum throughout the afternoon, closing just off the rally high of 1365.86.

On Tuesday I mentioned that if the market broke below the that day’s low by more than a couple of points, the market was probably forming a complex corrective wave 2, that would eventually carry the market significantly lower. On Wednesday the market did fall below that level, and today the market moved significantly lower.

The market did end up forming a complex inverted corrective wave 2. After a dip at the open on Wednesday, the rally to 1385 formed wave 1, while Wednesday afternoon’s late rally from 1373 to 1381 was wave 3. Wave 4 took the market down to 1361 Thursday morning, with wave 5 being the rally off that low to 1374. That completed wave 2 from 1392, with waves 3, 4, and 5 forming on the way down to the 1354.65 low.

With a 5 wave sequence from 1392 now completed, this could be the end of the correction. The market then completed a 5 wave sequence off the 1355 low into the day’s close. I would expect the market to now continue higher. It is possible for the market to move lower, but I would expect only slightly lower lows than we saw today.

Support is at 1356, and then 1346. Resistance is at 1367, 1384, and then the cluster between 1387, and 1397.

Wednesday's Market 08/01/12

After a slightly lower opening, the market moved up to 1385, and then fell back to 1378. Another rally took the market to 1384, before a sharp afternoon drop took the market down to 13763. After that the market tried to recover, but only made it back to 1381 before falling back to 1375 near the close.

Yesterday I mentioned 1384 and 1376 as important levels. Except for brief moves above, and below, the market spent the majority of the day trading within those two levels.

The market appears to have completed waves 1, and 2 from 1391.74 this morning. From there, things are a bit more complicated, but it looks like it completed two waves of a second sequence, with wave 2 being a complex inverted corrective wave. I had also mentioned yesterday that a move below yesterday afternoon’s low would probably mean a continuation of the correction from 1392. Today’s move appears to be that continuation.

Support remains at 1367, and 1352. Resistance is 1382 and 1385, and 1393.