Friday's Market 08/25/12

The market opened lower today, spiking below 1399, before recovering slightly to 1400. After that the market drifted slightly lower, bottoming at 1398.04. The market then rallied off that low, initially to 1401, and eventually carrying the market back near 1410 by late morning. After a small pullback to 1407, the rally continued. A move above 1412 was followed by a pullback to 1409, and then a final push to 1413. At that point the market fell rather quickly to 1410, before moving higher into the close.

 

Yesterday I mentioned the possibility of the market moving slightly lower this morning, but contended that it should hold above 1395. From there I expected the market to rally. The market completed a 5 wave sequence this morning from the 1426 high. Wave 1 of this sequence completed yesterday, with the small rebound into Thursday’s close serving as wave 2. The spike lower this morning was wave 3, the slight rebound wave 4, and the final drift lower to 1398 completed wave 5, holding above the 1395 level I had mentioned.

The rally off that low began with a 5 wave sequence completing at 1410. This wave featured a series of expanding wavelengths, indicating a further move higher. After a small pullback this rally continued, forming another 5 wave sequence that completed at 1413. This last series of waves were decreasing in length, indicating either the end of the move, or at the very least, a loss of momentum that will result in the end of the move coming soon.

 

Today’s low most likely completed wave 4 from 1267, now putting us in wave 5. With this wave in the target zone for wave 5, and the aforementioned decreasing wavelengths, makes it very likely that the move from 1267has completed. A move below 1395 should confirm this, with a further correction most probable. I have been operating under the assumption that this is wave 3 from the 667 low, but the fact that the current move rose above the previous 1422 high, and yet the 5 wave sequence completed below that high, buts that assumption in doubt. One possible scenario is that the move down to 1267, and then back up to 1426, was waves 1, and 2, of a complex correction from the previous 1422 high. I will cover this possibility, and the others, over the weekend.

 

 

 

Thursday's Market 08/23/12

The market opened lower today, falling quickly to 1407. After a slight rebound from that level, the market headed even lower, and reached 1404 before trying to rally. That rally only carried back to 1409, and then the selling resumed. This move took the market to 1400.50, and was followed by another rebound to 1405. One final move lower into the close, took the market back down to 1401.57.

 

Today’s initial move lower to 1403.90, completed a 5 wave sequence from Wednesday afternoon’s 1416 high. After the rebound to 1409, the market completed another 5 wave sequence to 1401.57.

 

Today’s waves also seem to complete a 5 wave sequence from the 1426.68 high, while staying above the 1395 minimum target, which means this is most likely still wave 4 from 1267. The market could still move slightly lower, completing another 5 wave sequence while staying above 1395, but I think the market is now poised for wave 5 up over the next several days. This could carry above the 1426.68 uptrend high.

 

 If the SPX breaks below 1395, we could be headed significantly lower. Support is at 1387-1397, 1376, and 1367. Resistance is at 1426.

Wednesday's Market 08/22/12

The market opened slightly lower, and soon the selling accelerated bringing the SPX down to 1408.51 after a few minutes of trading. The market then moved higher, rallying back to 1413. The market sold off again, this time falling to 1408. After another rally to 1410, the market fell to the low of the day at 1406.78. The market then rallied in stair step fashion through the afternoon, first to 1408, then 1410, followed by 1413, until reaching the high of the day at 1416. The market then fell slightly, back to 1413 near the close.

 

Yesterday the market completed a 5 wave sequence to the downside after hitting a new uptrend high at 1426.68. This morning the market completed another sequence from 1427, forming a contracting wavelength sequence. As I have noted in the past, this is generally a signal of a strong move in the opposite direction, and this was no exception, with the market rallying just less than ten points from the low. This rally unfolded in a 5 wave sequence, which terminated at 1416.12.

 

Today’s low of 1406.78 seems to complete wave 5 of the inverted corrective wave 4 from 1267. We should now be in wave 5 from that low. The rally to 1416 satisfies my model for wave 5, which fits the failed wave 5 scenario I mentioned yesterday. The upside limit for this wave could still carry the SPX higher from here, most probably taking out the 1426 uptrend high, and possibly higher. I do not see this wave making it up to my next target level of 1497.

 

Once wave 5 has completed, we can start looking at the downside potential for the corrective wave. As I see this as the completion of wave 3 from 1267, there are still possibilities for the market to continue higher. Wave 2 of this sequence was not a complex corrective wave, so the odds favor wave 4 being complex. This could mean an inverted corrective wave, which would only require a minor correction. I will discuss this further as the wave develops.