Monday's Market 03/03/2014

The SPX suffered a gap down opening today, dropping to 1844 at the open. After a small bounce the index moved lower still, stopping right at the important 1842 support level. That support only held momentarily, as the SPX continued to lose ground, this time hitting the low of the day at 1834.44. An attempted recovery followed, taking the index first to 1846.98, and then 1848.54 before pulling back to 1840.43. From there the SPX moved slightly higher into the close.

Over the last several days I have described a few different paths that this market may take. Looking at the SPX from the 1737.92 low, I see a 5 wave sequence completed at 1858.71, followed by a pull back to 1840.19. After that the index formed another 5 wave sequence to Friday’s 1867.92 high. Friday afternoon the index completed a wave at 1847.67, and then rose to 1860.68. That rise looks to be Wave A on an inverted corrective wave that completed this morning at 1847.40, and was then followed by a completed wave at the low of 1834.44. So from the 1858.71 high the market has completed 5 waves as 1840.19-1867.92-1847.67-1847.40-1834.44. This satisfies my model for a semi-inverted corrective wave from the 1858.71 high.

The SPX has formed quite a few of these semi-inverted corrective waves lately. Although normally rare, these seem to form in periods of indecision, which is exactly what we have seen lately.  Assuming those is an inverted corrective wave, the scenario showing 1867.92 as a completed 5 wave sequence from the 1646.47 low can now be discounted. It still appears that there are two options in play. The first has 1858.71 as Wave 1 of 5 from 1560.33. This would be the more bullish of the two scenarios. The second option has the move from 1737.92 as Wave D of an ongoing inverted corrective wave from 1709.36. Again, the index would be in Wave 2, but would most likely complete lower than the first scenario.

Shorter term, with a semi-inverted corrective wave completed, I would expect the SPX to move higher, but there may be limited upside, with resistance at 1865 and then 1875. It is also possible, as happened with last week with the same type of wave, but at a lesser degree, that this is only the first wave of a larger corrective formation. Support remains at 1819.

Sunday 03/02/2014

On Friday I presented two scenarios for the SPX. The first involved the index moving back up to 1867-1870 to complete a 5 wave sequence from the 1737.92 low. The other had the SPX dropping to 1842 to complete an inverted corrective wave from the 1858.71 high. The first scenario would be followed by a pullback; the second would point to higher prices ahead.

Over the weekend I have noticed a third possibility. This one looks at the SPX from what I have labeled as Wave 2 at 1646.47. From that point the index completed a 5 wave sequence at 1850.84. A pullback to 1737.92 followed, also a 5 wave sequence. A third sequence completed at 1858.71. After dropping to 1840.19 the SPX completed another sequence at 1867.92, which I discussed this week. I had been looking at the move from 1737.92 as the start of a new wave, of which the move to 1850.84 was only the first wave. It is possible that the move from 1646.47 to 1867.92 is all part of wave 2. The sequence 1850.84-1737.92-1858.71-1840.19-1867.92 satisfies my model, and thus could mark the end of Wave 3. If this is the case, the targets for the next pullback would be 1819 and then 1749.

I would still be looking at 1867-1870 and 1842 as important areas of support/resistance. As I mentioned on Friday, the target range in both cases is very narrow. If the SPX breaks above 1867-1870, it would indicate that the index could move substantially higher. If the SPX moves below the previous 1840.19 low, I would think that the scenario that I laid out is in play.

Friday's Market 02/28/2014

I had thought that a break out in one direction or another would provide some clarity. The SPX provided a breakout, but unfortunately not much clarity. I am a little limited on time today, but I will post my current counts and try to give some narrative. I will try to address it in more detail over the weekend.

On Thursday the SPX completed a semi-inverted corrective wave from Tuesday’s 1847.60 high. That does not seem to complete the entire corrective wave however. The SPX broke higher this morning, indicating a further move to the upside as I explained yesterday. After completing the semi-inverted corrective wave, the SPX formed two additional waves before the close. This morning the index move slightly higher, and then pulled back, forming waves 3, and 4. Then the rally ramped up, and the index rose to 1860.69, completing a 5 wave sequence. An inverted corrective Wave 2 followed, and then Waves 3, 4, and 5 took the SPX to 1866.16. I see this as a single completed wave from the completion of the semi-inverted corrective wave yesterday. The index then pulled back in three waves. I believe this to be the completion of the very complex Wave 2 from Tuesday’s 1847.60 high. The index then moved slightly higher, which appears to complete Waves 3, 4, and 5, finishing a sequence from 1840.19. After that the SPX decided to throw a curveball. The index plummeted from the 1867.92 high back to 1848, and then tried to recover, bouncing back to 1860.68.

Again, I will try to address this in more detail, but for now there are a couple of scenarios. Looking at the count from the 1737.92 low, the SPX completed the first wave at 1858.71. The pullback to 1840.19 may have been Wave 2, today’s 1867.92 high Wave 3, and today’s drop to 1847.67 Wave 4. This would give a Wave 5 target of 1867-1870. This is a very narrow range, so it would need to land almost exactly at that level. Another option is that the SPX is forming an inverted corrective wave from the 1858.71 high. The drop to 1840.19 would be Wave A, today’s high Wave B, followed by the drop for Wave C. Wave D may have then completed at the bounce back 1860.68 high, giving a target for Wave E of 1842. Otherwise Wave D may still be in progress. Right now it looks like 1868 and 1842 are the points to watch.