Thursday's Market 05/22/14

After some hesitation, the SPX broke through the 1892-1894 I have been mentioning, albeit without much conviction. As I talked about yesterday, this likely means a longer duration move to complete the wave from 1074.77. Due to that breakthrough, it appears there are still several waves to go, although it may remain choppy throughout. My minimum target remains at 1957.

The day started slightly higher, but the SPX quickly reversed and dropped to 1885.39. The index rose steadily from that point, hitting 1992.20 before pulling back to 1888.29. The SPX then turned once again, climbing steadily to 1895.96. The index then traded in a narrow range through the afternoon, hitting the high of the day at 1896.33 before slipping into the close.

It looks like the SPX completed a wave 1 from yesterday’s 1882.12 low at the open hitting 1888.80. The dip that followed was wave 2, and the rise to 1992.20 wave 3. The drop to 1888.29 was the wave 4, and the rally to 1895.96 completed wave 5. The SPX then moved lower in three waves. Looking at the SPX from Monday’s 1886.00 high, I had counted the move to 1882.12 as an inverted corrective wave. It now appears that this was only wave A of the corrective wave, with wave B completing at 1895.96. The three waves lower then completed waves C, D, and E, and Wave 2 from 1886.00. The slight move higher from that point unfolded in three waves, and looks to have completed a 5 wave sequence from 1862.36 as 1886.00-1893.27-1895.97-1895.11-1896.33.

This market may continue in a somewhat choppy fashion until it completes, but with several waves left to complete, the potential for a sustained move higher have increased. A lot will depend on the next several waves, and how they unfold. With a sequence completing today, a pullback from these levels would be expected. A move lower to 1875 would complete an inverted corrective wave from 1884.89, and Wave 2 from 1814.36. The waves that follow that should tell a lot about how high this market may go.

The SPX is now in that 1891-1902 support/resistance level I have previously mentioned. Next support would be 1875, with resistance at 1923-1928.

Wednesday's Market 05/21/14

The 1893-1894 resistance area looms large after today’s trading. A misinterpretation of the last pullback mentioned in yesterday’s analysis led to an incorrect conclusion as to what would unfold today. Instead of resuming the move lower, the SPX gapped up and barely looked back on its way to 1888.80.

It is easy to get caught up in the daily gyrations of the market, but important to keep the larger view in mind. Looking at the Weekly chart above, the SPX completed Wave 1 at 1219.80, Wave 2 at 1010.91, and Wave 3 at 1370.58, from the 666.79 low. From that point the index appears to be in an inverted corrective Wave 4, with Wave A completing at 1074.77. Wave B of 4 has been unfolding ever since, meaning I do not see the end of this bull market as imminent.

This Wave B is unfolding in a similar fashion, with Waves 1, 2, and 3 completing as 1292.66-1158.66-1422.38. Wave 4 was also an inverted corrective wave in this case, and completed at 1560.33 as 1266.74-1474.51-1343.35-1687.18-1560.33. The minimum target for Wave 5 was 1776, which of course the SPX has already surpassed. I am now looking for the lesser degree waves to complete a 5 wave sequence to mark the end of Wave 5, and Wave B of 4 from 666.79.

To re-iterate, I am looking for the SPX to now complete a 5 wave sequence to complete the entire sequence from 1074.77. I am counting this wave thus far as Wave 1 at 1709.36, an inverted corrective Wave 2 at 1646.47, Wave 3 at 1850.84, and Wave 4 at 1737.92. Wave 5 in this case gives a minimum target of 1957. Wave 5 to this point looks to have completed Wave 1 at 1882.35, and Waves A, B, and C of an inverted corrective Wave 2, with Wave C completing at 1814.36.

The wave from 1814.36 can be counted in two main ways at the moment. First, it can be series of nested waves, 1884.89-1850.61-1891.33-1862.36. It can also be looked at as Wave 1 at 1884.89, Wave 2 at 1850.61, Wave 3 at 1891.33, and an inverted corrective Wave 4 at 1862.36. This is the count that gives a Wave 5 target at the 1893-1894 level I mentioned at the beginning.

I won’t go through all the possibilities at this point, but I thought it important to give an overall view of my count. So that brings us to the wave that started at 1862.36. A five wave sequence ended at 1886.00, and appears to be a wave 1. I thought this was possibly the end of Wave D of an inverted corrective wave from 1884.89. A drop to 1852 would have completed this wave. Given yesterday’s action this seemed a likely scenario, as the SPX moved down in what appeared to be 3 waves. The bounce into yesterday’s close appeared to be a wave 4, with a wave 5 target of 1852. That seemed to fit pretty nicely, but the market usually has a mind of its own. The gap up open put this count in jeopardy, and by the middle of the day it was obvious that this was the incorrect interpretation.

The very small pullback into the close yesterday was part of an inverted corrective wave, but in the opposite direction. The bounce yesterday afternoon to 1875.89 now looks like a wave 1. That pullback, followed by the strong open this morning to 1886.06, and finally the pullback to 1879.87 look to complete an inverted corrective wave 2. The SPX then completed 3 waves up from that point to 1887.32 to complete waves 3, 4, and 5. This looks to be Wave D of what turned out to be an inverted corrective Wave 2 from 1886.00. The next pullback to 1882.12 completed this wave.

So now the SPX sits at a pretty important point. The resistance level I have been mentioning is very narrow. At this point the current wave from 1862.36 would have to complete between 1892.5 and 1894.5 to complete a larger wave from 1814.36. This would then imply a pullback back into the 1850 level. Since this resistance area is so narrow, it is easy to gap over, or push through. The very short term count for the last move higher today looks like a wave 1 followed by an inverted corrective wave, so it looks like we will start off higher tomorrow.

If the SPX gets above 1894.5, it is more likely that the move from 1862.36 is part of a larger inverted corrective wave 2 from 1814.36, and possibly a more bullish scenario. This would likely signal a “breakout “ from the current trading range, while the first scenario would likely mean continued choppiness into 1957. 

Tuesday's Market 05/20/2014

After reaching 1886.00 yesterday, the SPX started the day off to the downside. After just over 30 minutes of trading the index had fallen to 1877.47. From there the SPX started to rebound, bouncing back to 1882.91. After that it was downhill all the way, as the index dropped steadily throughout the afternoon, reaching a low of 1868.14 before moving higher. This took the SPX to 1875.89, but started giving back some of those gains into the close.

Looking at the wave structure from yesterday’s 1886.00 high, I count the drop to 1877.47 as a Wave A down. The move back up to 1882.91 was 5 waves, and can be counted as Wave B. The decline throughout the afternoon also looks like 5 waves which completed Wave C at 1869.05. I can also count 5 waves up to 1875.89 for the fourth wave, or Wave D. The move down from that high does not look like a completed sequence, but rather 1 wave down followed by an inverted corrective wave completing just before the close. This implies a further move to the downside.

The 4 completed waves, 1877.47-1882.91-1869.05-1875.89, give a fifth wave target near 1852, the same level I mentioned yesterday as a possible end point for this wave. If the SPX completes this wave at this level it would complete an inverted corrective wave from the April 22^nd 1884.89 high.

If my short term count is wrong, and the SPX moves higher from here resistance is still at 1893-1894, and then 1924-1925.