Tuesday's Market 09/30/2014

It was another up and down for the SPX today. This choppy action has been the norm for the better part of four days, and has been difficult to follow on the short term. I thought it best to focus on the longer term today, and outline the possibilities as they stand at the moment.

Looking at the Weekly chart, I identified 4 waves that completed from 1074.77 to 1560.33, with the SPX needing only to complete the 5^th wave to complete the sequence from 1074.77.

On the Daily chart I identified a complete 5 wave sequence from 1560.33 to the recent 2019.26 high. The completion of this wave at 2019.26 would complete the 5^th wave from 1074.77, and therefore I have been looking at that point as the termination of a 5 wave sequence from 1074.77. Unless the SPX moves above 2019.26 it appears the index is in the beginning stages of a correction of that sequence.

On the 60 Minute chart, the initial decline to 1978.63 looks to be a first wave a sequence lower. From that point, the SPX moved higher to 1999.79, lower to 1965.99, back up to 1986.37, back down to 1964.04, and then made one more move higher to 1985.17. Looking at this sequence gives 1978.63-1999.79-1965.99-1986.37-1964.04-1985.17. The points (1978.63, 1999.79), (1965.99, 1986.37), (1964.04, 1985.17) gives an R^2 value of .99756, meeting the parameters for a 5 wave sequence, and possibly the completion of an inverted corrective wave from 1978.63, or the second wave from the 2019.26 high. If this count is correct, I would expect a resumption of the decline from this point.

My concern with this count is the shorter term counts, which makes it difficult to be certain of this count. After the initial decline from 2019.26, I had somewhat expected a slightly different correction to form, namely a semi-inverted corrective wave, which is still a possibility. If it does occur now, it would actually contain another semi-inverted corrective wave within it. This would look something like this:

If this scenario does play out, the SPX should move up to 1989, pullback with the index holding above 1978.48, and then move above 1999.79, but falling short of new highs. The next few days should give us a good idea of which path the SPX is taking.

Monday's Market 09/29/2014

It was another interesting day, where obviously Friday’s rally did not continue as I had anticipated. Instead the SPX fell sharply at the open, dropping to 1964.04. From there the index rallied in somewhat choppy trading, cutting the bulk of its losses.

Although this wave did not play out completely as anticipated, I am still inclined to believe that this is a convoluted wave Thursday’s 1965.99 low that has yet to complete. My target for this wave is 1997. A move below 1976.76 would invalidate this count. I am also still looking at 2019.26 as the completion of the wave from the 1074.77 low. 

Friday's Market 09/26/2014

It was a fitting end to a rollercoaster week that saw the SPX sell-off Monday, Tuesday and into Wednesday, rally sharply into Wednesday’s close, and then plunge on Thursday. Having completed a 5 wave sequence from Wednesday’s 1999.79 high at the close on Thursday, it was likely that the index would bounce at the open. It did just that, moving higher at the start of trading to 1972.16. The morning was choppy, as the SPX then fell to 1969.16, rose to 1975.69, and then moved lower again in three waves to 1969.80-1974.15-1967.92. The first three moves can be seen as Waves 1, 2, and 3 of a 5 wave sequence higher, and the last three as Waves A, B, and C of an inverted corrective Wave 4. Wave D turned out to be the bulk of today’s rally, as it drove the index higher to 1986.37. That was followed by one more pullback to 1981.07 that   completed Wave E, and thus Wave 4. If correct this would mean a continuation of the rally on Monday, with a minimum Wave 5 target of 1990.

Where this Wave 5 concludes could provide some important clues as to the next larger move. The key price to watch is Wednesday’s 1999.79 high. If this wave terminates below that level, it is likely part of a complex corrective wave from Wednesday’s 1978.63 low. This could take several forms, and possibly conclude between 1999.79 and 2019.26. If current wave concludes above 1999.79, this may be the start of a larger move to new highs. I will try to elaborate on these scenarios over the weekend.