Wednesday's Market 03/19/2014

The SPX opened slightly higher this morning, but quickly reversed and dropped the 1870.52 low I had looked at as completing an inverted corrective wave from Monday’s 1862.30 high. This negated that scenario, but did complete the fourth wave from 1856.31, or the second wave from 1839.57. From there the SPX rose to 1874.14, to complete the fifth wave. The index then traded in a narrow range for most of the afternoon, first dropping to 1870.51 before rising again to 1873.75. The quiet trading day ended there, as the FED announcement was not well received. The SPX dropped to 1867, rebounded to 1871.29, and then dropped further to 1863. Another bounce to 1871 failed, and the index fell 1850 before staging another comeback, which took the index to 1864 shortly before the close.

Looking at the SPX from this morning’s 1874.14 high, the drop to 1870.51 can be looked at as a wave 1. The reaction to 1873.75 is the second wave, which is most likely the first wave of an inverted corrective wave. From there the index dropped in three waves, 1867.01-1871.29-1863.27. From 1863.27 the SPX rose to 1870.81, forming Wave A of an inverted corrective Wave 4. Wave B unfolded in a 5 wave sequence down to 1850.35. Three waves higher, 1858.80-1856.89-1864.07, completed Waves C, D, and E, and Wave 4 from 1873.75. Given this count, Wave 5 of the sequence should complete between 1856 and 1846. From there a rebound would be expected for Wave B of 2 from 1874.14.

With the SPX completing today’s wave below 1874.40, the count I have been from the 1882.35 high remains intact. This count has the drop to 1854.38 as a Wave 1, which was then followed by Waves A, B, and C of an inverted corrective wave. It now looks like the drop to 1839.57 was a wave 1 of a lesser degree, which was followed by Waves A, B, and C of an inverted corrective wave 2. This count makes it likely that the SPX is in a complex corrective wave from 1709.36, which has a target of 1758.

Tuesday's Market 03/18/2014

It was another higher open for the SPX this morning, having come off the inverted corrective wave I identified yesterday. The index rose to 1867.36 before taking a slight pause, and then proceeded to 1872.06. This completed a 5 wave sequence from 1856.31. After falling to 1867.10, the SPX chopped its way higher to the high of the day at 1873.76. This completed a 5 wave sequence from 1867.36. The index then made 5 waves lower into the close, completing that sequence at 1870.52.

Looking at this wave from the 1839.57 low, the SPX completed a sequence at 1862.30. From there an inverted corrective wave to 1856.31 followed. The index then completed another sequence at 1872.06 and another at 1873.76. I mentioned yesterday that a more complex corrective wave from the 1862.30 high could be forming, and it appears that is the case. I count an in inverted corrective wave from that high as 1856.31-1872.06-1867.10-1873.76-1870.52. If that is the case, the SPX should continue higher from these levels.

It does appear that the SPX is headed for new highs, but I still remain somewhat cautious. The wave structure from 1839.57 that I outlined above is bullish, but I will take this one step at a time. Yesterday I mentioned the 1874.40 level as being significant, and that is still the case. I will also mention one additional level that may prove important, and that is 1877-1880. A move into that level, followed by a pullback, could be a danger signal. Again I would look at the 60 Minute MACD(13,34) for an indication of the end of this wave. A negative crossover from that level could mean this market has further to go on the downside. This should prove to be an interesting day.

Monday's Market 03/17/2014

The SPX opened higher this morning, bouncing sharply off Friday’s 1839.57 low, and reaching the high of the day of 1862.30 within the first hour of trading. I had mentioned 1861 as a level that might determine whether this bounce would be just that, a bounce, or the start of a move to new highs. I had thought that this would be a small correction that would lead to the next move down, but with the index moving above 1861 the odds now favor the start of a new move higher.

The simplest count for today’s SPX action is a Wave 1 to 1862.30, followed by an inverted corrective wave as 1854.61-1857.96-1853.17-1861.15-1856.31. This is supported by the oversold readings on the RSI(5) for Waves A, C, and E. I would have expected the MACD(13,34) to cross the zero line at Wave E, but it fell just short of that level. This may indicate that this is only the start of a more complex corrective wave, but at the moment this would qualify as a Wave 2.

I am still not completely convinced that the SPX is headed to new highs. There are still several possibilities that would result in the index moving lower, so I will remain cautious at the moment. I would first like to see a move above 1874.40. This was the start of Wave D of the inverted corrective wave I was looking for, and until that level is surpassed it is still possible that the SPX is still in Wave D. The 60 Minute MACD(13,34) might be a good indicator to watch for now. A negative crossover just above the zero line before the SPX gets above 1874.40 could be a bearish signal.