Friday's Market 05/16/2014

The SPX worked slightly lower in the first few minutes of trading, dropping to 1866.99 before bouncing to 1871.77. That bounce was followed by another move lower to 1864.82. A slightly better rally followed, with the index moving up to 1873.04 before dipping back to 1868.14. An even better rally followed this dip, with the SPX hitting a high of 1878.28 before falling back into the close.

After completing a 5 wave sequence at 1872.49 after yesterday’s 1862.36 low, the SPX started the day off by completing three waves down from 1872.49. This can be counted as Waves A, B, and C of an inverted corrective wave. The rally off the 1864.82 occurred in 5 waves, and completed Wave D. Another 5 wave sequence lower to 1868.14 then completed Wave E, and Wave 2 from yesterday’s low. The rally from that low looks like Wave 1 at 1871.01, an inverted corrective Wave 2 at 1875.54, and Waves 3, 4, and 5 completing in quick succession at 1877.39-1877.23-1878.28.

This completes 3 waves from yesterday’s 1862.36 low. Wave 4 may also have completed with the slight pullback before the close. If so, this would give a Wave 5 target of around 1887. As I pointed out yesterday, there is a danger zone between 1893 and 1895. Completing a sequence just below that level could set up a gap above that resistance level, but that is getting too far ahead.

Yesterday’s 1862.36 low continues to be a critical level. A break below that level would likely lead to much lower prices.

Thursday's Market 05/15/2014

The SPX opened lower today, continuing the slide from yesterday afternoon.  The index worked its way below 1874 after the first half hour, and then chopped steadily lower until it bottomed at 1862.36 by mid-day. After shedding nearly 40 points in less than three days, the SPX tried to recover through the afternoon, gaining ten points from the low near the close.

From Tuesday’s all time high of 1902.17, the decline had been straight forward. The SPX first completed a 5 wave sequence yesterday morning at 1891.46. The index then completed an inverted corrective wave just before the close yesterday at 1888.87. Today the index followed that inverted corrective second wave with a strong move to the downside that ended at 1862.36. With three waves completed from the high, the expectation would be for a slight move higher, followed by another move to the downside to complete the fifth wave. It does appear that the SPX completed a 5 wave sequence from the low to 1872.49. A 5^th wave down from this point would give a target of below 1837.

This, however, may not play out as outlined above. Looking at the SPX from the 1891.33 high, I counted a 5 wave sequence that ended at 1867.02. The ensuing run-up to 1902.17 also completed in 5 waves. These two waves combined with the 3 waves down from 1802.17 gives us the sequence 1891.33-1867.02-1902.17-1891.46-1888.87-1862.36, which works as a semi-inverted corrective wave from 1891.33. The three points, (1891.33, 1867.02), (1902.17, 1891.46), and (1888.87, 1862.36) have a correlation of .9994. This would indicate that the SPX should now move higher, with a first target around 1909. This fits with my longer term count that the SPX is in Wave 5 from the 1560.33 low, with a target above 1957, which will in turn complete a 5 wave sequence from the 1074.77 low.

This market has been extremely choppy and complex from that 1560.33 low, with a multitude of possible ways this thing could end. This choppiness could continue for awhile, creating maximum confusion before an eventual correction. For some time every move lower has been accompanied by the doom and gloom faction calling for a market crash, while every move higher has heard calls of SPX 2200 and higher. Both are possibilities, but for me the fact that every market move elicits such diverse reaction lends credence to the continued choppiness scenario. For the moment it is best to look at this market wave by wave, while continuing to look at 1957 as the minimum upside target. Until some confirmation to the contrary changes that, I will use that as my primary scenario, and try to give points where alternate scenarios may complete.

Given today’s set-up, I am looking for a move higher, to near 1909. If the SPX drops below today’s low of 1862.36, the SPX could be headed below 1837. If the index does move higher, there is a danger area between 1893 and 1895 that could trigger another pullback similar to the one we have seen the last few days.

Thursday's Market 05/08/2014

The SPX opened slightly lower this morning, dipping to 1874.55 in the first few minutes. Following that dip the index continued the rally off yesterday’s low. The SPX ran up to 1887, fell back to 1883, and then moved higher to 1889. This has been a pretty impressive rally, with the SPX moving up 29 points from yesterdays low. After hitting 1889 the index started to pull back. The SPX moved steadily lower throughout the afternoon, dropping to 1870.05 before bouncing into the close.

This morning’s run up was unexpected form my point of view, but may actually turn out to be more bearish than if the decline had continued this morning. After reviewing my charts, this appears to be a semi-inverted corrective wave from the 1880.58 low. This means today’s high was the completion of the second wave from the 1891.33 high. The decline from today’s high looks to be a 5 wave sequence, and possibly the third wave from 1891. If the bounce into the close was the fourth wave, the fifth wave would now project to the 1775 support level.

Resistance is still between 1892 and 1902, and the 1923.