As expected, the market continued to rally today after yesterday’s low of 1340.03. This still appears to be only a pause in the down move that started last week, a pause that may soon come to an end.
The market rallied from the opening bell, and completed a 5 wave sequence when it hit 1348.12. After a small drop, the SPX broke through that high, signaling a continuation of the rally. That rally continued into the afternoon, and completed another 5 wave sequence at 1353.08. Once again the market moved to a new high, indicating this rally still had further to go. The market continued to make new highs into the last hour before dropping a few points into the close to finish the day at 1352.63, up 9.27 points for the session.
As stated, the SPX completed two separate 5 wave sequences today, then moved higher both times to signal a further continuation of this very short term up trend. The next point we are watching is the 1355 level. Should the 1352.63 closing level hold, and the SPX moves to that level, another 5 wave sequence will be completed, at which point we may see the market turn lower once again. Only a move back above the high of that sequence would mean that the rally would continue. If we break through that 1352.63 low before hitting the 1355 level, our targets will need to be revised.
When the down move does continue, we are likely to see more sharp moves to the downside as we did on Tuesday. We would either be in a wave 3 to the downside, or in a wave 2 of an inverted corrective wave, which would be even more bearish for the market.
Very short term the correction from Tuesday’s lows has not been completed. We do not expect this to last much longer. Therefore we are short term bearish.
Medium term, we believe last week’s highs were the completion of a 5 wave sequence from the March 2009 lows. This would mean we are in the beginning stages of what could be a very significant correction.
Long term we believe the market is in an uptrend from those 2009 lows.
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