Friday's Market

In Thursday’s post we stated the afternoon’s low of 1398.82 marked the termination point of a corrective Wave 2, and that we should see the market move higher on Friday. We didn’t have to wait long for confirmation of that call, with the market gapping up at the open, and hitting 1405.82 in the first half hour. After that, however, the market turned lower, eventually dropping below yesterday’s close, before turning higher once again. The market made steady, if not spectacular, progress into the afternoon, and completed a 5 wave high from the 1398.82 low at 1405.88. The market then moved lower into the close, possibly completing 4 waves of a 5 wave sequence before closing at 1404.17. For the day the SPX was +1.57, or +0.11%.

It appears that the choppiness of Friday’s session may carry into Monday, at least at the outset. It does not appear that we have completed a 5 wave sequence from the 1405.88 high on Friday. A move back down to the 1400-1401 level would complete that sequence. That would complete Wave 4 on the 30 Minute chart. Given that 4 wave structure, Wave 5 would project to about 1407. As labeled, this should be Wave 5, but it does not satisfy our model’s criteria for a 5 wave sequence. A move down from that 1407 level to 1394-1401 would meet the criteria for a 5 wave inverted correction from the 1374.76 Wave 1 high. Waves 2, 3, 4, and 5 would then be re-labeled Waves 1, 2, 3, and 4. The ensuing move to 1394-1401 would then be Wave 5, and Wave 2. Once we reach that level, we can begin moving back up to our target range of 1414-1421 for Waves 3, 4, and 5. That will complete the 5 wave sequence from the 666 March 2009, and begin a 5 wave corrective sequence.

A lot of information I know. To summarize, we are looking for a move down at Monday’s opening to 1400-1401, a move back up to 1407, and then one final move down to 1394-1401. From there we look for a last move up for this rally to the 1414-1421 level.

We are already in the topping range for the 5 wave sequence from 666, and are only waiting for the last few minor waves to complete, so we urge caution.