Yesterday we said we did not believe 1397.68 would be the low of this down move, and set our short term target at 1393. Within minutes of today’s open, the SPX hit 1392.96. From there the market staged a short rally, moving up to 1396.95 before turning back down. The move unfolded in two 5 wave sequences, completing a 5 wave inverted corrective wave from the 1400.65 Wave 1 low. What we labeled as Wave 2 yesterday was in reality Wave 1 of that sequence. From 1396.95 the market turned lower, hitting a fresh low at 1389.22 to complete Wave 3. The market then staged another short rally to 1394.93 for Wave 4. One final session low at 1388.73 completed Wave 5, and Wave 5, setting the stage for a move higher. The market did move higher towards the close, hitting 1394.51 before fading into the close to finish the day at 1392.78.
Completing Wave 5 from the 1414 top now puts the market at a decision point. If the market is to move to new highs, this could be the starting point. We still feel the risk is greater to the downside. We would expect a more substantial move from the Wave 5 top. A breakdown below 1388.73 would now signal a continuation of the downtrend, with Wave 5 becoming the first wave in another 5 wave sequence. Our outlook would not change unless we break above 1414.
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