Well, if nothing else, today’s action was a bit easier to follow than yesterdays, and we believe it also clarified some of the wave action. It now appears that Wednesday’s wave action consisted mostly of an inverted corrective wave, and most of a wave 3. The 1390 high made in the last hour on Wednesday we would now consider the termination of an inverted corrective wave from Tuesday afternoon’s 1390 low. While the termination points we discussed yesterday remain the same, their relationship within the current wave structure has changed.
Yesterday we said we were closing at a wave 5 termination point from the 1390 high made earlier that afternoon. Today the market opened lower, than rose slightly before falling to 1382. This formed another 5 wave sequence from that 1390 high, and also took out the 1383 level we had pointed to as an important support level. We believe the 1382 was wave 3 of a sequence. From there the market staged a rally, rising to 1388, before heading towards new lows, which it made at 1379. From this 5 wave sequence low, the market staged one more pretty impressive rally, rising to 1390. From there it was downhill all the way, as the market rapidly fell to new intraday lows, finally bottoming out at 1370. This completed another 5 wave sequence from 1393, and wave 4 from the 1357 low. We still believe we need to make one more high in this sequence, which we now project to be at 1395. That should complete the 5 wave sequence from 1357, and set the stage for another move lower.
At the end of Thursday’s session, the market completed a 5 wave sequence up, in what we would consider to be the first move to 1395. The critical area to watch on the downside would be the 1365 low. Should we take out that low, it would appear the current corrective phase is over, and we will be headed back to the downside.
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