After hitting a high if 1422.38 Monday afternoon, the market pulled back towards the close. Monday’s action from that high turned out to be wave 1 at 1417.43, and wave 2 at 1419.18. Tuesday’s open was a continuation of that sequence, with the market dropping to 1414.98 before a slight rally back up to 1418.34. Again the market fell, this time reaching 1414.18. This completed a 5 wave sequence from the 1422.38 high with a model value of .9983.
From there the market tried to rally, hitting 1418.74 before turning down once again. When the market fell through the 1414 level, a new 5 wave sequence to the downside was confirmed. This time the market hit 1410.27 before finding some support. A short-lived rally ensued, pushing the market back to 1414.13 before dropping once more, this time to the day’s low of 1404.62. This completed Wave 5, giving a model value of .9986.
From this point the market moved higher into the close, completing a 5 wave sequence at with stops at 1406, 1405, 1408, 1407, and finally at 1411.13. This sequence yielded a model value of .9950. A pullback to 1407.71 formed the second wave of another sequence higher, confirmed when the market moved above the previous high of 1411.13, reaching 1412 and a fraction. A very slight pullback below 1412 and one final move up to 1413.38 completed this sequence, this time with a model value of .9997.
Having completed a 5 wave sequence from the low of 1404.62 could make this a wave 2 of another sequence lower from the 1422.38 high. A move above 1413 would mean a move to higher levels.
1404.62 is the first level to watch for another possible move to lower levels. The next level to watch would be the 1392 low. A move below that could signal we have finally broken out of this topping formation.
If we move above 1413, the next level to watch is of course the 1422 high. Should we break convincingly above that level, it could mean a breakout to the upside. At this point we still believe the odds favor a move lower from here.
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