Sorry I haven’t updated here for a couple of days, my paying job was interfering with my fun job.
As of our last update, we believed we had started a major corrective wave from the 1422 high. It appears that Monday’s steep drop following the disappointing jobs report last Friday completed a 5 wave sequence from that high. 1404.62, 1392.92, and 1378.24 would be lows of that sequence; with 1378 being hit in the first half hour of Monday’s trading session. From there the market moved higher during the day, reaching 1387 before heading lower into the close. The move to 1387 had stops at 1383, 1382, 1386, and 1384 before reaching 1387, which formed a 5 wave sequence, with a model value of .9919, and pointed to another move lower.
That move came Tuesday, with the market opening lower, and continuing lower throughout the day. From 1387, the SPX completed a 5 wave sequence down to 1375, and then rallied slightly to 1376. Another drop to 1366, an uptick to 1367, and a final drop to 1357.38 formed a 5 wave sequence from 1387 with a model value of .9947.
The market then moved higher into the close, but we don’t think we have quite formed a 5 wave sequence from 1357. Given the current data, a move higher to 1364-1365 would complete that sequence.
Tuesday’s move below 1378 now means the market needs to complete a 5 wave sequence from 1422. 1378 now becomes wave 1 on that sequence. The rebound to 1387 would either be wave 2, or wave 1 of an inverted corrective sequence from 1378. The wave action over the next couple of days should give us the answer. If this ends up being a simple 5 wave sequence, with wave 3 at 1357, and wave 4 at 1364-1365, we would anticipate wave 5 to carry down to 1348-1339. Should this be a more complicated wave structure, we could move even lower.
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