From Monday’s 1359 low, we identified a 5 wave sequence terminating at 1368, and stated a move above that level would signal another sequence to the upside. Within the first few minutes of trading we were through that level, initialing hitting 1370, and after a small pullback, the market moved to 1371.
That level marked the end of another 5 wave sequence from the 1359 low, but the market was not done yet. After correcting to 1369, the SPX gathered steam and surged to 1375. The ensuing corrective wave was choppy, but the market eventually continued higher, hitting 1375.57, and completing another 5 wave sequence from 1359.
From that high, the market turned lower, spending most of the afternoon giving back almost all of the day’s gains. By the time the 5 wave sequence from 1375 was over, the market had fallen back to 1368.
The market moved higher towards the close, completing a 5 wave sequence at 1373, before dropping to 1371 into the close.
From here we looking at first the 1372.65 level to signal a move higher, and if we move above 1375.57, we could be looking at another run back towards 1400. We mentioned yesterday that it was interesting that the market held above the 1357 low, and that could mean that the corrective wave from that level was not yet over. The wave structure of this correction has been puzzling, with the market forming three identifiable waves from that level, but we could not identify a 5 wave structure. It now appears that the drop to 1359 may have been wave 5 of a semi inverted corrective wave from 1388. Should this turn out to be the case, we could expect first a 5 wave sequence carrying above 1388 for wave 3, a corrective wave 4, and then one more sequence higher to complete wave 5 of the corrective sequence from 1357. Should we break through 1357, we would assume the corrective sequence was over, and the move down from 1422 would continue.
We still believe that 1422 will hold for awhile, and that we still have a ways to go to the downside, but that may have to wait for the moment.
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