It turned out to be quite an interesting day for the market, which created some very complex wave structures. Starting out to the downside, as expected since the market had not completed a wave sequence from Tuesday’s 1393 high, gapping down and hitting the day’s low at 1383 in the first several minutes. This did complete the 5 wave sequence from 1393.
From there the market traded in a tighter range, in what appears to be the formation of another 5 wave sequence from the 1393 high. Several of today’s waves looked a little odd, but seem to be correct based on the wave counts of the more minor waves, and the expected behavior from the 1357 low.
From Wednesday’s initial low of 1383, the market rallied, completing a 5 wave sequence at 1389.80. This was followed by another move down, bringing the market back down near the 1383 low. A second 5 wave sequence to the upside then unfolded, carrying the market back to 1388. After hitting that level the market turned lower for a third time, a five wave sequence which featured an inverted corrective wave 2, and once again the market found itself at the 1383 level. We believe this completed the second 5 wave sequence from the 1393 high.
From there the market showed some strength, rallying back to 1390, where it terminated a 5 wave sequence. However, from there the market gave up most of those gains going into the close, falling back to 1385.
At 1385 the SPX completed a 5 wave sequence, which we believe to be a wave 2 of a sequence from 1383. From here we expect the market to rise back up to 1400, where it would complete the 5 waves from the 1357 low. From there the market may turn lower once again.
As we said at the beginning, several of these waves appear to be not typical. We believe we are interpreting them correctly, but we would view a break of the 1383 level to signal another move to the downside. If we hold 1383, we should be on our way to 1400.
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