Yesterday we said we had completed waves 1 and 2 from the 1359 low, and that we should see a move higher. With the earnings news from Apple, that was a no-brainer. The market opened much higher, hitting 1390.81 in the first half hour. From there the market consolidated, moving lower to 1385 just before 1:00pm. From there the market moved to 1390, pulled back, hit a new intra-day high at 1391.01, pulled back again, and then hit the high of the day at 1391.37. The market spent the last hour trading in a narrow range from that high, down to 1388.
By our count, the action from Tuesday’s 1375.57 high was an inverted corrective wave 2 which terminated Wednesday at 1384.78. From there the market completed waves, 3, 4, and 5 at 1391.01, 1386.30, and 1391.37 respectively. This completed the 5 wave sequence from 1359 slightly above 1388.13 as we discussed might be the case in yesterday’s update. This leaves intact our count from the 1357.38 low as wave 1 terminating at 1388, a semi-inverted corrective wave 2 ending at 1358.79, and now wave 3 terminating at 1391.37.
If this count is correct, we can expect a move lower from here, with the market most likely moving below 1385, and then moving back above, 1391.37. This would complete the 5 wave sequence from 1357, and pave the way for the move down from 1422 to finally continue. Should the market fail to move below 1385, the projected wave 5 high would be above 1422, perhaps signaling the correction is over. At the moment we would expect wave 4 to bottom back near the 1360 level, which would project a high slightly above today’s 1391.37. This would keep the action nicely within the current trading range, and satisfy our model.
The current move could possibly extend slightly higher, so we would need a move back above 1422 to invalidate this count.
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