Today was not a whole lot different than what we have seen recently. After opening slightly to the downside, the market made a quick run, stopping shy of 1311. After falling back near break-even, the market staged another rally, making it above 1312. This would prove to be the high of the day, however, as the market quickly reversed course, and dropped below 1300. After rallying back to 1307, the SPX moved steadily lower through the afternoon, falling to 1295. After moving back up to 1300, another down move took the market to 1292 shortly before the close, before rising slightly into the close.
As we discussed yesterday, the market has been unfolding in a series of 5 wave sequences from 1365.88, where wave 5 becomes wave 1 of the next sequence, then completes waves 2-5, with that becoming wave 1 of the next sequence, and so on. The first completed sequence occurred at 1326, and a second one completed Friday morning at 1305. The action today completed yet another sequence at 1292.
The market is now within the target range for completing the 5 wave sequence from 1422, so the bottom could be the termination point of any one of these sequences. However, we still see significant downside potential, as this target range is rather large.
At this point all we can say is we are in a continuation of the downtrend from 1422. A rally could ensue at the completion of this sequence, or any future sequence, but a drop below the wave 5 level will mean that the downtrend is continuing.
We’ll have more to say at some point this weekend.
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