The market gapped lower this morning, confirming that an inverted corrective wave was in progress. The SPX dropped to 1380 before trying to move up. This was only a brief pause, however, as the market headed lower again, 1374. The market it made it back to 1377 before once again moving lower. It fell to 1370, rose to 1372, and then dropped again to 1368. From there the SPX tried a more sustained comeback, moving back to 1372 before making one last drop for the day to 1368. Once again 1372 was the extent of the move back up, as the market faded into the close to 1369.
Today’s move was an inverted corrective wave from 1388.71. This wave terminated at 1372, and completed a 5 wave sequence from 1403.39 when it hit the low today of 1367.96. Yesterday we indicated it was not yet clear which wave was inverting, but we now believe it was wave 2 of the 5 wave sequence from 1403.39 to 1367.96. This would appear to be wave 3 of the sequence from 1415.
Having completed a 5 wave sequence we think the market could rebound on Monday, and we are looking for a move up between 1378 and 1391. This would be wave 4, and we believe wave 5 of the sequence will bring the SPX down to the 1331 level. A move above 1393 would indicate that the 5 wave sequence from 1415 was completed, and perhaps a more extending correction, or more, was underway. A move below 1368 would probably mean wave 4 was over, and wave 5 was underway.
We continue to believe that the correction from the 1422 level is not over, and we expect to see lower prices from here. We continue to see indications that the 1331 level will be the next stopping point.
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