A very interesting day for the market, gapping down at the open and falling to 1348, then a strong rally up to 1366, and a drop back to 1353 at the close. As of yesterday, we had identified a wave 2 high at 1365.88, a completed 5 wave sequence to 1356.94, a completed 5 wave sequence back up to 1364.64, and an incomplete 5 wave sequence back down. The gap open, and move to the downside completed that 5 wave sequence. We count from 1364.64, 1363.01 as wave 1, 1363.55 as wave 2, 1358.9 as wave 3, 1360.52 as wave 4, and 1348.89 as wave 5. This yields a model value of .9992.
From that low of 1348.89, the market experienced a fairly sharp rally, which unfolded as a 5 wave sequence to 1360.98, and after a very minor pullback, another 5 wave sequence which took the market up to 1365.66.
Yesterday we said we thought the market was beginning to form an inverted corrective wave from 1364.64, with a 5 wave sequence having formed, and a subsequent move below that. As we noted above, we now think the move from 1364.64 to 1348.89 unfolded in a 5 wave manner. What was forming was a semi-inverted corrective wave from 1356.94. We see 1364.64 as wave 1 of this sequence, with the fall to 1348.89 as wave 2. The sequence we described above were waves 3, 4, and 5 of the sequence. These waves yield a model value of .9982.
So as we stand now, we continue to see 1373.91 as wave 4 from 1415. This puts us in wave 5. Wave 1 of 5 bottomed at 1347.75. Wave 2 was a semi-inverted corrective wave that terminated at 1365.88. Wave 1, of 3, of 5, completed yesterday at 1356.94, and another semi-inverted corrective wave 2 ended today at 1365.66.
From 1365.66 the market completed a 5 wave sequence at 1356.97, with 1361.49, 1362.73, 1358.49, and 1360.93 being the stops in between. This gives a model value of .9975. After a brief rise, another 5 wave sequence was completed, finishing at 1352.82, with a model value of .9999.
This indicates to us that the move from 1365.66 has not yet completed, and we should see lower prices from here.
I tried to become bullish today. The reaction from this morning’s sell-off was pretty impressive. The market has failed to tank despite bad news, and it appears that an ascending triangle is forming. I even have a count that would 1343.13 the termination point of a 5 wave sequence from 1415. Despite all that, the counts still look bearish in the near term. The alternate count does not break down into sub-waves very well, and the market failed to take out our 1365.88 wave 2 high. Because of this we’ll keep our outlook the same. 1374 still is the point that we would turn short term bullish, although the 1366.88 level seems to be the important one.
We’ll try to expand on this a bit over the weekend. The market has been very difficult lately, but so far our counts have held, and we see no reason to change them.
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