Thursday's Market

The market opened higher today, moving above 1322, and completing wave 3 from yesterday, before pulling back. This took the market below 1316, where it reversed course, and moved higher to 1324.14. This completed the 5 wave sequence which began yesterday at 1300. Once again this kept the market below 1325, which we think is a critical level.

Much of the rest of the day was spent moving lower, which at its lowest point, 1310.50, was right at the 1310-1307 resistance level we mentioned yesterday. This wave turned out to be quite complex, whose main feature was an inverted corrective wave from 1319.95. The 5 wave termination point from 1324 turned out to be not the lowest point of the wave, but 1311.64.

From there things became more interesting. The market moved sharply higher, rising over 8 points in fifteen minutes. After a small pullback, this latest rally continued into the close, lifting the market over 1320.

This completed a 5 wave sequence from 1312. From the 1291 low, we have completed five sequences of 5 waves. 1291 to 1328, 1328 to 1296, 1296 to 1324, 1324 to 1311, and 1311 to 1320. With each successive wave terminating within the other, this is setting up to be a powerful move in whichever direction it breaks out. This is taking on the appearance of another double inverted corrective wave, such as the one we have been discussing for the past several days. This should be of a larger degree than the one we saw on Tuesday into Wednesday, and will move the market to greater extent. With the wave structure such as it is, the market could move in either direction, and exhibit the double inverted corrective wave characteristics.

With today’s late move higher, it would appear that this formation will eventually resolve itself with a move to the upside. We are not totally on board with the bullish argument. With the market having been severely oversold recently, it has thus far failed to create the “buying mania” many have envisioned. Some of that oversold pressure has now been alleviated, and the question becomes whether those technical measures can still propel the market higher.

Whichever way the market wants to move, it should happen soon, as the waves are becoming increasingly smaller. We believe the market closed today by completing a 5 wave sequence higher, so we would expect a move lower at the open. We see support near 1315. If that level breaks, a move below 1311.64 would mean we have begun another move lower. From there, 1300, 1296, and 1292 are the levels to watch.

 If the market moves higher, a break above 1325 would signal a breakout to the upside.