Tuesday's Market

We were expecting the market to move lower today, with Monday’s 1406 high marking the termination of a 5 wave sequence from 1357. Instead we got the complete opposite, with the market moving decidedly higher.

The SPX rose back to near 1400 in the opening minutes of trading, and then started moving lower. At 1396 it abruptly reversed course, and rose virtually uninterrupted until it reached 1415 at midday. That turned out to be the high of the day, moving steadily lower, closing near the move’s low of 1405.25.

This move appeared to have some conviction to it, but we have seen that same conviction, in both directions, ever since that 1357 low. One day the market seems almost certain to breakout in one direction or another, but ultimately failing to do so. This time things may be different of course, but we are not willing to join the bullish camp just yet. The market acted today like it wanted to break out to new highs, and some of our scenarios account for that, but until we actually break into new ground, our current scenario remains intact.

With our current count from 1357, 1415 still falls within our target range for wave 5. We would now label the 5 wave sequence from 1384.78 as, 1384.78-1393.32, 1393.32-1390.12, 1390.12-1404.64, 1404.64-1394.00, and 1394.00-1415.32. Wave 4 appears to have been a semi-inverted corrective wave. This sequence yields a model value of .9945.

The count from 1357.38 would be 1357.38-1388.13, 1388.13-1358.79, 1358.79-1390.81, 1390.81-1384.78, and 1384.78-1415.32, which yields a model value of .9981. This also fits our projections for waves 1 and 2 from the 1422 high. Given this, we still believe we can make new lows, even with Tuesday’s action.

Should we move to new high ground, a scenario involving an inverted, or semi-inverted corrective wave would come into play. Having completed a 5 wave sequence from 1422, and three 5 wave sequences from 1378(1340, 1422, and 1357), both of those scenarios are possible.

In the near term, we expect the market to move lower, possibly down to 1394, before moving back up to 1405. After that we will be watching breaks of the 1385, and 1357 levels to signal moves lower. Should we move above 1415, the market bias would be to the upside, possibly moving to much higher levels.