Over the weekend, I presented my case for an important bottom to be put in between SPX 1265 and 1270, with 1267 being the optimum target. The market opened higher today moving up to 1282.55. The buying did not last long, as the SPX quickly fell to 1271. The market rallied back to 1278, before moving lower again to the day’s low at 1266.74. A fairly strong rally ensued, pushing the market back to 1280. After a pullback to 1273, the market moved higher once again to 1279.
I believe the rally this morning was wave 4 of a 5 wave sequence from 1422. From there the market completed a 5 wave sequence to 1266.74, which I believe to be the end of a wave 5 from 1422. This last sequence took the same form as many other waves in this move from 1422, with a large 5 wave sequence becoming wave 1 of the next sequence, with waves 2, 3, 4, and 5 being significantly smaller. This generally appears as triangles, or wedges, and usually precipitates a strong move in the opposite direction. Several of these wave types have extended into several series of waves, with the reversal point being wave 4 of the last sequence. This means that it is possible for the same to happen here, with the next sequence moving slightly beyond today’s lows. The next likely most likely support would be 1258, and then 1252. The end of wave 4 in this case is 1282.55, and a move above that would indicate a rally is underway. I am not yet ready to say the correction is over, or that we will now move to new highs, but the rally could be significant.
Assuming 1267 was wave 5, the move to 1280 would be a wave 1. From that, I would project wave 3 of this sequence to reach 1285, or 1294.
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