A 5 wave sequence was completed today as the market opened higher, hitting 1335.52, right in the middle of the 1333-1337 target range. After that strong opening move, and the completion of the sequence, the market quickly reversed course and started selling off. The market completed a 5 wave sequence to the downside at 1320, and tried to rally. However, the market only made it to 1326 before heading back down.
Given the first 5 wave sequence down, 1318, and 1312 were the downside targets for a possible wave 3 from the 1336 high. Both of these levels were right at resistance levels identified over the weekend. The market hit 1318, bounced, dropped to 1317, bounced again, then broke through that support level, and fell to 1312.70. After another short rebound to the 1316 resistance level, the market completed 5 waves from 1336 at 1307.73.
With a 5 wave sequence completed from 1336, it is possible that this corrective phase is over, and the push higher will continue. At this point, however, it would seem that the market still needs to work lower before resuming that uptrend. With the break of the 1316 support, the next support is near 1290. The same thing can be seen on the hourly chart, with support at 1298. It seems most likely that the market will move down to those support levels before moving higher.
Assuming today’s 1308 low was wave 1; wave 3 would project to either 1306, or 1300-1294. If wave 3 occurs at 1306, wave 5 would project at slightly below that. If this scenario plays out, the correction should end at that point. If wave 3 occurs below 1300, wave 5 should terminate near the 1298, or 1290 support levels.
If the market is able to move back above the 1316-1318 resistance levels, the rally could very well resume at that point. Right now it is difficult to say, for the short term, which way the market will go. Longer term, the bias is still to the upside.
Thank you for your interest.
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