Yesterday I said the decline from 1327 was setting up a bullish wave structure that usually indicated a strong rally.
The market opened higher today, reaching the 1318 resistance line. A pullback from that point took the market below the 1316 support level to 1314. Shortly afterwards the market once again rose above the 1318 resistance, and the rally was on. The initial move took the SPX to 1323, and after a brief pause, the market continued to just below 1327. After another small pullback, the market got above 1327, where it finally came under some selling pressure. The market fell to 1321, and then jumped to 1333. Another pullback to 1323 followed, and then the market turned higher into the close. It made it back to 1331 before dipping into the close.
The initial rise to 1318 this morning was wave 1 from 1310.51. This was followed by an inverted corrective wave 2, with the 5 wave sequence completing at 1327.44. That appears to be wave 1 of the next move higher. The drop to 1321 was wave 2, with the action from there a bit more complex. The unusual action from 1321is best seen as a wave 1, followed by an inverted corrective wave 2, and then wave 3. It is possible wave 4 of the sequence has been completed as well, giving a projection for wave 5 between 1344, and 1354. This is line with our wave 3 projection from 1310 of 1343. The market could experience a slight sell-off at that point, bringing the market back into the mid 1330’s, before completing wave 3 from 1306 at 1354.
It is getting a bit complex, I know, but basically I am looking for a move to 1343-1344, a slight pullback, and then another move to 1354. This would complete wave 3 of 3 from the 1267 low.
A couple words of caution. There seems to be a danger area right at 1335. If the market can only make it to 1335, and then fall below 1321, we may be putting in some sort of top. If we exceed 1336, that option is eliminated. Support remains at 1316-1318, and then 1297. Upside targets, once we clear 1336, are 1343, followed by 1354.
Thank you for your interest.
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