The market gapped to the upside this morning, reaching 1353 in the first few minutes of trading. This opening move eliminated the two alternate scenarios I discussed yesterday, keeping my main count intact. After only a minor pullback from 1353, the SPX continued higher, moving to 1359, then 1360, and finally a strong move to 1363.46. After that strong move up however, the market quickly reversed course, dropping back near 1357 before finding support. The ensuing rally could only carry the market back to 1361.51, before moving back down to 1357. In the final minutes of trading, the SPX moved slightly off its lows.
The move today from my 1344 wave 4 low, unfolded in 5 waves, with wave 1 being the opening move to 1353. The second move of the day to 1358 was wave 3; with wave 5 subdividing into 5 waves, and terminating at 1363.46. This was very near our optimum wave 3 target of 1367. I was looking at three separate relationships all converging on that number, and today’s high satisfies my model in all respects.
It seems that the market has now completed a 5 wave sequence from 1307, and three waves thus far from 1267. From this point I was expecting a corrective sequence, and then wave 5 from 1267 to terminate near 1393. The move today from 1363 to 1357 breaks down into 5 waves. There is also support at 1358, and 1357, given the wave structure from 1307. If the corrective wave ends there, it now appears that wave 5 will carry above my original 1393 projection, and terminate between 1410, and 1414. This would complete the 5 wave sequence from 1267.
If the correction does not end here at 1357, things are a little less rosy. I mentioned support at 1358, and 1357, but there is then a large gap before the next support levels. The next cluster of support is between 1326, and 1323, and then between 1315, and 1313. While another move higher would still be in order, the wave 5 projection for this scenario would be between 1372, and 1381.
While there are other scenarios, these two seem the most likely. A move above today’s high of 1363 would spark another strong rally, moving the market above 1400 to the 1410-1414 level.
Conversely, a break below 1357 would result in what appears would be a rather significant sell-off into the 1320’s. This sell-off should hold above 1307, with wave 5 from 1267 terminating between 1372, and 1381.
Thank you for your interest.
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