It was another very interesting day for the markets. It started with another gap opening to the downside, stopping right between the 1318, and 1316 support levels. After a slight bounce, the SPX made a temporary bottom at 1315.26. The market then rallied and neared 1327 before falling back to 1320. Another rally pushed the index to the day’s high, just over 1327.
Up until this point, the market was behaving pretty much as expected. I had been watching 2 wave sequences for my projections, one from 1306, and the second from 1315. The sequence from 1306 had completed 4 waves before today, with wave 4 terminating at 1315. My projection for wave 5 was above 1327. The second sequence was wave 5 of the first sequence, and I thought wave 1 had been completed Tuesday at 1324.31. This sequence had a projected wave 3 at 1327, and a wave 5 projection of 1329-1333. I thought today’s first move near 1327 was wave 3. I expected wave 4 to move back near 1318, and wave 5 to come in between 1329, and 1333. This would have completed both sequences. What I thought would be wave 4 came up a little short of expectations, and what should have been wave 5 only made it back to 1327. This does satisfy the main sequence from 1306, and I either misinterpreted wave 5, or it came up short of our target.
From the 1327 high, the market sold off sharply, completing a 5 wave sequence near 1316. It appears that became wave 1 of another sequence, which terminated at 1310.51. This wave has the characteristics I have mentioned before, with an extended wave 1, followed by a rapid, short. 2-3-4-5 sequence. As I have said before, with this type of wave, a move above wave 4 usually precipitates a sharp reversal. As you can see on the chart, the small rally to end the day moved above wave 4.
At this point nothing has changed to eliminate my original scenario of 1335 being wave 1 from 1267, 1335 to 1306 being the corrective wave 2, and now waves 1, and 2 of wave 3 of that sequence being completed. My target for wave 3 from 1306 is 1354. For now I will stay with this scenario.
Because of the inconsistent wave action today, it is, of course possible that the market will break below 1306. Should that happen, a move to the support levels below 1300 seems likely.
Resistance is still the 1316-1318 area, with support at 1297, and 1290.
Thank you for your interest.
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