Yesterday I offered several scenarios for today’s market. The first involved a slight move higher into the low 1340’s followed by a move to the downside. This would have completed an inverted corrective wave 4 from 1374.81, and then wave 5. Another scenario had the market moving sharply lower if it broke 1336. This would be wave 5 down from 1374.81. My target was 1318, with support at 1323-1326, and then 1313-1315.
The market did open lower, dropping to 1331 in the opening minutes of trading. The market continued lower for the first hour and a half of trading, hitting a low of 1325.41. The market did find support at that level, and rallied for most of the remainder of the session. First the SPX moved up to 1334, and after a small pullback continued on to 1339. After another pullback, the market made a slightly higher high at 1339.93, and then fell back to 1334.41 near the close.
Today’s initial drop to 1325 broke down into a 5 wave sequence. The ensuing rally contained a 5 wave sequence to 1334, and another to 1339. I have been targeting 1325, and 1318 for some time, and today’s low of 1325 does offer a possible 5 wave sequence completed from 1375. However, looking more closely at the sub-waves of the sequences, it seems most likely that the move down today was wave 4 of an inverted corrective wave 4 from 1375. The rally after that were waves 1-3, and most likely 4, of wave 5 of that inverted corrective wave. If this turns out to be the case, wave 5 of that inverted corrective wave should terminate at 1341-1342, and then we should see wave 5 down from 1375. This wave should terminate at 1318-1325, with 1318 being preferable.
Thus, the perfect scenario for the conclusion of the 5 wave sequence from 1375 would be a move from here to 1341-1342, followed by another drop to 1318. Since the market rarely accommodates perfection, there are a couple of things I will be keeping my eye on. First, if the market rallies beyond 1342, I would assume the 5 wave sequence from 1375 ended at 1325. The uptrend should then continue. T o the downside, 1309, and 1306 are important levels. If the market moves below them, our count would be incorrect. As the market approached the 1375 high, I mentioned a possible count for the completion of a 5 wave sequence from 1267. I discounted this possibility because the market moved beyond the limits of my model. If the market moves below 1306, this may still be a possibility.
Support remains at 1323-1326, and then 1313-1315. My target remains at 1318. Resistance is at 1337, and then 1357-1358.
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