The SPX entered this week having come off a strong two day rally from 1313 to 1362. The rally continued at the open on Monday, as the index reached 1366.35 before pulling back to 1355.70. The market then continued the rally, and by midday Tuesday, the index stood at 1374.81. This completed a 5 wave sequence from 1313, and what I currently see as wave 3 from 1306.62.
From that point the market turned lower, dropping to 1370 Tuesday afternoon, and then falling to 1363 Thursday morning. Thursday afternoon saw the market trying to recover, making it back to 1374 before falling into the close. Friday the market opened sharply lower, and continued down from there, as the SPX fell to 1348.03. The market then rallied back to 1356 into Friday’s close.
I continue to see 1266.74 as the completion of a 5 wave sequence from 1422.38. This means the market is now forming a 5 wave sequence to the upside, which should eventually take the market back above 1422. From 1267, the market has thus far completed 2 waves of that 5 wave sequence. Wave 1 terminated at 1335.52, and wave 2 at 1306.62. Wave 3 from 1267 is now in progress, and my current count has wave 3 of 3 terminating at 1374.81. Wave 4 of 3 may have terminated on Friday at 1348.03.
Although I am still quite confident that the market is still working on a 5 wave sequence up, and that sequence should carry above 1422, the shorter term count is less clear. My current count would require the current correction to continue down to about 1318, but I view that as highly unlikely. It is more likely that some kind of complex corrective wave is forming, and the market is set to move higher from the 1348 low put in Friday.
My long term targets remain the same. I see 1393, or 1475-1480 as the termination point of wave 3 from 1267, with wave 5 completing at 1426, or 1497.
Even though the short term wave structure could resolve itself in several ways, it is still possible to follow the individual 5 wave sequences, giving us an idea of where the market is headed. Looking at the corrective sequence from 1374, I see a 5 wave sequence which contained waves of diminishing lengths, which ended at 1348, right at a support level generated by the up sequence from 1309 to 1374. The move up Friday afternoon carried above the wave 4 high of 1353.11. This would point to the market moving higher from 1348. I would expect this wave to carry first to 1378, and then possibly the 1393 level I have been target for some time.
Resistance should be at 1357-1358, 1367, and 1378. Support should be at 1349, 1333-1336, 1323-1326, and 1313-1315.
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