The market moved slightly lower at the outset of today’s trading, before moving higher, first to 1404, and then to 1405.95 after a small pullback. The SPX sold off from there, dropping below 1400, to 1398, before attempting to stage another rally. This rally fell just short of making it back to 1405, and another pullback took the market to 1402 near the close.
Yesterday I mentioned the 1405 level as important for today, and it turned out to be. The first rally to 1405.95 completed the 5 wave sequence from Wednesday’s 1396 low. Another 5 wave sequence completed as the market fell to 1398, and the rally back to 1404.69 also played out as a 5 wave sequence.
The market appears to be looking to stage a breakout in one direction or the other, but short term there are a few danger signs. Since the 1354.65 low last Thursday, the up sequences have been forming with waves of diminishing length, while the down sequences have displayed increasing wave lengths. This usually means the market will break out to the downside. If the market does break out to the downside, I would look for it to move down between 1390, and 1370. There is a cluster of support down to 1387, with support then moving to 1384, and 1376. Those would seem to be likely levels for the down move to terminate. A move to that area would likely mean a subsequent move to 1426 would complete a 5 wave sequence from 1267.
If the market breaks out to the upside, I still look for a move to between 1435, and 1475. That projection should narrow as the wave starts to complete.
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