Tuesday's Market 09/25/12

 

The market opened higher today, completing a higher degree 5 wave sequence from 1452.06 at 1462.80, and yet another higher degree sequence at 1463.24. This turned out to be the high of the day, as the market went into selling mode from this point. By early afternoon, the market had fallen below yesterday’s close, and after a short rebound, continued the rather steep decline. A 5 wave sequence from the high was completed at 1450.23, and another higher degree sequence completed at the day’s low of 1441.65.

 

The move higher completed in a sequence of diminishing wave length sequences, which usually precedes a precipitous move in the opposite direction. That proved to be the case as the market moved sharply lower, interestingly enough in another series of diminishing wave length sequences. This may presage a sharp move higher from this point.

The early move higher was expected, but I had not anticipated the sharp move lower that followed. When the market moved below the short term 1449.98 low, my interpretation of an inverted corrective wave 2 playing out from 1438.74 was no longer valid. The most likely scenario at this point is that wave 2 completed at 1428.98, following the 1438.74 high. From there, a 5 wave sequence completed at 1474.51 and another at 1441.65. This could be waves 1, and 2 of the next sequence higher.1428.98 now becomes the critical level. If the market breaks below that, this correction could move longer lived.

 

Short term support is now at 1426. A move above 1448.05 would most likely mean the market is headed higher once again, possibly towards 1497.