The market
opened to the upside this morning, rising above 1557 before falling back to
1550. After a short-lived rebound, the market broke through yesterday’s 1545
low, and fell to 1538.57 with only one feeble attempt at moving higher. After
that, the market staged a pretty good rally, moving above 1550 once again. A
pullback followed, with the market turning higher into the close.
Yesterday I called for the market to open slightly
lower before moving up to 1558, with a test of the 1545 low to follow. I was
wrong about the lower opening, with the explanation coming shortly, but the
market then acted as expected.
As for the explanation, I will break down the
current wave from Friday’s 1563.62 high. The move from that point to 1555.74
formed Wave 1 of the current wave. The SPX moved to 1562.86 after that, which I
interpret as Wave 1 of an inverted corrective Wave 2 from 1563.62. The market
completed another 5 Wave sequence at 1557.29, which is Wave 1 of a sequence one
degree smaller than the 1563.62-1555.74 wave. The bounce to 1560.70 is where I
went wrong. Yesterday I interpreted that as Wave 1 of a second inverted
corrective Wave 2. This is a set-up I refer to as a nested inverted corrective
wave. It was under this assumption that I gave my forecast as I did. Today’s
action made it clear that the bounce to 1560.70 was the completion of Wave 2
for that sequence that completed today as
1562.86-1557.29-1560.70-1545.13-1558.73-1538.57. This sequence then completed Wave
2 of the inverted corrective wave from 1555.74.
The market should now be in Wave 3 of that
inverted corrective wave. From the low of 1538.57 I see wave 1, an inverted
corrective wave 2, wave 3, and what appears to be wave 4, which concluded
shortly before today’s close. T o complete the inverted corrective wave 2 from
1555.74, the market should move higher to 1554, pullback 1545, and then move
higher to 1557. The market would then need to complete waves 3, 4, and 5 to
complete the wave from 1563.62. I still look for 1535 to be the downside limit
of this correction. It is possible that we have seen the low of this wave. With
the low of 1538.57 being part of an inverted corrective wave, Wave 5 of the
sequence could very well terminate above that level.
This scenario also fits in well with a timing
model I have been developing. This timing model called for the end of this
corrective wave to terminate late Wednesday afternoon. If the market should
move higher at the open, and then fall to 1545 in the morning, the final move to
1557 mentioned above could occur in a couple of hours. With the FOMC concluding
its meeting tomorrow afternoon, there would be enough time to complete Waves 3,
4, and 5 to the downside. The FOMC statement could then provide the impetus for
the next move higher, or the final push lower if it has not already completed.
I have been a little long winded, so I will wrap
this up here. The market should move higher tomorrow morning, first to 1554,
and then 1557. This should be followed by a test of today’s 1538.57 low, which
should hold above 1535. That will then complete the wave from 1563.62, and the
inverted corrective wave from 1470.96, clearing the way for the market to move
higher, to above 1608.
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