Coming off the long holiday weekend, the market
began the week on a positive note, gapping higher at Tuesday’s open, and
quickly moving to 1674.21. That would prove to be the high for the week, as the
market just as quickly reversed course and headed down. Following a gap down
open on Wednesday, the SPX fell below Friday’s closing level to 1640.05, and
then rallied into Thursday. This rally carried to 1661.91, and then failed.
After a choppy open on Friday, and a small bounce, the SPX headed further south,
with the selling accelerating into the close, as the SPX closed the week at its
low of 1631.67.
By falling below the previous low of 1635.53, the
SPX signaled that it was still in a downtrend from the 1687.18 high. Since the
wave structure from that high has not yet completed, I believe this move has
further to go. The question now is whether this is the start of the move down
to the 1540 level, or whether this move lower will stop short of that, and
stage one more rally, possibly to one more new high.
My count from 1687.18 now shows the completion of
four waves, with Wave 4 terminating at 1661.91. A move below 1618 would
complete Wave 5, and set the stage for a rally off that low. While that rally
may lead to new highs, it is possible that it may fall short of that level. While
there is a cluster of support between 1618 and 1621, and would provide a good
stopping point for this move, it could end at a lower level. I would put the
lower limit of this move at 1595.
By my count, the SPX needs to put in a low, and
stage one more rally to finally complete the entire move from 1343.35. At that
point I would expect a deeper correction, down to the 1540 level.
Thank you.
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