Following a virtually flat open, the SPX bounced slightly
to 1640.08 before drifting lower through the morning hours of Friday’s trading
session. BY mid-day the index had fallen to 1630.85 with only small bounces higher.
At that point the SPX bounced again to 1634 before making another move lower to
1628.43. That’s when things got interesting. The index rose sharply to 1636,
fell back to 1631, and then rose again to 1635.80. That move was short-lived,
as the SPX fell again to a new intra-day low at 1628.05, before rising quickly
in the last few minutes of trading to 1634.06.
Counting from Thursday’s 1646.30 high, the SPX
completed a 5 wave sequence at 1633.91. This is denoted by the yellow “C?”.
After a small bounce higher to 1636.42, the index then completed an extremely complex
5 wave sequence that terminated at 1628.05. This can be then counted as 3 waves
down from the 1646.30 high. Looking at the 15 minute chart from the 1627.47
low, I have been counting the move to 1646 as 3 waves higher,
1641.18-1630.88-1646.41. I have mentioned in the past a complex corrective wave
that I refer to as a semi-inverted corrective wave. This type of wave has very
specific properties, but is difficult to identify during its formation. If the
trend is higher, the first wave of this corrective wave is to the downside. The
second wave is to the upside, and carries above the previous high. The third
and fourth waves complete within the Wave 1 high and the Wave A low. The fifth
wave finishes below the third, but above the origin of Wave 1.
Looking at the entire move from 1627.47, the move
to 1641.18 can be labeled Wave 1. 1630.88 can then be considered Wave A, and
1646.41 Wave B. The first wave lower from 1646.41 completed at 1633.91, which
is within the 1630.88-1641.18 range, and the second wave, 1636.42, within that
same range. The last move, to 1628.05, completed below 1630.88, and above
1627.47. This sequence must also satisfy my model’s criteria for a completed
wave, which it does. It seems likely, at this point, that the move from 1627.47
to 1641.18 was a Wave 1, and the subsequent move to 1628.05 a complex corrective
Wave 2. These types of waves generally result in extremely powerful and swift
moves.
The SPX now could have, by my count, completed 5 waves
down from 1709, and near the 1621 support level. Considering that the type of
wave that may have completed Friday, the market may be ready to start a sustained
rally. While I am not ready to call this the end of this corrective phase, I
think it is becoming a real possibility.
A move below 1627.47 obviously invalidates this
scenario. Support remains at 1621. Resistance is at 1651, 1669, and 1685.
No comments:
Post a Comment