The market kept to the same script we saw much of
last week; an opening gap down to start the day, followed by a slow drift
higher into the close. Although the patterns were similar, there was one key
difference worth noting. In all the instances last week, with the exception of
last Monday, the initial move to the downside did not hold as the low of the
day. Today it did. It is also worth noting that today’s action was identical to
last Monday’s trading action; a gap down to open, followed by a lower high, a
higher low, and then another lower high. That pattern led to a move lower into
today. Last Monday, however, the market was coming off overbought levels at the
60 minute time frame, while today the SPX hit oversold with a positive
divergence.
As I mentioned above, the SPX gapped down at the
open today, and took out the 1684.91 low along the way. The index rallied
almost immediately from that point, rebounding to 1691.49. After that, the SPX
moved lower, dipping to 1686.34, before rebounding into the close.
The move below 1685 took the
1604.57-1698.38-1676.03-1709.24-1684.91 inverted corrective wave scenario I had
talked about over the weekend out of play. Last Friday, the Dow made a new
short term low, while the SPX did not. That index seemed to complete an
inverted corrective wave with the last three waves forming a zig-zag from the
15655.75 high. Today, the SPX hit a new short term low, while the Dow did not.
It would appear that the SPX has completed an inverted corrective wave in the
same fashion. As I noted over the weekend, the move from the recent 1684.51
high has been difficult to follow. Over the weekend I treated 1698.38 as the
end of the wave from the 1604.57 low, but it now appears that wave carried all
the way to 1709.24. The inverted corrective wave can then be counted as
1604.57-1709.24-1684.91-1700.18-1683.35. This seems to be supported by the fact
that the move from 1709.24 to 1683.35 appears to have completed with 3 waves.
It is still possible for the market to move
further to the downside, with support at 1676, and then 1668. I still expect
the SPX to move higher, with a minimum target of 1776. A move above 1709 would
likely confirm that.
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