The SPX gapped higher at the open, hitting 1663,
and then 1666.15 after a small pullback. After reaching 1666, the index paused,
dropping 4.5 points before resuming the move higher. The SPX rose steadily
until late afternoon, rising to 1672.4, before spending the last part of the
day trading sideways, between that high and 1670.01.
On Friday I said that it appeared the SPX had completed
a 5 wave sequence at 1664.83, and another to the downside at 1654.45,
indicating another move higher was likely. With today’s move higher, that seems
to have been the correct interpretation. The move to 1666.15 this morning looks
to be a wave 1, which was followed by an inverted corrective wave 2, which
completed this afternoon at 1670.01. This would mean that SPX should make at
least one more move higher.
By way of review, I have been looking at two
possible scenarios for this wave. The first is that this is part of a complex
correction from 1687 that would go something like
1687.18-1560.33-1709.24-1627.47-1685?-1540? This scenario would require the
current wave to complete between 1680 and 1687. I erroneously stated on Friday
that the SPX would need to drop further than Friday afternoon’s 1654.45 low for
the current wave, as I have been counting it, to complete within that range. I
apologize for that, as this wave from 1627.47, as currently constructed, could complete
above 1683.
The second scenario has 1687.18 as a top, 1560.33
as a bottom, and a 5 wave sequence underway from that point that would go
1709.24-1627.47-1745-1680-1773. This had been the preferred sequence, as until
Friday it looked as though the wave from1627 would complete above 1687. However,
after I identified the inverted corrective wave on Friday, and the possibility
of the SPX completing this wave between 1680 and 1687, both scenarios are at
least equally likely, with perhaps a slight edge given to the first scenario.
There are a couple of reasons for this. First,
there is a good possibility that this wave will complete within the 1680-1687 range.
Second, if this wave does end there, the first support zone is setting up to be
in the 1645 area. That would seem to be a pretty severe drop if the SPX were
setting itself up for new highs. Also, many of the technicals are reaching
overbought levels again.
As I said on Friday, the battleground is shaping
up to be in the 1680-1687 range. If the SPX gets above 1687, I would be
inclined to think that this market will continue higher. If the index gets into
that 1683-1687 range, and then pulls back, it is likely that it is headed
lower, most likely below 1560.
Shorter term, I am looking for the SPX to make one
more move higher, to above 1683, and that should be followed by a pullback, as
it would complete a sequence from 1627. Resistance is at 1685, with support at
1669, 1651, and then 1621.
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