The SPX opened higher this morning, gapping up to
1738.69, and then continuing on to 1741.21 after a brief pullback. My count
from Tuesday’s 1695.93 low has been a bit messy, with it now looking like wave
1 from that low completed at 1721.75. An inverted corrective wave 2 was next,
and ended yesterday at 1725.93. Today’s higher open then completed wave 3. This
was followed by a pullback to 1735.74. From there, the SPX rose steadily to
complete wave 5. The index completed waves 1, 2, and 3 to the upside, which was
then followed by an inverted corrective wave 4. This completed at 1742.82. Wave
5 then carried the index to a new all-time high at 1745.31.
This appears to complete a sequence from the
1695.93 low, which in turn completes a sequence from the 1646.47 low. I have
been pointing to the 1745 level as a possible termination level for this wave,
and it appears to have done just that. I would now expect the SPX to move
lower, possibly down to 1680.
Looking at the longer term count, the SPX looks to
have completed Wave D of an inverted corrective wave 2 from the October 2011
high of 1292.66. A move to 1680 would complete that corrective wave, and then
be followed by waves 3, 4, and 5 to the upside.
Many have noted the continuing divergence between
the SPX and the Dow recently. I have also been analyzing the Dow charts in an
effort to account for the divergence. I have the two indices on the exact same
count, with one important difference. Both, by my count, are in, or have just
completed wave D of an inverted corrective wave. As I have discussed before,
these waves can resolve themselves in several forms. Wave D on the SPX has now
moved beyond Wave B. Thus I would expect Wave E to complete above the level of
Wave C, or 1646.47. Another form the last three waves of this corrective wave
can take is a zig-zag. It appears this is what is taking place on the Dow. Wave
D does not look like it will move beyond Wave B, and this means that Wave E should
complete lower than Wave C. In this scenario the Dow could make a new near term
low, falling below 14719.43, while the SPX should hold above its previous low
of 1646.47. It should make for an interesting market.
I will try to elaborate on all of the above over
the weekend.
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