The SPX hit another all time high today, something
that has become commonplace these days. The market has once again entered a
stage where it seems that it will never go down, a stage it has been in several
times during this bull run. The market will, of course, go down, but it has
become a dangerous game to try to pinpoint when. I have underestimated this
latest rise in the market, with my 1745 target having been taken out several
days ago, with very little pressure to the downside. I was early in calling for
a possible downward move, as it has become apparent that 1745 was not the
completion of this sequence from 1646.47.
This sequence is reminiscent of the rise from 1627
to 1730. Both contained choppy upside moves, with very few pullbacks of any
consequence. Looking at the end of that move, from the 1704.95 high on
September 16th, the action is quite similar to the action from the
recent 1759.33 high. Both highs were followed by a small pullback, followed by
new highs which formed in a very narrow upward biased channel. The previous
move was then followed by another small pullback, and then a sharp move to new
highs that proved to be the precursor of a nearly 85 point pullback. This is
noteworthy as both have occurred leading into an FOMC meeting.
Looking at this sequence from the 1646.47 low, the
most predominant feature is the inverted corrective wave which formed between
1703.44 and 1740.50. Those have been the only significant pullbacks of this
rally. The most likely scenario is that the move from 1646.47 to 1703.44 was
wave 1 of this sequence. The inverted corrective wave would then be wave 2.
From that low, it is possible that wave 3 ended at 1758.46, wave 4 was the
small pullback to 1752.45, and the SPX is now in wave 5 of that sequence. The
target for this scenario would be between current levels and 1773. It is also
possible that the move from 1740.50 to current levels is wave 3, which would be
followed by a pullback, and then one more move higher. This would be similar to
the scenario I described above.
For now, a move below 1740.50 would most likely
signal an end of this sequence. Until then it is difficult to fight the
momentum.
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