Wednesday's Market 11/20/2013

The SPX gapped higher at the open, hit 1791.83, and then turned lower.  After closing that opening gap, the index turned higher, moving to 1795.73, slightly higher than yesterday’s high. I thought this would confirm a continuation of the up move, but I turned out to be wrong. From that high, the SPX formed a 5 wave sequence lower to 1789.21. Things then turned choppy, but set up the downside breakout to come. After that initial sequence lower, the SPX set up a nested inverted corrective wave. An inverted corrective wave is a corrective wave in which the second and fourth waves, generally corrective waves, are more powerful than the usual first, third, and fifth normally impulsive waves. The result is generally a corrective wave that completes beyond the end of the previous impulse wave.

After dropping from 1795.73 to 1789.21, the index formed three waves higher, which were waves A, B, and C, of the first inverted corrective wave. This was followed by another wave 1 to the downside, and another A, B, C higher. Wave D of this second inverted corrective wave broke out of the narrow trading range, and then bounced to 1791.50 to complete the corrective wave. The SPX then saw waves 3, 4, and 5 which took the index sharply lower. This then completed wave D of the second inverted corrective wave, and again was followed by waves 3, 4, and 5, taking the index sharply lower once again, all the way down to 1777.23.

From 1795.73, a 5 wave sequence was completed at 1777.23. I had thought an inverted corrective wave from 1773.44 had completed yesterday, but my count for this wave seems to be mistaken. I would now say that today’s low is a better choice for the completion of this wave, with it forming 1760.64-1801.34-1784.72-1795.73-1777.23.

My longer term outlook remains unchanged. I am still looking for the index to move higher, with a minimum target of 1828.