Tuesday, February 4, 2014

Tuesday's Market 02/04/2014

In the wake of yesterday’s market rout, I was expecting a move higher today, and that move started from the opening bell. After quickly running up over nine points at the open, the SPX then settled into a slightly upwardly biased choppy range for the next two hours. The index pulled back to 1745, and then rallied again to 1754. Another pullback took the SPX to 1748, at which point it rallied once more to 1753, and was followed by another pullback to 1748. A more prolonged rally took the SPX to the high of the day at 1758.73 by early afternoon. The choppiness then returned, as the index bounced between 1750 and 1757 into the close.


From yesterday’s 1739.66 low, it looks like a Wave 1 higher occurred at 1752.19, and was followed by an inverted corrective Wave 2 that completed at 1747.84. A five wave sequence then looks to have completed at 1758.73 which may be a Wave 3, with a 5 wave sequence lower then completing at 1749.58.


I have been looking for a move from the 1739.66 low to a minimum of 1762, with an ideal target of 1773. This would complete an inverted corrective wave, and would be followed by another move lower to 1679. That remains my preferred count, but some red flags were raised today. First, the SPX failed to reach the 1762 threshold. Second, given the four waves completed from the low, Wave 5 would project to complete below 1762. While this could simply mean that this bounce will continue a bit longer, it could also suggest that there is something else going on. An alternate count puts the SPX still in Wave D of 2 from the 1850.84 high, which means the next leg down could start from this point.


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