The SPX opened slightly to the upside this
morning, chopping its way higher to nudge above Friday’s high. After hitting 1842.42 the index reversed direction
and dropped to 1835.01. From there the SPX moved higher once more until reaching
1842.87. Trading then became choppy as the index moved between that high and
1839.33.
As some of you may know, I have been counting last
month’s 1850.84 high as the completion of a 5 wave sequence from the October
2011 1074.77 low. I had been expecting a drop to 1679 before the next move
higher. The SPX fell short of that mark, and so I have been reviewing my charts
to try to understand why. During that review I noticed something interesting
when looking at the chart from the 1560.33 low. The recent 1737.92 low may
actually have completed an inverted corrective wave; a wave that I thought had
ended at 1646.47. From 1709.36 the SPX has completed 5 well defined waves,
1627.47-1729.86-1646.47-1850.84-1737.92, which forms a 5 wave sequence. And so it appears I was premature in calling
1850.84 the end of a sequence. Re-evaluating the entire structure from 1560.33 it
appears that the SPX completed Wave 1 at 1709.36, which was followed by an
inverted corrective Wave 2 that completed at 1737.92. This would mean that the
index would need to complete Waves 3, 4 and 5 to complete the sequence from
1560.33.
Looking at the structure from the Wave 2 low, or
1737.92, there is a strong possibility that Wave 3 completed at 1798.03, Wave 4
at 1791.83, with the SPX in the range to complete Wave 5. This wave could have
completed at 1842.87. It is also possible that 1842.87 is only the end of Wave
3. If that is the case the index should pull back at this point, and then make
one more move higher.
Since this market has been notorious for finding a
way to continue moving higher, I will remain cautious with this count until I
see some price action confirming it. But it seems that a pullback of some sort
is a strong possibility. I will work on some targets for both scenarios in the
coming days.
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