The SPX suffered a gap down opening today,
dropping to 1844 at the open. After a small bounce the index moved lower still,
stopping right at the important 1842 support level. That support only held
momentarily, as the SPX continued to lose ground, this time hitting the low of
the day at 1834.44. An attempted recovery followed, taking the index first to
1846.98, and then 1848.54 before pulling back to 1840.43. From there the SPX
moved slightly higher into the close.
Over the last several days I have described a few
different paths that this market may take. Looking at the SPX from the 1737.92
low, I see a 5 wave sequence completed at 1858.71, followed by a pull back to
1840.19. After that the index formed another 5 wave sequence to Friday’s
1867.92 high. Friday afternoon the index completed a wave at 1847.67, and then
rose to 1860.68. That rise looks to be Wave A on an inverted corrective wave
that completed this morning at 1847.40, and was then followed by a completed
wave at the low of 1834.44. So from the 1858.71 high the market has completed 5
waves as 1840.19-1867.92-1847.67-1847.40-1834.44. This satisfies my model for a
semi-inverted corrective wave from the 1858.71 high.
The SPX has formed quite a few of these
semi-inverted corrective waves lately. Although normally rare, these seem to
form in periods of indecision, which is exactly what we have seen lately. Assuming those is an inverted corrective wave,
the scenario showing 1867.92 as a completed 5 wave sequence from the 1646.47
low can now be discounted. It still appears that there are two options in play.
The first has 1858.71 as Wave 1 of 5 from 1560.33. This would be the more
bullish of the two scenarios. The second option has the move from 1737.92 as Wave
D of an ongoing inverted corrective wave from 1709.36. Again, the index would
be in Wave 2, but would most likely complete lower than the first scenario.
Shorter term, with a semi-inverted corrective wave
completed, I would expect the SPX to move higher, but there may be limited upside,
with resistance at 1865 and then 1875. It is also possible, as happened with
last week with the same type of wave, but at a lesser degree, that this is only
the first wave of a larger corrective formation. Support remains at 1819.
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