The SPX opened higher this morning, bouncing
sharply off Friday’s 1839.57 low, and reaching the high of the day of 1862.30
within the first hour of trading. I had mentioned 1861 as a level that might
determine whether this bounce would be just that, a bounce, or the start of a
move to new highs. I had thought that this would be a small correction that
would lead to the next move down, but with the index moving above 1861 the odds
now favor the start of a new move higher.
The simplest count for today’s SPX action is a
Wave 1 to 1862.30, followed by an inverted corrective wave as
1854.61-1857.96-1853.17-1861.15-1856.31. This is supported by the oversold
readings on the RSI(5) for Waves A, C, and E. I would have expected the
MACD(13,34) to cross the zero line at Wave E, but it fell just short of that
level. This may indicate that this is only the start of a more complex corrective
wave, but at the moment this would qualify as a Wave 2.
I am still not completely convinced that the SPX
is headed to new highs. There are still several possibilities that would result
in the index moving lower, so I will remain cautious at the moment. I would
first like to see a move above 1874.40. This was the start of Wave D of the
inverted corrective wave I was looking for, and until that level is surpassed
it is still possible that the SPX is still in Wave D. The 60 Minute MACD(13,34)
might be a good indicator to watch for now. A negative crossover just above the
zero line before the SPX gets above 1874.40 could be a bearish signal.
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