Friday, May 16, 2014

Friday's Market 05/16/2014

The SPX worked slightly lower in the first few minutes of trading, dropping to 1866.99 before bouncing to 1871.77. That bounce was followed by another move lower to 1864.82. A slightly better rally followed, with the index moving up to 1873.04 before dipping back to 1868.14. An even better rally followed this dip, with the SPX hitting a high of 1878.28 before falling back into the close.


After completing a 5 wave sequence at 1872.49 after yesterday’s 1862.36 low, the SPX started the day off by completing three waves down from 1872.49. This can be counted as Waves A, B, and C of an inverted corrective wave. The rally off the 1864.82 occurred in 5 waves, and completed Wave D. Another 5 wave sequence lower to 1868.14 then completed Wave E, and Wave 2 from yesterday’s low. The rally from that low looks like Wave 1 at 1871.01, an inverted corrective Wave 2 at 1875.54, and Waves 3, 4, and 5 completing in quick succession at 1877.39-1877.23-1878.28.

This completes 3 waves from yesterday’s 1862.36 low. Wave 4 may also have completed with the slight pullback before the close. If so, this would give a Wave 5 target of around 1887. As I pointed out yesterday, there is a danger zone between 1893 and 1895. Completing a sequence just below that level could set up a gap above that resistance level, but that is getting too far ahead.

Yesterday’s 1862.36 low continues to be a critical level. A break below that level would likely lead to much lower prices.




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