Today was in some respects similar to last Monday.
Last Monday the SPX opened lower at the open, and then found a bottom from
which it staged a strong rally. Today was similar, although the selling did not
last quite as long before finding a bottom. After a gap down opening, the SPX
fell sharply in the opening minutes, dropping to 1866.77. From there the index
rallied, reaching 1881.86, and closing the opening gap in slightly more than an
hour. A period of choppy trading ensued through the middle of the day, with the
SPX putting in a low at 1879.46. The rally continued from there, as the index
hit 1885.51, before fading slightly into the close.
Counting from Friday’s 1891.33 top, the SPX
completed a 5 wave sequence at 1880.58. Another sequence higher completed at
1885.98, and was followed by a sequence lower which ended with today’s weak
opening. The rally so far has formed three waves, 1881.86-1879.46-1885.51. The
first 1880.58 low can be counted as a wave 1, and the move from that point,
1885.98-1866.77-1881.86-1879.46-1885.51 counts as an inverted corrective wave,
or a wave 2. This implies another move lower for the SPX, at least in the very near
term.
For this short term count to remain valid the SPX
would need to remain below 1886. Support would be at 1849, and then 1775. If
the SPX does continue higher, there will be a small band of resistance between
1893 and 1896. A move above this resistance would likely mean one of the more
bullish scenarios I outlined yesterday is in play. As of now all three scenarios
remain valid.
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