Thursday's Market 08/27/2015

Volatility remained the story again today, with the SPX undergoing three separate moves of 39 points or better. The index opened higher, rising to 1972.35 before undergoing a 12 point pullback. Another move higher took the SPX to 1980.69, which was followed by a 9 point pullback. Then the index rose to the high of the day at 1989.60. At that point the SPX moved sharply lower, giving up most of its 48 point opening move, and it fell to 1948.33. The SPX quickly reversed again, this time moving back to within 2 points of the previous high at 1987.76.

The market took a slightly different tack than I had outlined yesterday. I had been looking at Wednesday’s opening 1914.56 high as Wave (c) of a semi-inverted wave. That turned out to be Wave 1 of (c), with Wave (c) actually completing at 1942.63. Wave (d) then completed at 1935.05.The SPX then rose from that point to today’s high of 1989.60 in a 5 wave sequence. This would seem to complete Wave (e) and Wave C in light blue.

It is important to note that the rise from 1879.88 occurred as a single 5 wave sequence, and not two as I thought it might. This is important in that some of the levels I mentioned yesterday, most notably 1993, are not in play at the moment, but may become important numbers again. In my count Wave E in light blue needs to complete below 1993, but the current Wave C could extend above 1993 without any affect to my current count.

 

At the moment it appears that Wave C has completed at 1989.60 and if so the next move should be at minimum a test of the 1879.88 low.

Wednesday's Market 08/26/2015

 Following Tuesday’s market action, I mentioned the possibility of the SPX forming a semi-inverted wave from the 1879.88 low. From that low the index rose to 1948.04, and then dropped below the first low to 1867.08. This wave would suggest a move higher between 1879.88 and 1948.04, followed by a pullback within that same range, and finally a move above 1948.04.

The SPX did open higher, to 1914.56, within the range described above. The pullback that followed again stayed within that range, barely, as the index fell back to 1880.13. This would complete Waves A-B-C-D of the semi-inverted wave, with a Wave E target between 1945 and 1952. This should be followed by a pullback, before another move higher to 1980 or above. This pullback could carry as low as 1905, and still target the 1980 area.

My longer term view remains that this correction should terminate below 1725. Given the count to this point, there are a couple of important levels to watch.  At this point a move above 1993 would dramatically increase the possibility that the low is in. If the SPX fails to reach 1966, the low could be below 1725. Lastly, if the index fails to clear the 1948.04 high, it could be setting up for another major move lower.