Monday's Market 08/31/2015

It has been an interesting couple of days. After trading up to 1993.48 on Friday morning, the SPX has traded lower from there. The move up to 1993.48 does seem to complete 3 waves up from the recent lows, which alters the Daily count slightly, but does not change the overall outlook for the index.

It may be better to start with the big picture at this point, and then work my way down. Working from the March 2009 low of 666.79, my count shows completed waves at 1219.80, 1010.91, 1370.58, 1074.77, and 2019.26. In my model Waves 1, 3, 5 of every sequence develop a certain relationship. Specifically, when the waves are taken as points, (start point, end point), the points exceed an R^2 value of .99. Since the three impulse waves that I mentioned above, (666.79, 1219.80), (1010.91, 1370.58), (1074.77, 2019.26, do not meet this criteria, one can assume that this sequence has not yet completed. Although my model is called the 5 Wave Model, it can also be thought of as a 9 wave model. Normally one corrective wave is what I term a complex wave, which breaks down into 5 waves with magnitudes similar to the others. The result is a sequence that displays 9 similar or related waves. My current view is that the move from 1219.80 has been just such a complex corrective wave, in particular one I call an inverted corrective wave. So we can look at the points (1219.80, 1010.91), (1370.58, 1074.77), and (2019.26, X). Given the correlation I described above, 1748 would be the maximum value at which the correlation would exceed .99.

The wave structure from the 2019.26 high has been quite complex and the structure hard to discern. My model is designed to identify the ends of waves, although it can provide some insight. Given the action of the past several days, I have relabeled some of the move from that high. Again, this does not change the target, but may provide some insight as to how we might get there.  My current count suggests that there are several waves that need to complete before ultimately reaching the low. It also appears that we may stay within the current range, 1867-1993, for some time as some of these waves complete. I will try to go into more detail in the upcoming days.

Shorter term the SPX completed a sequence at 1968.68, followed by three waves up to 1986.26. Another sequence completed to the downside at 1967.29 and was followed by a wave up to 1978.45. This suggests a sequence from 1986.26 has yet to complete. Once it does the SPX should move higher, likely completing a complex corrective wave from 1968.68. The three waves up from that point were likely waves A, B, and C, and the sequence from 1986.26 is Wave D. Wave E should the be something less than a 14 point bounce before the sequence from 1993.48 completes. I would expect this to come close to the previous 1867.08 low.