Tuesday 04/07/2020

It was another gap up opening for the SPX. After opening at 2738.65, the index rose to 2756.89 before falling back. That proved to be the high of the day, and after the higher open, the SPX spent the rest of the day giving back all of it's gains. It didn't take long for the SPX to drop back to 2688.03 before trying to regroup and move higher. It did rally to 2746.03, but after that it was all downhill. An hour before the close the index was at 2669.55, erasing all of it's gains. The last hour was spent trying to break back into positive territory, but every rally was met with more selling. The SPX hit the low of the day at 2657.67, and closed only slightly above that level.

Going into this morning I was looking for a wave 5 from the 2447.49 low to complete either at Monday's high, or possible up to 2692. This morning's opening move to 2756.89 was obviously higher than I was looking for. So a review of the chart was in order:

Looking at the entire wave structure, the SPX made it's first move to 2475.51 off that low. From there, one can count 4 pullbacks before yesterday. 2475.51-2464.39, 2488.78 - 2466.10, 2614.54 - 2594.55, and 2636.28 - 2620.52. Taking the first 3 as points, (2475.51, 2464.39), (2488.78, 2466.10), (2614.54, 2594.55), gives an R^2 value of .9943, which satisfies my model for a 5 wave sequence. Taking the last 3 sets, (2488.78, 2466.10), (2614.54, 2594.55), and (2636.28, 2620.52) gives an R^2 value of .9995, which also would satisfy my model. I usually label sequences as they complete, and so the first 3 pullbacks were labeled as a-b-c-d-e(2). So the entire wave structure was 1-a-b-c-d-e(2)-3-4. This resulted in the wave projection I gave last night. Equally possible would be 1-2-3-a-b-c-d-e(4), as the last 3 pullbacks qualify as a completed sequence. Using that count, 2756.89 would satisfy the conditions for a 5 wave sequence. As (2459.96, 2475.51), (2464.39, 2488.78), (2620.52, 2756.89) yields an R^2 value of .9997.

With the wave from 2459.96 completed at 2756.89, the next move would be a pullback. As we saw today, the SPX did pull back, in what appears as 3 waves from that high; 2688.03 - 2746.03 - 2657.67. This also brought the SPX into oversold territory on the 15 minute chart.

Taking the pullback from wave 1 which was 2538.18 to 2459.96, and the 3 waves of today's pullback gives (2538.18, 2459.96), 2759.89, 2688.03), (2746.03, 2657.67) gives an R^2 value of .9938. So it looks like the SPX has completed waves 1-a-b-c-d-e(2). The next move appears to be up.

The SPX now seems to be in the last stages of Wave 5 from the 2191.86 low. While I am still looking for higher levels, those higher levels may be minimal. My target for this wave remains 2755 - 2888, a level that the SPX already reached this morning when it hit 2756.89. Unless the SPX manages to move above 2888, I view this as the index reaching the end of this move higher. There are always alternatives of course, but I'll wait until this wave completes before getting into any of those.