Wednesday 04/08/2020

With the likely end of a corrective wave on Tuesday at 2657.67, the expectation was for a move higher today. The SPX did move higher this morning to 2696.23 before falling back to 2663.30. The index then began a methodical move higher for much of the rest of the day. The first peak came at 2729.55 as the RSI(5) reached overbought. A pullback to 2708.35 brought the RSI(5) back below 50, and as it rose above that level it gave the first indication that 2729.55 may have been wave 3, and 2708.35 wave 4 of the sequence from 2447.49. The SPX then moved slightly above yesterday's high, to 2760.75. The RSI(5) hit oversold shortly before that, and then formed a negative divergence.

Looking at the wave structure from 2447.49, and the previously identified waves, the points are (2447.49, 2538.18), (2657.67, 2729.55), and (2708.38, 2760.75), which has an R^2 value of .997. So the criteria for a completed wave was met at SPX 2760.75.

I had previously given a range of 2755 - 2888 as the target for the 5 wave sequence from the 2191.86 low. That was also met at SPX 2760.75. This wave structure had the points (2191.86, 2300.73), (2360.25, 2641.39), and (2447.49, 2760.75), with an R^2 value of .992. Once again, the criteria for a completed wave from that low has been satisfied.

Interesting that the Wave 5 top was very similar in nature to the wave 3 top at 2641.39. With that wave there was a wave d peak at 2637.01, followed by a pullback, and then a lackluster 3 wave move to marginal new highs. Wave 5 had a wave d peak at 2746.03, followed by a pullback, and then a lackluster 3 wave move to marginal new highs.

I outlined the technical indications for the 15 Minute chart, and with today's high possibly being a significant top, I thought I would provide some of the technical indications that would tend to support this analysis.

The 60 Minute chart shows that the SPX formed a negative divergence on the RSI(5) with today's marginal new high, which many times indicates a move lower to at least oversold levels.

Finally, a look at the Daily chart shows that the RSI(5) also reached overbought today.

Putting all of this together, my 5WaveModel suggests the SPX completed a wave today from 2447.49. This completed within the range identified as the end point of a 5 wave sequence from the 2191.86 low, suggesting an end to that move. A negative divergence has formed on both the 15 Minute chart, and the 60 Minute chart. The Daily chart shows the SPX in overbought territory. The 15 Minute, 60 Minute, and Daily charts all show the SPX either in, or coming off of, overbought territory. And there is the prospect of a long weekend after tomorrow. Recently there has seemed to be a reluctance to hold longs over the weekend. While none of this guarantees a top is in place, there are ample indications to be at least cautious, at least in my mind.

From here I am looking for supportive market action to confirm my analysis. When and if that materializes, I will give some thoughts on the next move.