In Friday's Update I outlined the start of what appeared to be a bullish sequence beginning from Friday afternoon's low. This sequence played out this morning as SPY opened with a gap to the upside, opening at 391.21, and then continuing higher to 391.85. SPY then entered a consolidation pattern, trading between that high and 390.07, which closed the opening gap. SPY then moved to a new intra-day high at 392.69, before pulling back to 391.16. From that point, SPY showed continued strength nearing mid-day, and hit a high of 394.17. Once again SPY pulled back, falling all the way back to 390.73 before regaining strength heading into the close. SPY made it back above 394 before pulling back slightly to close the day at 393.67.
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The chart above shows the completed wave that began late Friday afternoon. This wave completed as (388.55. 390.05), (389.20, 390.87), (390.90, 394.17), with an R^2 value of .99329. This featured an inverted corrective Wave 4, which completed as (390.87, 389.60), (390.52, 389.44), (392.69, 390.90), with an R^2 value of .99743.
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This chart shows that Friday's low was Wave 2 of Wave C from the 15th. The wave that completed this morning as outlined above was Wave 3, and the mid-day pullback completed Wave 4. Given the four waves, Wave 5 projects to the 397-399 level. That would complete Wave D from the 13th low. From there we should see that approximately 5 point pullback for Wave E, which would complete Wave 4 from the low on the 13th. Wave 5 would then project above 404.
The short-term outlook is a move to 397-399, followed by a small pullback of around 5 points, before another move higher above 404. Since that will complete a 5 wave sequence from the low on the 13th, we would likely see a more substantial correction from there. Keep in mind that 404 would be a minimum value for Wave 5. I will wait until the next few waves complete before making any forecasts beyond reaching at minimum the 404 level.
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