Monday's Market

On Friday the market was up, completing a 5 wave sequence from the 1392 low late in the day at 1411, and then fading into the close. We said a 5 wave sequence down from that high had not been completed, and we expected the market to move lower at the open on Monday. From there we were watching for a break above 1411 as a signal of another 5 wave sequence higher. The market did open lower today, hitting 1404.46, and completing the 5 wave sequence from 1411. From there the market moved higher, breaking above 1411, and continuing up from there. A 5 wave sequence from 1392 was completed at 1420 and continuing higher still, completing another 5 wave sequence at 1422.38, the high of the day. From there the market fell to 1417, before rising and closing at 1419.04

While the market broke into new higher ground, our feeling that we are still experiencing a market top remains intact. We are still within our target range of 1378-1422 for that top, and the market has not been convincing in moving higher since it hit 1378.We are now, however at the top of that range, and a break above the 1422 would most likely signal a move higher from here. At the moment we will stand by our call of a market top, and look for a move lower from these levels.

Last Week's Market

On Thursday the SPX completed Wave 5 of a move from the 1392 low, and then moved above it, indicating another 5 wave sequence up. On Friday that analysis was confirmed with a strong opening. When the SPX hit 1409, it completed Wave 3. From there the market turned down, spent the next hour working on Wave 4, which terminated at 1401. From there the market turned higher once again, spending most of the remainder of the day forming a detailed Wave 5. This wave made stops at 1409, 1407, 1410, 1409, and finally at 1410.89, which completed that wave. The market then turned lower into the close, hitting a low of 1406.86, before moving up slightly to close at 1408.47.

We do not discern a 5 wave sequence from the 1410.89 high, therefore we would expect the market to open lower on Monday. From there will be watching that 1411 level, a  move above that signaling another 5 wave sequence to the upside would be in order. Our belief at the moment is that 1410.89 is the high of a correction from the 1392 low. We now expect the market to work its way lower, now in a wave 3 from the 1419 high. That would be confirmed with a move below the 1387 low.

Longer term we still view 1419 as the high from 667. We are looking for a major 5 wave sequence to form from there.

Thursday's Market

At Wednesday’s close, the SPX stood at 1405.54, right in the midst of what we identified as the termination range of a semi-inverted corrective wave from the 1398.2 low. That turned out to be the correct analysis of the wave structure, as the market opened, dropping to 1397 in the first few minutes of trading. Within the first half hour, the index hit 1394.5, completing Wave 3 from the 1419 high. A short rebound to 1398, and a final drop to 1391.56 completed Waves 4, and 5 of that sequence.

With a completed 5 wave sequence from 1419, the market was now in a position to rally. The first move was to 1394, and after dropping back to 1392, it quickly rose again to 1396. After hitting 1396, the market spent the next hour in a narrow trading range, finally finding its way down to 1393.66. From there the market rallied again, forming a 5 wave sequence from 1393 up to 1402.80. This completed a 5 wave sequence from the 1391 low, and interestingly enough marked almost exactly a 38.2% retracement of the drop from 1419. However, instead of ending the rally there, the SPX dropped to 1400, and then extended the rally through the final hour of trading. This extension of the rally was very interesting, as it also completed another 5 wave sequence from 1391, 1404.61, before fading to close at 1403.28.

Since we have completed a 5 wave sequence from the 1391 low, we can expect the market to head down once again. Should we surpass the 1404 high, we would need to form another sequence from that low. Longer term we are keeping an eye on 1419, and 1387. A breakout from either point should give an indication of the next move. At this point we still expect the market to move lower, with 1419 the termination point of a 5 wave sequence from 667. Only if we move above 1419 would that outlook change.