Wednesday's Market

On Tuesday we said we did not think we had completed a 5 wave sequence from the 1357 low. We were looking for a continuation of that corrective sequence heading into Wednesday’s open, with a move to 1364-1365 completing that move.

Instead of the move terminating at 1365, the market headed straight up to 1373. From that low the SPX rose to 1361before turning back down. This would turn out to be a wave 1of a corrective wave sequence. The move back down to 1358 was then a wave 1 of an inverted corrective wave sequence from 1361 that would carry over to Wednesday’s trading session. The rise to 1362, and fall to 1369 on Tuesday became waves 2, and 3 of that sequence. The opening on Wednesday was wave 4, and this carried the market to the 1373 opening move. The short drop from there to 1370 completed the 5 wave inverted corrective wave sequence with a model value of .9997.

Having completed the corrective sequence, and thus wave 2 of the move from 1357, the market once again was poised to move higher. First it rose to 1373, fell back a point, and then made a final move to 1375. This completed a 5 wave sequence from 1357.

From 1375 the market began to erode, completing a 5 wave sequence at 1370 with a model value of .9934, and another 5 wave sequence from 1375, terminating at 1368.33. This sequence was 1375, 1370, 1372, 1369, 1370, and 1368. This sequence yielded a model value of .9963.

From 1368 the market tried to move higher once again, but completed a 5 wave sequence below the previous high, topping out at 1373.  From there it was mostly lower into the close, completing a 5 wave sequence from 1373 at 1367 in the last hour, and then moved slightly below that mark in the final few minutes.

We do not see the completion from the 1375 high; therefore we would look for the market to move lower, at least at the opening, on Thursday. The way the wave structure stands, a move down to 1365-1363 would complete that 5 wave sequence. From there we will be looking for a move above 1375, which would indicate the move up has further to go, or a break below the 1365-1363 low.

To recap, we believe wave 3 of a 5 wave sequence from 1422 was completed on Tuesday at 1357. The action since then would be wave 4 of that move, which may have terminated at 1375. A move above 1375 would mean the corrective sequence higher would continue, and we are looking for a short term low around 1365, and then a break of that to signal a continuation of the downtrend.

There is a count that would make the 1357 low the termination point of a 5 wave sequence from the 1422 high, which would possibly indicate that this move up could last a little longer. That count cannot be confirmed on the daily charts, se we’ll maintain our current count, but a move above 1387 would confirm 1357 as a wave 5 low. Keep in mind we still expect the move lower from 1422 to continue. We do not think we have seen an end to that move yet.

Tuesday's Market

Sorry I haven’t updated here for a couple of days, my paying job was interfering with my fun job.

As of our last update, we believed we had started a major corrective wave from the 1422 high. It appears that Monday’s steep drop following the disappointing jobs report last Friday completed a 5 wave sequence from that high. 1404.62, 1392.92, and 1378.24 would be lows of that sequence; with 1378 being hit in the first half hour of Monday’s trading session. From there the market moved higher during the day, reaching 1387 before heading lower into the close. The move to 1387 had stops at 1383, 1382, 1386, and 1384 before reaching 1387, which formed a 5 wave sequence, with a model value of .9919, and pointed to another move lower.

That move came Tuesday, with the market opening lower, and continuing lower throughout the day. From 1387, the SPX completed a 5 wave sequence down to 1375, and then rallied slightly to 1376. Another drop to 1366, an uptick to 1367, and a final drop to 1357.38 formed a 5 wave sequence from 1387 with a model value of .9947.

The market then moved higher into the close, but we don’t think we have quite formed a 5 wave sequence from 1357. Given the current data, a move higher to 1364-1365 would complete that sequence.

Tuesday’s move below 1378 now means the market needs to complete a 5 wave sequence from 1422. 1378 now becomes wave 1 on that sequence. The rebound to 1387 would either be wave 2, or wave 1 of an inverted corrective sequence from 1378. The wave action over the next couple of days should give us the answer. If this ends up being a simple 5 wave sequence, with wave 3 at 1357, and wave 4 at 1364-1365, we would anticipate wave 5 to carry down to 1348-1339. Should this be a more complicated wave structure, we could move even lower.

Wednesday's Market

We were looking for a lower open, having closed on Tuesday at a wave 5 termination point, and we got one. The market gapped down at the open, and continued down in the first couple of minutes to the 1400 level, before finding some temporary support. After rising several points to 1403, the market moved to new lows for the day. At 1394 a 5 wave sequence from 1422 and a corrective sequence was in order.

The SPX completed the first wave of this sequence just shy of 1399, and then headed south once again. A new intra-day low at 1394.09 formed wave 2, the move to a new low indicating an inverted, or semi-inverted corrective wave was in progress. A bounce to 1398 and the subsequent drop to 1396 were waves 3 and four of the sequence. Rallying once again into the close, the market topped at 1401.39, then fading to close at 1398.96.

We believe the final rally was the fifth wave of the semi-inverted corrective sequence from the 1394.33 low. This would indicate another down move on Thursday, which would most likely be wave 3 of the move down from 1422. We are still anticipating a move below the 1391 level, which would confirm the current downtrend. Interestingly, the bottom of this move is almost identical to the bottoms at 1391, and 1387. In both cases we thought we had formed a semi-inverted corrective wave from those bottoms, and in both cases we were wrong. We believe we are correct in the current count, but given the circumstances will proceed with caution. A move above 1401 would mean the corrective wave has not yet been completed, but we still believe this to be a corrective wave.