Wednesday's Market

It turned out to be quite an interesting day for the market, which created some very complex wave structures. Starting out to the downside, as expected since the market had not completed a wave sequence from Tuesday’s 1393 high, gapping down and hitting the day’s low at 1383 in the first several minutes. This did complete the 5 wave sequence from 1393.

From there the market traded in a tighter range, in what appears to be the formation of another 5 wave sequence from the 1393 high. Several of today’s waves looked a little odd, but seem to be correct based on the wave counts of the more minor waves, and the expected behavior from the 1357 low.

From Wednesday’s initial low of 1383, the market rallied, completing a 5 wave sequence at 1389.80. This was followed by another move down, bringing the market back down near the 1383 low. A second 5 wave sequence to the upside then unfolded, carrying the market back to 1388. After hitting that level the market turned lower for a third time, a five wave sequence which featured an inverted corrective wave 2, and once again the market found itself at the 1383 level. We believe this completed the second 5 wave sequence from the 1393 high.

From there the market showed some strength, rallying back to 1390, where it terminated a 5 wave sequence. However, from there the market gave up most of those gains going into the close, falling back to 1385.

At 1385 the SPX completed a 5 wave sequence, which we believe to be a wave 2 of a sequence from 1383. From here we expect the market to rise back up to 1400, where it would complete the 5 waves from the 1357 low. From there the market may turn lower once again.

As we said at the beginning, several of these waves appear to be not typical. We believe we are interpreting them correctly, but we would view a break of the 1383 level to signal another move to the downside. If we hold 1383, we should be on our way to 1400.

1400 One More Time?

It turned out to be quite an interesting day for the market. The small dip we anticipated at the open never materialized, and although we expected another move higher, the move turned out to be stronger than we envisioned.

The market opened higher, rising above the 1380 level we said would lead to a continuation of the correction from 1357. After moving above 1380, the market paused and dropped back to 1377. It is now apparent that wave4 of the correction from 1357 occurred at 1369.41, shortly before yesterday’s close. The slight rise from there, and then the dip into became wave 1 of the next move higher, and wave 1 of an inverted corrective wave that result in the sharp rise at Tuesday’s open. Although a bit unorthodox, normally wave 4 of an inverted corrective wave would carry beyond wave 2, this wave terminated at 1377.

When the market hit 1384, it completed 5 wave sequences from the 1369 low, and the 1365 low. A short move to 1382 followed, in what would turn out to be another inverted corrective wave from 1384. This wave carried above that level, indicating yet another move higher. This corrective wave took the market to a high of 1391, before completing at 1390. Having finished wave 2 of this sequence, the market then continued higher, completing the 5 wave sequence at 1393.

We believe this to be the completion of wave 3 from the 1357 low, which would indicate we have at least one more move higher to complete the sequence. It would appear that a drop to 1389 would complete a 5 wave sequence from 1393, which we believe would be the end of wave 4 from 1357. One more move to right around 1400 would complete the 5 wave sequence from 1357, and be the point from which we will once again move lower.

Our view that the market made a major top at 1422 and that we are in a corrective sequence from that level remains unchanged.

Monday's Market

We got the stronger opening we expected, with the market moving up to 1380 in the first few minutes of trading. We warned this rally might be short-lived, and that turned out to be the case. From 1380 the market turned sharply lower, breaking through Friday’s 1370 low, and continuing down until it completed a 5 wave sequence at 1365.38.

From that low, the market spent the middle of the day in a corrective mode, working its way back higher, but not surpassing the earlier 1380 high. The market completed the first phase of the correction at 1371. From there it completed a 5 wave sequence down to 1366.48. Another rally followed, the market completing a 5 wave sequence at 1371 once again, then continuing on until it completed another 5 waves from 1366 at 1376. We believe this to be the third wave a 5 wave correction from 1365.

The remainder of the day was spent moving back down, working on wave 4 of that sequence. In this wave the market dropped to 1369 before moving slightly higher into the close.

It does not appear that we have quite completed wave 4, therefore we expect a slightly lower opening on Tuesday, looking for a wave 4 termination point between 1367 and 1369. From there we look for the market to move higher, as we have yet to complete wave 5 from the 1365 low. We would expect wave 5 to carry the market back to the 1378 level.

Longer term we believe we have completed waves 1 and 2 from the 1388 high, and waves 1 and 2 from 1422. We still anticipate the market moving lower, with our current target remaining at 1330. Should we move above the 1380 high, we would expect the market to continue higher, most likely moving above the 1388 high and completing another 5 wave sequence from the 1357 low. We don’t believe this would carry us above the 1422 high.