Monday's Market

Overnight the futures were down quite dramatically, putting in jeopardy the bounce we were looking for today. The SPX opened lower, dropping to 1364 before quickly recovering to 1370 and turning positive for the day. From there the market dropped back to 1367 moved back towards 1370, and then fell to the low for the day at 1363.94. The market then experienced the bounce a bounce, spending the rest of the morning, and early afternoon trending higher, reaching 1373.90 by 2:00PM.The last two hours of the session found the market moving lower once again, falling back to 1368.48 before moving slightly higher into the close.

We believe the drop this morning was a continuation of the move from Friday’s 1372.41 afternoon high. To us this looked like wave 2 of an inverted corrective wave from the 1367.96 low from Friday. This corrective sequence completed at today’s high of 1373.91. If we are correct that would complete wave 4 of the sequence from 1415.32. This would mean that wave 5 of that sequence is underway now, and we believe this will take the market down to 1331.

We’ve included a chart of how we believe the entire wave sequence from 1422 will play out. This is based on the wave sequence thus far, and the points that best fit our model. After the drop to 1331 for wave 3, we see the market rising again to 1411, before falling once more to 1320. These projections were developed using my main model criteria, along with several others that I have been developing. Again, waves can, and do, develop in many different ways. This is simply my interpretation of the wave structure, and the most likely outcome at the moment. It should be taken as nothing more or less.

Waves 3, 4 and 5?

Friday's Market

The market gapped lower this morning, confirming that an inverted corrective wave was in progress. The SPX dropped to 1380 before trying to move up. This was only a brief pause, however, as the market headed lower again, 1374. The market it made it back to 1377 before once again moving lower. It fell to 1370, rose to 1372, and then dropped again to 1368. From there the SPX tried a more sustained comeback, moving back to 1372 before making one last drop for the day to 1368. Once again 1372 was the extent of the move back up, as the market faded into the close to 1369.

Today’s move was an inverted corrective wave from 1388.71. This wave terminated at 1372, and completed a 5 wave sequence from 1403.39 when it hit the low today of 1367.96. Yesterday we indicated it was not yet clear which wave was inverting, but we now believe it was wave 2 of the 5 wave sequence from 1403.39 to 1367.96. This would appear to be wave 3 of the sequence from 1415.

Having completed a 5 wave sequence we think the market could rebound on Monday, and we are looking for a move up between 1378 and 1391. This would be wave 4, and we believe wave 5 of the sequence will bring the SPX down to the 1331 level. A move above 1393 would indicate that the 5 wave sequence from 1415 was completed, and perhaps a more extending correction, or more, was underway. A move below 1368 would probably mean wave 4 was over, and wave 5 was underway.

We continue to believe that the correction from the 1422 level is not over, and we expect to see lower prices from here. We continue to see indications that the 1331 level will be the next stopping point.