After a choppy open, the SPX put in a 5 wave sequence bottom from 1347.32 at 1336.80. The market then rallied back to 1344, before falling to new session lows just above 1335. The market then rallied again, this time moving up near 1345. This completed the semi-inverted corrective wave from 1337, and what we believe was wave 2 from 1347.
The SPX fell back to 1336, before attempting to rally again. This rally cloud only get the market back just above 1340. The selling accelerated during the afternoon, with the SPX falling to a new session low at 1328.41. The market did try to rally once more, but could only make it above 1333, before dropping back down into the close.
We continue to believe we are in wave 5 from 1373.91, and wave 5 from 1415.32. Our projected low from wave 5 from 1415 is 1325-1260, and 1319-1295 from 1374. Therefore the move from 1415 should be between 1319 and 1295. From that point we should see a rather substantial rally. We still do not think this will be the low from 1422, however, as this still appears to be wave 3 from that point.
If our counts are correct, we have only to complete a 5 wave sequence from 1347. Up until now, 1337 seems the most likely point for wave 1, and 1345 for wave 2. From there things are a bit less clear. We see a distinct 5 wave sequence from 1345 to 1336, and another from 1341 to 1328. If these were waves 1-4 from 1345, wave 5 would project to 1319, and we would need to rally from there back to the 1340 level just to project wave 5 of the sequence to terminate within the ranges from 1374 and 1415. While this is possible, it seems unlikely at the moment. Almost all of the solutions possible would require several more waves to play out, while we have always envisioned this stage of the sequence developing fairly quickly.
A stranger, but at this point much more likely scenario, has appeared with the wave action from today. This would put wave 1 from 1347 at 1339.76, followed by an extremely rare, from our experience, expanding corrective wave 2 which ended at 1344.94. This would make the two 5 wave sequences from today’s 1345 high, and the intervening corrective wave, waves 3, 4, and 5 from 1345. We have labeled these points as A1-A5 on the following chart. If this 5 wave sequence in turn becomes wave 1 of a larger degree sequence from 1345, the entire move from 1415 would end with two more sharp moves down, with a small corrective wave in between. This would fit much more closely with our overall scenario. Using our optimal target from 1311 from the 1373 high, this would play out something like 1317.4-1325.2-1311 from 1333.63. These are approximations of course, but in any event wave 5 should be slightly shorter than wave 3.
If we move above 1333, we will stay with our current count, and we could rally back near 1345. 1366 would be the next level to watch, with a move above that likely signaling the end of the current move.
