The market opened sharply lower today, dropping below one of our support levels at 1318. Once below that level, the market consolidated for a short time, before resuming the decline, hitting 1311.18. The market tried to stage a rally from there, but could only make it back to our resistance line, topping out at 1318.18. After that, the SPX staged one more decline, reaching its low for the day at 1310.76, before moving slightly higher into the close.
The move yesterday from 1323 to 1333 would now appear to have been waves 1, 2, and 3, of an inverted corrective wave from 1323.40. Wave 4 come this morning in the sharp move lower at the open, with the small rise to 1318 completing wave 5, and wave 2 from 1335. The drop to 1311 formed wave 3, the rally to 1318 wave 4, and the day’s final decline to 1311 completed wave 5.
We now have a 5 wave sequence completed from 1292 to 1335, and a 5 wave sequence from 1335 to today’s low of 1311, leaving us again without a clear cut answer as to which way the market will head next. With the completion of a 5 wave sequence today, we would expect a move higher, with an initial target of 1320. Before we can even think about the resumption of a rally, we would need to see a price above yesterday’s 1335 high.
We believe this market still needs to work lower before a rally attempt can occur. A move below 1311, in our opinion, would signal the start of that move lower. We see support at the 1301-1302 level, with resistance at 1327, and 1333.
