In my view, today’s action was a little curious, and in the end, possibly very interesting. Having put in wave 5 from 1422 at 1267, I was looking for a move above 1282.55 to confirm, and then a move to 1285, or 1294. This would complete wave 3 from 1267. After a lower opening, the market did move past 1283, confirming the 1267 low, and continued higher to 1285. However, the move from yesterday’s 1273 wave 2 low, to 1285, does not appear to be a 5 wave sequence. The market then sold off, moving back down to 1278. For the rest of the day, the SPX moved steadily higher, moving above 1287 shortly before the close.
While the market did move higher today, it did so in a rather subdued manner. Given the wave structure moving down to 1267, I was looking for a sharper move.
The move from 1267 to 1280 was a clearly defined 5 wave structure, as was the decline back to 1273. If the 1285 level proves to have been wave 3 from 1267, wave 5 would project just slightly higher than today’s high. A I said before, the move to 1285 does not seem to be a 5 wave structure, but more likely 3 waves so far. Similarly, the move from the following low at 1278 has not yet completed 5 waves. If we take the move from 1273 to 1285 as 3 waves, and 1278 as wave 4, wave 5 projects to 1296. The wave structure thus far from 1278 started with 2 strong impulse waves, and using those waves we can project a wave 5 termination point at 1294-1296.
We now have three separate projections pointing to 1294-1296, and this seems like the most likely wave 3 termination point from 1267, with waves 4, and 5 left after that. This would be a pretty short term bullish outlook, with wave 5 projecting somewhere around 1320.
If 1285 was wave 3, we should be close to a wave 5 top. With the diminishing wave lengths of 1, 3, and, 5, this would be a more bearish scenario, and would likely mean at least one more low below 1267. A move below 1278 would make this scenario most likely.
At the moment, I see the first scenario as the most likely, and if so, we should see sharper moves higher, with a move above 1290 most likely confirming this.