Until Tuesday it seemed likely that
the rally from 2056.32 would terminate near 2106. On Tuesday the SPX completed
a 5 wave sequence from that low at 2083.73. With a 5 wave sequence completed,
the possibility arose that the rally was over. While that still may be the
case, a continuation of the rally to the 2106 level, or actually slightly below,
remains in the picture.
The SPX still looks to have
completed a 5 wave sequence from the October 2011 low of 1074.77 last September
at 2019.26. Since then the index has been in an irregular correction that
should take it to much lower levels. This correction has been comprised of a
series of semi-inverted corrective waves. These waves feature a second wave
that terminates beyond the origin of the first wave, and a fifth wave that
terminates beyond the second wave. This has been the market’s wave of choice, and
it may be what is happening in the market now.
From the 2056.32 low, the SPX
completed a 5 wave sequence at 2083.72. It then underwent a decline to 2044.66,
below the origin of the first wave (2056.32). These would be Waves a and b,
with Wave c ending at 2074.28. Wave d appears to be an inverted corrective wave
terminating at 2073.17. This would project Wave e to complete between 2094 and
2103. If this completes as described a test of the 1980 low would be next.
A move below 2073.17 would bring
this scenario into question, with a continuation of the decline likely.
