Market Update 03/17/2020

Yesterday I talked about the possibility of Monday's 2380.94 low being the end of Wave D, with the likelihood of the SPX following that with a rally into the 2537-2666 zone.

The index did open sightly higher, making it to 2463.54 before reversing course, and falling slightly below Monday's low to 2367.04. The SPX quickly ran up to 2553.93 by midday. The move to a slightly lower low did change the resistance zone to an extent, but not significantly. 2553.93 put the index right within the 2537-2666 resistance zone I spoke of. Once hitting that zone the index pulled back to 2448.00, and then spent the rest of the afternoon trading between those two numbers.

So where does this leave us in my count? From the 3393.52 high, I am counting 2880.89 as Wave 1 of a five wave sequence. The SPX, in my view, has been forming an inverted corrective wave from that point, with 3136.72 being Wave A. Wave B ended at 2478.86, and the rally to 2710.89 as Wave C. Today's low of 2367.04 would be Wave D, and the subsequent rally to 2553.93 Wave E, completing Wave 2.

I realize that most people are not familiar with my terminology, so I will try to simplify it here, hopefully making where we are in my count clearer. The easiest way to think of it, would be to see each wave in my model as breaking down into 9 identifiable waves. There are a number of reasons why I label the waves as I do, with the main one being the relationships between waves. For those familiar with Elliott Wave counts, you can think of it as being a 1-2-1-2-3-4-3-4-5 sequence, which is 9 waves. In my model that would be labeled as 1-A-B-C-D-E(2)-3-4-5, with the A-B-C-D-E portion being what I call inverted corrective waves. So, 1-2-3-4-5-6-7-8-9, equates to 1-2-1-2-3-4-3-4-5 in Elliott Wave, which equates to 1-A-B-C-D-E(2)-3-4-5, in my 5 Wave Model. I count 5 wave sequences in both impulsive and corrective waves, so I won't equate it with Elliott Wave corrective counts. Obviously there are numerous variations for all of these, but that would be the simplest way to look at it. There are also many differences between my 5 Wave Model, and Elliot Wave, so this is only equating count sequences between the two for clarity.

So given that, if Wave E(2) completed today at 2553.93, it means the SPX has completed 6 of the 9 waves, with 7-8-9 to follow. I am currently still expecting this sequence to complete at my 2030 target level. The past few days I have been considering other possibilities, such as the SPX putting in a shorter term low, and undergoing a short term rally before moving down to 2030. That is still possible, but normally if that were to happen, it would occur either as "B" or "D" waves of the inverted corrective wave, or a smaller magnitude sequence would occurred.

Another reason for that conclusion is the relationships that form between waves. The 2030 target was based on the relationship between the 666.79 low, the 3393.52 high, and the intervening waves. The conclusion of this sequence will depend on the relationship between the first, third, and fifth waves of this sequence. But with Wave E(2) possibly completing today, I was able to look at several secondary relationships, and one of them confirms the 2030 number.

But I don't want to get too far ahead of myself. Let's stick to what we know. It does appear that today's low of 2367.04 was Wave D. But Wave E has not been confirmed yet, so a move above the resistance zone I mentioned yesterday would still negate this count.I will adjust the upper bound of that level to 2653 to take into account the new low. I also mentioned yesterday a possible alternate count. That is still a possibility, so if 2553.93 proves to be Wave E, the sequence from 3393.52 could complete under 2400, so a slightly lower low than today and rebound could bring this into play. Especially if we bounce off the bottom trend line, which looks to be around 2300.

Market Update 03/16/2020

Just wanted to spend a few minutes updating my count after today's action. With any luck I'll have more time to go in depth tomorrow.

I mentioned yesterday that Friday's 2710.89 high likely completed Wave C of a corrective sequence, and that a move lower was likely. The SPX did open substantially lower this morning, hitting 2401.57. From there the index moved higher. That rally attempt failed, and the SPX closed near the low of the day of 2380.94.

That low took the index into oversold territory, and continuing my count, that would be Wave D of the corrective wave. If so, the SPX should rally off this low. As I have mentioned the first, third, and fifth wave of each sequence develop a specific relationship. With this being the fifth wave of the sequence, I can project a target for this wave. Assuming my count is correct, this wave should terminate between 2537 and 2666 on the SPX. At the termination of this wave, the SPX should once again move lower. So what I would be looking for is the SPX to move into the 2537-2666 range, and hit an overbought reading on the hourly RSI. A move above 2666 would indicate an alternate count, and the SPX would likely continue to rally.

There is a possible count that would make today's 2380.94 low the completion of a 5 wave sequence lower, and possibly at least a short term bottom.

Another Wave Down?

Last night I reviewed the long term SPX chart, and gave a target of 2030 on the downside. Tonight I'll analyze the shorter term outlook with the Hourly chart. From the 3393.52 high, the SPX formed a 5 wave sequence that terminated at 2880.89. The first wave took the SPX to 3214.65, Wave 2 at 3253.58, and Wave 3 at 3118.77. From there the SPX formed an inverted corrective wave for Wave 4. Normally either wave 2 or wave 4 forms one of these waves. In a normal sequence there is a relationship that develops between the impulsive waves 1, 3, and 5. In an inverted corrective sequence, the relationship is still between the first, third, and fifth waves, but these waves are counter trend waves. So Wave 4 went 3118.77-3182.51-3007.06-3097.07-2855.84-2959.72. One more move down to 2880.89 completed the fifth wave, and the sequence.

The SPX at this point took a bit of a breather, and managed a small rally to 3136.72. At the moment I am counting 2880.89 as Wave 1. This small rally I would count as Wave A of the inverted corrective wave that normally occurs. Wave 2 is the most likely spot for this.

From 3136.72, the SPX started another wave down. First came some very quick waves for 1, 2, and 3. 3136.72-3026.92-3081.65-2976.63. Wave 4 started with a move up to 3130.97, and then the bulk of the damage occurred in waves b, and d of this inverted corrective wave, as is normally the case. One more small move to 2478.86 completed wave 5, and the sequence.

So visually, looking at waves 1, 3, and 5 of both sequences, you will notice the relationship. In the first sequence from 3393.52 to 2880.88 each consecutive wave gets smaller. In the second, from 3136.72 to 2478.86, each consecutive wave increases. There is a mathematical component I use to objectify the relationship, but it visually notable. You will observe the same relationships between waves A, C, and E of the corrective sequences.

Once the market found a short term bottom at 2478.86, the SPX again attempted a rally which took it to 2710.89 on Friday. A couple of things to notice with this wave. First, it took it into overbought territory. Secondly, since we counted the first nominal rally from 2880.89 to 3136.72 as a Wave A, I would expect this wave, as a Wave C, to be similar in magnitude to Wave A. Wave A was just under 256 points, and this rally was just over 232 points. Fairly similar.

Given those two things, it seems likely that the 3136.72 was the end of Wave C, and the SPX should again move down for Wave D. These inverted corrective waves can take on many forms, so I'll be keeping a close eye on the market action from here.