Wednesday 04/15/2020

As of Friday's close, I made my case for the possibility of the SPX having completed a 5 wave sequence from the 2191.86 low. Given my count from that low, there is an upper limit of 2888 for this wave to complete.

On Monday, instead of continuing down from Friday's 2818.57 high, the index gapped up at the open, and then continued to move higher through the day, finally topping out at 2851.85. Friday's high of 2818.75 still looks to have completed a 5 wave sequence from the 2447.49 Wave 4 low. But it does look like that only completed a first wave from that low. Looking at the SPX from the 2818.57 high, the index first dropped to 2721.17 on Friday. The initial move higher on Monday took the index to 2843.83 with a subsequent move lower to 2807.89. Finally the SPX made another push higher to 2851.85. From the Wave 4 2447.49 low, the SPX thus has formed 5 waves, (2447.49, 2818.57), (2721.17, 2843.83), (2807.89, 2851.85), which has an R^2 value of 1. At times waves will form such a structure, or a structure that creates a trap.

So taking the waves from the 2191.86 low to the 2851.85 high, gives, (2191.86, 2300.73), (2360.25, 2641.39), (2447.49, 2851.85). This is still under the 2888 upper limit, and has an R^2 value of .9979.

This morning saw the SPX gap down, moving into oversold territory on the RSI(5), and then staged something of a recovery to hit overbought, without making a new high on the SPX. This suggests another move down. The level I am watching to the upside remains 2888.

Market Meanderings 04/12/2020

On Wednesday, it looked like the SPX had completed a 5 wave sequence from the 2657.67 low, and was poised to  to move lower. Instead, on Thursday, the SPX opened higher, moved up to 2818.57, and then began to fall back into the close.

If we look at the move from 2657.67, we can see an initial move up to 2729.55. From there the SPX pulled back to 2708.35, before rising again to 2754.09. After another pullback, the index rose again to 2813.07, before another pullback to 2778.76. Looking more closely at the three pullbacks following the 2729.55 high, we have (2729.55, 2708.35), (2754.09, 2729.52), (2813.07, 2778.76), which has an R^2 value of .9999. Given that, the best interpretation is that the SPX formed another inverted corrective wave for wave 4.

Widening out, and then looking at the wave structure from 2447.49 we have (2447.49, 2538.18), (2657.67, 2729.55), (2778.76, 2818.57), which has an R^2 value of .9971, which would satisfy conditions for the completion of that wave. And since that is still within the range that would satisfy a completion of a 5 wave sequence from 2191.86 low, it still appears that the SPX has completed that sequence.

The negative technical picture I elaborated on Wednesday essentially remains the same. On the 15 Minute chart, a negative divergence arose, and near Wednesday's close, the SPX moved to oversold on that chart, and then moved above 50, without moving to a new high. This could possibly be the start of a move down.

The negative divergence on the 60 Minute chart remains, and the Daily chart shows the SPX having moved into overbought territory on the RSI(5). On Wednesday the SPX had remained below 50 on the Weekly chart, but the slight move higher on Thursday brought that above 50 on the RSI(5), one more indication of at least a short term top.

If the SPX continues to move higher, the best interpretation would be to take the entire move from 2657.67 to 2818.57 as wave 3 from the 2447.49 low. The pullback to 2762.36 could then possibly be wave 4. I bring this possibility up, because the minimum projection for wave 5 under this scenario would be 2908, above the 2888 upper limit for a wave 5 from the 2191.86 low. That could indicate that this move has a ways to go on the upside.

Wednesday 04/08/2020

With the likely end of a corrective wave on Tuesday at 2657.67, the expectation was for a move higher today. The SPX did move higher this morning to 2696.23 before falling back to 2663.30. The index then began a methodical move higher for much of the rest of the day. The first peak came at 2729.55 as the RSI(5) reached overbought. A pullback to 2708.35 brought the RSI(5) back below 50, and as it rose above that level it gave the first indication that 2729.55 may have been wave 3, and 2708.35 wave 4 of the sequence from 2447.49. The SPX then moved slightly above yesterday's high, to 2760.75. The RSI(5) hit oversold shortly before that, and then formed a negative divergence.

Looking at the wave structure from 2447.49, and the previously identified waves, the points are (2447.49, 2538.18), (2657.67, 2729.55), and (2708.38, 2760.75), which has an R^2 value of .997. So the criteria for a completed wave was met at SPX 2760.75.

I had previously given a range of 2755 - 2888 as the target for the 5 wave sequence from the 2191.86 low. That was also met at SPX 2760.75. This wave structure had the points (2191.86, 2300.73), (2360.25, 2641.39), and (2447.49, 2760.75), with an R^2 value of .992. Once again, the criteria for a completed wave from that low has been satisfied.

Interesting that the Wave 5 top was very similar in nature to the wave 3 top at 2641.39. With that wave there was a wave d peak at 2637.01, followed by a pullback, and then a lackluster 3 wave move to marginal new highs. Wave 5 had a wave d peak at 2746.03, followed by a pullback, and then a lackluster 3 wave move to marginal new highs.

I outlined the technical indications for the 15 Minute chart, and with today's high possibly being a significant top, I thought I would provide some of the technical indications that would tend to support this analysis.

The 60 Minute chart shows that the SPX formed a negative divergence on the RSI(5) with today's marginal new high, which many times indicates a move lower to at least oversold levels.

Finally, a look at the Daily chart shows that the RSI(5) also reached overbought today.

Putting all of this together, my 5WaveModel suggests the SPX completed a wave today from 2447.49. This completed within the range identified as the end point of a 5 wave sequence from the 2191.86 low, suggesting an end to that move. A negative divergence has formed on both the 15 Minute chart, and the 60 Minute chart. The Daily chart shows the SPX in overbought territory. The 15 Minute, 60 Minute, and Daily charts all show the SPX either in, or coming off of, overbought territory. And there is the prospect of a long weekend after tomorrow. Recently there has seemed to be a reluctance to hold longs over the weekend. While none of this guarantees a top is in place, there are ample indications to be at least cautious, at least in my mind.

From here I am looking for supportive market action to confirm my analysis. When and if that materializes, I will give some thoughts on the next move.