Tuesday's Market 08/11/2015

In several posts following the 2056.32 low on June 30^th, I mentioned a rally to 2106, followed by a test of the 1980.90 low of February 2^nd could be next. While some of the price action since that time would seem to discount that scenario, the recent price action tends to substantiate it. After the SPX rallied more than expected to 2132.82, the SPX quickly dropped to 2063.52. Another rally took the index to 2112.66, before falling again to 2067.91. Then on Monday the SPX staged one more rally to 2105.35, very close to the 2106 level mentioned earlier.

Looking back to the September 19^th 2019.26 high, I have been counting the subsequent action as a series of nested semi-inverted corrective waves that would eventually take the SPX down below 1725. Since I was looking for 2106 as a termination point, the rally above that level was troublesome, but analyzing the waves from 2056.32, the entire move from that point can be counted as a five wave sequence to Monday’s high of 2105.35. Although many of the waves were quite complex, the sequence 2056.32-2128.91-2063.52-2112.66-2067.91-2105.35, does complete a 5 wave sequence. The points (2506.32, 2128.91), (2063.52, 2112.56), (2067.91, 2105.35) give an R^2 value of .99414.

It should be an interesting couple of days. If my analysis is correct, this should be the first of several waves down, ultimately carrying the SPX below 1725. This first move down should complete between 2014 and 1979. 

Friday's Market 07/10/2015

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.

Tuesday's Market 07/07/2015

After completing a wave b from 2056.32 Monday at 2059.66, the SPX rallied into the close to 2071.12. A pullback from that high was not unexpected, but the decline soon dropped below the level of wave b to 2044.02. From there the index staged a rally, topping out at 2083.73 shortly before the close.

Looking at the wave structure from last Tuesday’s 2056.32 low gives us 2056.32-2074.28-2059.66-2071.12-2044.02-2083.73. The points (2056.32, 2074.28), (2059.66, 2071.12), (2044.02, 2083.73) yields an R^2 value of .9985. This would appear to complete the corrective wave from that low, below the 2106 target level.

This should mean that the decline should resume from this point, with a target near 1995.