Tuesday's Market 08/25/2015

As I have mentioned in several previous posts, I view last September’s 2019.26 high as the completion of a 5 wave sequence from October 2011 low of 1074.77. Since that point the SPX has been forming a series of semi-inverted corrective waves that eventually should terminate with the index below 1725. In a rising market these waves are characterized by a move lower, a false breakout above the previous high, and then a move below the initial low. Looking at the daily SPX chart from the 2019.26 high, one can see a series of such moves. After forming a series of A and B waves, the SPX now seems to be completing those sequences.

Again looking at the daily SPX chart from the 2019.26 high, the index formed a series of A and B waves, with the last noted one being Wave (b) in yellow at 2125.92. The SPX completed Wave (c) at 2056.32 and Wave (d) at 2105.35. I had been looking for Wave (e) to then test the 1980 low with 1995 as a target. This would also complete Wave [c] in green. The SPX did complete a 5 wave sequence at 1993.27. Obviously the selling did not end there. After a small rebound to 2009.47 the SPX continued to fall to 1867.01. This was followed by three waves higher to 1954.09, and then another move lower to 1879.98.

Assuming that Wave [c] in green did complete at 1993.27, the next 5 waves, 1993.27-2009.47-1867.01-1932.14-1904.52-1954.09 would complete a 5 wave sequence for Wave [d], and the subsequent move to 1879.98 Wave [e]. This is rather difficult to see on the Daily chart, so I have also added a 30 Minute chart for clarity.

 

At this point I have added one alternate count that does not change the ultimate target, but just seems a more likely way to get there. After the high at 2079.46 ((B) Blue), I have been counting the next two waves, 1972.56 and 2093.55, as another A-B. The alternate has the move to 1972.56 as Wave (C) in blue and the move to 2093.55 as a Wave A. Looking at this count, yesterday’s 1879.98 low would complete Wave B in light blue, a Wave C higher would be the next move. Given the completed waves, and my target of 1725, the most likely scenario would be a three wave rally to complete Waves C, D, and E, which would also complete Wave (D) in blue. A rally to 1980 would then give a target of 1725 for the final Wave (E), completing the correction from 2019.26.

Given the current count, I would expect a rally to 1980, followed by another move lower to below 1725 to complete this correction. Just as there is a price relationship between waves, so to is there a time relationship. The Weekly SPX chart shows that this current move is Wave [E] in purple of an inverted corrective wave from 1219.80. The time relationship suggests the earliest that this move would conclude is the first week of October.

 

On a short term time frame, the SPX looks to have completed a 5 wave sequence higher today at 1948.04. The index then moved lower, below the 1879.98 Wave [e] low. Since a rally is expected, this looks to be another semi-inverted wave forming, this time to the upside.

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.