Wednesday's Market 09/02/2015

It would seem that my logic yesterday was correct, however the analysis was not. I had called yesterday’s 1903.07 low Wave d of an inverted corrective wave that began Monday at 1965.98. I had anticipated a rally, and then one more wave down to complete Wave (e) yellow, and thus Wave [b] green. After today’s action it seems pretty clear that I was incorrect, and Wave d actually occurred yesterday, and the move to 1903.07 was the final wave lower.

By this count, the initial move higher this morning to 1938.37 can be seen as Wave [c] green, and the pullback to 1919.64 Wave [d]. Wave [e] of this sequence would need to complete below 1993 to complete Wave (D) dark blue of the long running corrective wave from the September 2014 2019.26 high. This would suggest that the final leg to below 1748 would begin once this wave completes.

Given the sequence so far, 1972.56-2093.55-1903.07-1938.37-1919.64, this current wave should complete between 1961 and 1989.

In my mind the SPX is now at a decision point, and it is a good time to discuss the main alternate count that paints a more bullish scenario. The corrective scenario I have been outlining has the September 2014 2019.26 high completing a 5 wave sequence from the October 2011 low of 1074.77. The alternate has the same count, but counts 2019.26 as Wave 1 of a higher degree wave. Waves 2, 3, 4, and 5 then completed as 1820.66-2079.46-1972.56-2093.55. This gives a complete sequence from 1074.77 as 1074.77-2019.26-1820.66-2079.46-1972.56-2093.55. I have already discussed above how yesterday 1903.07 low has completed a 5 wave sequence from the 2093.55 high. 1903.07 also would satisfy the criteria for the inverted corrective wave from 1219.80.

Tuesday's Market 09/01/2015

The SPX gapped lower this morning, dropping to 1931.41 within a few minutes. After bouncing around for a couple of hours, the index headed lower again to 1918.21. After another short consolidation period the SPX dropped to the low of the day at 1903.07, before staging a strong rally to 1920.41 in the last 15 minutes.

The entire drop today looks to have completed the sequence from yesterday’s 1986.26 high. As discussed yesterday, this sequence appears to be wave d of an ongoing inverted wave. Yesterday I said I would then expect a bounce of something less than 14 points. This was based on the point move for the first waves of the sequence. With the low in, this bounce could carry to 1946 and still satisfy my correlation criteria. During this inverted sequence, Wave c reached an oversold level on the 15 Minute RSI(5). It would likely that Wave d would also reach this oversold level.

Looking at the longer term count, I have labeled the 1993.48 high Wave (b) yellow. The drop to 1965.98 could have completed Wave (c), and the current inverted wave then would be Wave (d). After that the market should undergo one more decline for Wave (e).  

Monday's Market 08/31/2015

It has been an interesting couple of days. After trading up to 1993.48 on Friday morning, the SPX has traded lower from there. The move up to 1993.48 does seem to complete 3 waves up from the recent lows, which alters the Daily count slightly, but does not change the overall outlook for the index.

It may be better to start with the big picture at this point, and then work my way down. Working from the March 2009 low of 666.79, my count shows completed waves at 1219.80, 1010.91, 1370.58, 1074.77, and 2019.26. In my model Waves 1, 3, 5 of every sequence develop a certain relationship. Specifically, when the waves are taken as points, (start point, end point), the points exceed an R^2 value of .99. Since the three impulse waves that I mentioned above, (666.79, 1219.80), (1010.91, 1370.58), (1074.77, 2019.26, do not meet this criteria, one can assume that this sequence has not yet completed. Although my model is called the 5 Wave Model, it can also be thought of as a 9 wave model. Normally one corrective wave is what I term a complex wave, which breaks down into 5 waves with magnitudes similar to the others. The result is a sequence that displays 9 similar or related waves. My current view is that the move from 1219.80 has been just such a complex corrective wave, in particular one I call an inverted corrective wave. So we can look at the points (1219.80, 1010.91), (1370.58, 1074.77), and (2019.26, X). Given the correlation I described above, 1748 would be the maximum value at which the correlation would exceed .99.

The wave structure from the 2019.26 high has been quite complex and the structure hard to discern. My model is designed to identify the ends of waves, although it can provide some insight. Given the action of the past several days, I have relabeled some of the move from that high. Again, this does not change the target, but may provide some insight as to how we might get there.  My current count suggests that there are several waves that need to complete before ultimately reaching the low. It also appears that we may stay within the current range, 1867-1993, for some time as some of these waves complete. I will try to go into more detail in the upcoming days.

Shorter term the SPX completed a sequence at 1968.68, followed by three waves up to 1986.26. Another sequence completed to the downside at 1967.29 and was followed by a wave up to 1978.45. This suggests a sequence from 1986.26 has yet to complete. Once it does the SPX should move higher, likely completing a complex corrective wave from 1968.68. The three waves up from that point were likely waves A, B, and C, and the sequence from 1986.26 is Wave D. Wave E should the be something less than a 14 point bounce before the sequence from 1993.48 completes. I would expect this to come close to the previous 1867.08 low.