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.

5 Wave Model 03/15/2020

It has been way too long since I have posted. To those who have followed in the past, I apologize. But, considering the state of the market at the moment, I have contemplated starting to post again. Since it has been so long, I will spend a few minutes catching up. Those who have followed in the past know that I have been looking for 5 waves to be completed from the 3/6/2009 low of 666.79. I saw 1219.80, which was reached on 4/30/2010 as the first wave. The following correction to 1010.91 I considered Wave A of a 5 wave corrective wave. The subsequent high on 5/5/20111 of 1370.58 was Wave B of this corrective wave, and the low of 1074.77 Wave C. The market then underwent a lengthy rally that carried the SPX to 2134.71 on 5/22/2015. The market action from 9/22/2014, with the SPX at 2019.26, until 216/2016, when the SPX fell to 1820.66, was a bit muddled. At the time the SPX rose to 2134.71, I was looking for a low below 1810 to complete Wave C of the corrective wave from the 1219.80 high. There a couple of possible counts for this, but at the moment it is moot, since the count remains the same regardless of the exact points. So I will go with 2019.26 completing a 5 wave sequence from the 1074.77 low, and then an extension of that wave to 2116.48 on 11/6/15. Taking that as Wave D of the 5 wave correction from 1219.80, the following low of 1810.10 meets my requirements for the completion of 5 wave from 1219.80.

So we have this entire wave starting at 666.79, Wave I completing at 1219.80, and a 5 wave corrective sequence completing at 1810.10, for Wave II. Considering that, my model would be looking for Waves III. IV, and V to follow. I counted a 5 wave sequence from that 1810.10 low, to 2872.87, thus possibly completing Wave III. I saw a complex corrective wave from there to 2346.58 low reached on 12/31.2018. This completed Wave IV. The SPX then rallied to 2393.52 on 2/25/2020.

So if you take the 5 waves 666.79, 1219.80, 1810.10, 2872.87, 2346.58, 3393.52, who find a correlation of .9925, which meets my model's requirements for the completion of a 5 wave sequence. If so, the target for this corrective wave would be around 2030.

I will continue to post, depending on interest.