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.

Tuesday 04/07/2020

It was another gap up opening for the SPX. After opening at 2738.65, the index rose to 2756.89 before falling back. That proved to be the high of the day, and after the higher open, the SPX spent the rest of the day giving back all of it's gains. It didn't take long for the SPX to drop back to 2688.03 before trying to regroup and move higher. It did rally to 2746.03, but after that it was all downhill. An hour before the close the index was at 2669.55, erasing all of it's gains. The last hour was spent trying to break back into positive territory, but every rally was met with more selling. The SPX hit the low of the day at 2657.67, and closed only slightly above that level.

Going into this morning I was looking for a wave 5 from the 2447.49 low to complete either at Monday's high, or possible up to 2692. This morning's opening move to 2756.89 was obviously higher than I was looking for. So a review of the chart was in order:

Looking at the entire wave structure, the SPX made it's first move to 2475.51 off that low. From there, one can count 4 pullbacks before yesterday. 2475.51-2464.39, 2488.78 - 2466.10, 2614.54 - 2594.55, and 2636.28 - 2620.52. Taking the first 3 as points, (2475.51, 2464.39), (2488.78, 2466.10), (2614.54, 2594.55), gives an R^2 value of .9943, which satisfies my model for a 5 wave sequence. Taking the last 3 sets, (2488.78, 2466.10), (2614.54, 2594.55), and (2636.28, 2620.52) gives an R^2 value of .9995, which also would satisfy my model. I usually label sequences as they complete, and so the first 3 pullbacks were labeled as a-b-c-d-e(2). So the entire wave structure was 1-a-b-c-d-e(2)-3-4. This resulted in the wave projection I gave last night. Equally possible would be 1-2-3-a-b-c-d-e(4), as the last 3 pullbacks qualify as a completed sequence. Using that count, 2756.89 would satisfy the conditions for a 5 wave sequence. As (2459.96, 2475.51), (2464.39, 2488.78), (2620.52, 2756.89) yields an R^2 value of .9997.

With the wave from 2459.96 completed at 2756.89, the next move would be a pullback. As we saw today, the SPX did pull back, in what appears as 3 waves from that high; 2688.03 - 2746.03 - 2657.67. This also brought the SPX into oversold territory on the 15 minute chart.

Taking the pullback from wave 1 which was 2538.18 to 2459.96, and the 3 waves of today's pullback gives (2538.18, 2459.96), 2759.89, 2688.03), (2746.03, 2657.67) gives an R^2 value of .9938. So it looks like the SPX has completed waves 1-a-b-c-d-e(2). The next move appears to be up.

The SPX now seems to be in the last stages of Wave 5 from the 2191.86 low. While I am still looking for higher levels, those higher levels may be minimal. My target for this wave remains 2755 - 2888, a level that the SPX already reached this morning when it hit 2756.89. Unless the SPX manages to move above 2888, I view this as the index reaching the end of this move higher. There are always alternatives of course, but I'll wait until this wave completes before getting into any of those.

Monday 04/06/2020

On Friday I described the decline from 2538.18 to 2459.96 as a complete 5 wave sequence. From that point, in the last hour and a half of Friday's session, the SPX did some technically productive work, putting a series of higher highs, and lower lows on the 5 minute chart.

This morning the SPX continued that positive tone in a big way. A gap up at the open, to 2578.28, started the day off, and the index continued higher right until the close, with only minor pullbacks along the way. From the 2459.96 low, the SPX looked to have formed a wave 1, followed by waves a, b, and c of 2, an inverted corrected wave. The opening surge to the SPX to 2614.54, making wave d of wave 2, and the pullback to 2494.55 completed wave d, and the entirety of wave 2. It then looks like the move higher to 2636.28 formed wave 3, the pullback to 2620.52 wave 4, and the push up to 2676.85 near the close could be wave 5. The 5 waves outlined above satisfy my model for the completion of a 5 wave sequence, and the SPX is in overbought territory on the short term charts. Using my thresholds, this wave could complete anywhere from today's high of 2676.85, on up to a maximum level of 2692. So it is conceivable we see a continuation at the outset tomorrow.

On Friday I mentioned a slight adjustment to my count from the 2191.86 low. The adjustment affects Wave 3, which started at 2360.25. I originally had called 2637.01 as the end of that wave, but after some review, I would label that as wave d of 2 of an inverted corrected wave, the pullback to 2520.02 as the completion of wave 2, and then the three waves up to 2641.39 as waves 3,4, and 5, completing the wave from 2360.25. The move from 2641.39 down to 2447.49 still counts as a 5 wave sequence from 2641.39 to 2447.49, so the only thing this does is slightly alter the range for the completion of wave 5. I had been mentioning 2749 to 2886 for that range, but will change that to 2755 to 2888.

So to review, I see the SPX as having completed 4 waves from the 2191.86 low. The target range for wave 5 is between 2755 and 2888. Wave 4 of this sequence completed at 2447.49. Wave 1 of 5 completed at 2538.18. The second "wave" completed at 2459.96. This could be wave 2, or wave a of in inverted corrective wave.  The third wave of the sequence is in progress, and will complete either with today's high, or possibly up to 2692. At that point the index should pull back before continuing higher.