The market started off the week on a positive note, with SPY reaching 407.45 Monday morning after closing the previous week at 404.12. That proved to be the high for the week, as the market stumbled through a tumultuous week. SPY worked mostly lower Monday after the higher open, and carried those losses into Tuesday. Wednesday's trading was mostly flat, and Thursday saw a higher open, peeking once again above 400 before dropping to near 390 by the end of the day. Friday's market was choppy, with a lower open, a move back into positive territory, and a sell-off below 385 to close out the week.
On Thursday I detailed a count projecting a move below 379, and possibly a test of the 348.11 low. That remains my count, but with the current uncertainty in the market, I will be monitoring that closely. I will pay close attention to short term waves, and give what I feel are important levels to watch. With that in mind, we'll take a closer look at Friday's action.
As these waves can resolve themselves in several ways, I have denoted the major waves with an "X", and have counted out the sub-waves when applicable.
SPY traced out 3 waves off the Friday morning low, the second sub-dividing into a 5 wave sequence. From there, there were 3 waves down into the 2:00pm hour. The choppy trading from there looks like two waves, with the second wave a complex corrective wave. The 1 - 2 set-up points to a move higher to begin. One possible count would call for a move higher to the 387-390 level, followed by a move down to 383.
Short term, the 391 level will be the area to watch. if the 387-390 resistance holds, an initial move to 383 is likely, with a small rebound, and then further lows below 379. A break above 391 would indicate a very complex corrective wave from the morning 393.16 high, and most likely a move above that level, possibly testing the 400 level again.
I'm not going to get too far ahead of myself. At the moment it will be best to take one wave at a time. If we do test the 400 level, the key point will be the 401.48 high. A break above that could mean a change in the overall scenario.
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