Tuesday Market Action

I wasn't going to post a chart of the SP500 until the end of the week unless the trend channel was broken, and that happened today.   This completes the five wave impulse of some minute cycle, and a corrective wave is now in progress.

I've labeled subwaves i through v.  The complete drop from Wednesday's high of 1208.47 to yesterday's low of 1121.09 (narrowly beating out Friday's 1122.05) covered 87.38 points.  Today's closing high of 1162.35 is within 2 1/2 points of the 50% retracement of the entire impulse.

(Note my typo in the chart.  The wave label at the bottom of the channel should be v, not iv.)

Simple chart from Yahoo Finance, all the folderol added by me

A new channel is trending up at the moment.  Coincidentally, the 50% retracement at 1164.78 is right in the middle of a support-resistance band I noted back on the 12th.  It seems the 1120-1130 support-resistance band from the 8/12 chart might also be in play.

Despite the tidy trend channel containing subwaves iv and v, the actual charted values are a bit of a mess.  Regardless, the subwave 5 bottom is in, and the corrective wave might be close to over.  If not, the next potential top would be at 1175, the 61.8% retracement.  This is also the failed support level from last Thursday morning.  Curiouser and curiouser.

Remember, this is all part of the development of wave 5 down from the 7/07 top.  A rise above the subwave i low of 1184 calls this wave counting into question; and if 1208 is topped, it all goes out the window.

Update: S&P Equity research chief investment strategist Sam Stovall offers a very bearish assessment.

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