Dow Jones Industrial Average: -93.87 or 0.90% at 10332.44
S&P 500 Index: -14.90 or 1.34% at 1094.90
NASDAQ Composite Index: -36.32 or 1.66% at 2156.82
NYSE Internals: 576 Advance. 2484 Decline.
After gapping down this morning, most of the day was in a sideways to slightly upward range. In the last 5 minutes however, the market ran up. The market opened up on a bearish note, with market breadth down more than 14:1 at the lows, but that faded as the day progressed. Although we ended the day down, I think this was a victory for the bulls. They managed to hold support around 1090(low was 1088) and got the SPX to close at nearly 1095.
After looking at the daily charts, I see two possible scenarios in play now. Both at this point suggest a new high in the near future. One scenario is slightly bullish, while the other one is looking for a lot more upside.
My first count suggests that this move up from the March lows is a simple ABC correction, a simple 5-3-5 zigzag. This would suggest that we are in Minor wave 5 of Intermediate wave C. A common Fibonacci extension for a wave 5 is .618 the length of 1. If we take a fib extension of Minor wave 1 of C, the .618 extension is around 1120. The 50% fib retracement of the ENTIRE bear market is 1122. So that area serves as pretty heavy resistance. If this count is in play, we should see 1122 soon, probably by next week. After hitting 1122, we should start pulling back.
The second count is extremely bullish. The target is around 1160 on the SPX. This count suggests that the move up from the March lows is not a simple ABC correction, but a complex triple zigzag. Meaning it consists of waves W-X-Y-X-Z. Each of those containing 3 minor waves of ABC. This count suggests that we are in Intermediate wave Z of the final leg up of this uptrend. In a triple zigzag, all the waves are a series of ABC's instead of 1-2-3-4-5. If this count is right, we completed Minor wave A of Intermediate Z at 1113, and we are now in Minor wave B of Z, which should retrace some of A before continuing higher towards 1160 for Minor wave C. If we are in Minor wave B, a good target for a small pullback would be between 1070 and 1080. Then we head higher. A common fib extension for a wave Z is .618 of wave Y. If Z is going to be .618 of Y, the target comes out to roughly 1160.
So all in all, I still believe we will make a new high, somewhere between 1122 and 1160. I will only turn bearish once we break 1029. But of course, as we have seen in the past, all of this could be wrong and we just start going down heavily over the next few days, which would suggest that maybe a new downtrend is here... again.
US Dollar was slightly up. Crude Oil was down, Gold was up. VIX was a lot higher in the day, but closed up around 4.62% Energy and Financials led to the downside.
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