In this week, as long as we do not break below last week’s low, we have a set up to rally back towards the 2737-2776 SPX region, writes By Avi Gilburt, ElliottWaveTrader.net.
As the market continues to whipsaw market participants, it has certainly left many of you scratching your head.
As each day goes by, it offers me another opportunity to chuckle when I see so many attempts by pundits to try to explain what latest news events cause each whipsaw. And when they try to fit their square pegs into round holes, or, when they don’t have any pegs at all when there is no news to even attempt to explain a move, it just makes me wonder when these market participants will finally open their eyes as to how the market really works.
In fact, last week, I penned a blog post to at least urge market participants to consider adding another tool to their tool box beyond fundamental analysis or news following:
It's time for a new tool in your investing toolbox - Avi Gilburt
Whereas those attempting to follow the news have been terribly whipsawed, those that have used Elliott Wave analysis have had forewarning as to where these turns would occur.
For those who understand Elliott Wave analysis, and as I have explained before, the 4th wave within the 5-wave Elliott structure provide the most whipsaw as it is the most variable wave within the 5-wave structure. Understanding the market through this context can prepare you to expect this type of whipsaw, and a deeper understanding of Fibonacci Pinball allows you to have forewarning as to where these turns can occur.
So, in true 4th wave action, I noted last week that if the S&P 500 (SPX) 2640 level were to break as immediate support, it would point us to the next lower support, which was around the 2616 SPX region. The market bottomed at 2613 SPX, and began a 65-point rally off that level.
In this coming week, as long as we do not break below last week’s low, we have a set up to rally back towards the 2737-2776 SPX region.
Alternatively, should we break below last week’s low, then it opens the door to complete this 4th wave correction in the 2450-2495 SPX region later in May. And, it will most likely continue in whipsaw fashion, as it would likely take the shape of an ending diagonal.
See long-term chart illustrating the wave counts on the SPX.
Avi Gilburt is a widely followed Elliott Wave technical analyst and author of ElliottWaveTrader.net (www.elliottwavetrader.net), a live Trading Room featuring his intraday market analysis (including emini S&P 500, metals, oil, USD & VXX), interactive member-analyst forum, and detailed library of Elliott Wave education.
