Even More Whipsaw - Market Analysis for Jan 27th, 2022

Well, folks, don’t say you were not warned.  Elliott outlined for us that 4th waves are the most variable, and he was not kidding.  And, having this information is truly valuable, as it is not a normal trading environment.

With the current action, I have now outlined several potentials on the chart, not too dissimilar to what we have been discussing.  While I still have the purple count on the chart, when the market was unable to follow through over yesterday’s high, it made that potential less likely.   And, for now, I am not going to consider it unless we are able to break out over today’s high.

In the meantime, one of the messages the market provides to us is that when you see this much whipsaw, it is often indicative of either a triangle, or a diagonal.  And, those are the two primary counts I am now tracking.   So, let me give you the parameters we are watching.

Specifically, today’s high is the key to both these patterns.  If we take out today’s high then we go back to purple.  But, as long as we remain below today’s high, then I am looking for downside follow through to at least the 4239ES region.  That is going to be the line in the sand between the triangle count and the 5th wave going directly to lower lows.  

As long as we hold 4239ES, then we can continue in this triangle well into next week before we complete wave iv, and then see wave v take us to our target below.  

However, if we are indeed in the green count, then we should be breaking down below 4239ES, and drop to AT LEAST 4195ES for wave [iii] within an ending diagonal structure.   But, if this does turn into an ending diagonal structure, see that waves [iv] and [v] still provide whipsaw before this completes.

Now, many of you are asking me what happens if we break down below the Major Market Pivot.  Well, at this time, we have projections that can potentially take us down below there briefly, but I would expect a very strong snap back rally once we complete 5-waves down.  So, in other words, I will give it a bit of room just below our pivot if we do see that.  For now, the bottom of the pivot still looks like reasonable support we can hold.  Much will depend on just how a 5th wave lower will take shape.

In summary, as long as the market holds below today’s high, then this should be our high until the market completes wave v, even if we spend the next week filling in the triangle.   And, a break out over today’s high will have me looking again towards the more expanded wave iv in purple.  

Furthermore, I want to remind you that we are extremely oversold on all indications.  So, if we break out over today’s high, it will again suggest I have to entertain an alternative which views wave [4] as completed.  While my primary will still be wave iv as long as we remain below 4550SPX, I have to respect what this market can do when we are this oversold.  Remember, surprises often come to the upside in bull markets.

Lastly, I want to again outline to our newer members that this is not typical action in the market.   Normally, the market is relatively straight forward.  While we will always have an alternative count for risk management purposes, the action within a 4th wave is such that whipsaw is the nature of the game, and I can never be certain as to how this 4th wave will take shape until we move through it about half way.  Therefore, I am giving you the best parameters that I can glean from the market action, even though there is nothing definitive to take away from such 4th wave action.  Yet, even so, we have still managed to catch almost all these twists and turns.  But, as we move through this a bit more, we will have a much more confident wave structure with which we can plan.  

Avi Gilburt is founder of ElliottWaveTrader.net.