Final Test - Market Analysis for May 4th, 2022

With the market finding a low in the pullback today, it allowed us to assign value to the resistance overhead.  As I outlined today before the rally began in earnest:

“With the rally off today's pullback low, I am going to assume that the b/(ii) is done.  So, now, our resistance region is 4245-4286SPX.  The 4245 level is the 1.00 extension to the downside of waves 1-2 in the c-wave down, and is a standard target for a 4th wave bounce off the 1.618 extension when wave 3 completes.  The upper end of the resistance is the a=c in the potential wave 4 in yellow in the 4286 region.  

For now, I would say if we hit that DANGER target, and then drop back below 4200, we are likely on our wave down in the yellow wave 5 towards the 4000 region.  So, let's see if the bulls can get it done with a strong move through the 4286SPX region.”

So, here we are at our resistance.  And, as I also posted not too long ago, the micro structure seems to suggest the top end of the danger box can be seen.   

Therefore, the next day or so will likely provide us with a very important test as to whether the bottom to wave [4] is in place.  Since we have the bare minimum number of waves in place to suggest that wave [4] has completed, and we have hit the minimum target I had for this decline, I have to give the bulls the slight edge from a wave count perspective.

With that being said, there is still too much evidence for this yellow count, so I will personally be taking some positions in hedges as long as we remain below 4290SPX.   Remember, it still takes a strong break out over 4310/20SPX to suggest that wave [4] is done, and that wave [5] has indeed begun.    So, I am just going to get a little protection in the event we see that dreaded lower low in wave 5.  But, remember, this entire region is a buying opportunity as our upside ideal target is 5500SPX, which is still over 1200 points overhead as I write this update, with maybe another 200-300 points of downside risk.

For me, this should be our final test for the completion of wave [4].  

5minSPX
5minSPX
60minSPX
60minSPX
Avi Gilburt is founder of ElliottWaveTrader.net.