Still Waiting For Market To Make Intentions Clear

First, I want to start out by reiterating that I believe this is a bull market and that we will likely be heading much higher this year.  But, the question still remains as to when the SPX is finally going to give us the set up for its break out to the next target region in the 4300-4400SPX.

So, before I go into the complexities of the analysis right now, I want to repost something I posted this morning:

“For those that have recently joined us and are new to our work and new to Elliott Wave analysis, I want to highlight that we are in a period of uncertainty within the market structure.  You see, within the Elliott Wave 5-wave structure, waves 2 and 4 are corrective structures.  And, corrective structures are the most variable of 5-waves within the Elliott Wave structure.   

For this reason, I consider trying to track a corrective structure akin to throwing jello for distance.   They can take many different twists and turns which are not always foreseeable, which makes waves 2 and 4 very different than waves 1, 3 and 5.  

Currently, I still have no indication that wave [2] has completed, so we can still see more whipsaw. So, I want to remind you of the note rom Frost & Prechtor which explains this situation:

“Of course, there are often times when, despite a rigorous analysis, there is no clearly preferred interpretation.  At such times, you must wait until the count resolves itself.  When after a while the apparent jumble gets into a clearer picture, the probability that a turning point is at hand can suddenly and excitingly rise to nearly 100%.”

My view is that it will likely take us a few more days until the smaller degree clarifies.  So, during this environment, it is not advisable for most to trade aggressively unless you are very nimble.  Moreover, I have no indication that a bottom has yet been struck for wave [2]. 

Lastly, in the event that a bottom has been struck, we will not be heading to 4300SPX in earnest until we have a 1-2, i-ii structure for a wave 3 break out.  And, that will likely take us some time.  So, patience is now the order of the day.”

With that being said, there is one way the market can prove that the bottom to (2) is in place, and I have highlighted that potential path in green on the attached ES chart.  To keep it simple, the ES must hold over this morning’s low of 3795ES, and then break out through the pivot.  Should it reach the 3935ES region, it must not break back below the pivot, and continue higher to complete 5-waves up for wave 1 of [3].  Ultimately, a break out over 3935ES which does not break back below 3900ES would make it much more likely that wave [2] has completed.

Until such time that this gets proven, there are still several paths that the market can take to a bigger wave [2].  One such path is outlined in the ES chart in yellow, which still suggests we can go higher to complete the b-wave at the 3935ES region, whereas the other path would suggest that we will break below the 3795ES support first, which would likely be the yellow [b] wave of a bigger b-wave presented in yellow on the 5 minute SPX chart.

So, as I said, these corrective structures are quite variable in nature, and can take several paths before we complete wave [2], as presented by the various yellow paths.   But, if the market is going to prove that wave [2] is done, it has to thread the needle as per the outlined I laid out in above, and follow through on the green count presented on the 5-minute ES chart.  

And, for those a bit more on the aggressive side, if we are able to break out over the pivot, and you want to take a long position in early anticipation of the completion of wave 1, then you should place your stops just below the pivot.  For if we have indeed completed wave [2], we may not come back below the 3880ES region once we break out over the pivot, even in a potential wave 2.

For most of our members, I would suggest to continue concentrating on the individual stock set ups being presented by our StockWaves analysts, as they fully support us still being within a bull market with pullbacks being buying opportunities.

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