Wild Action - Market Analysis for Dec 1st, 2021

Normally, when I see wild action like this, it is often suggestive of corrective wave structure, or an ending diagonal to a c-wave.  Therefore, as I have been warning all morning, we will need to see an impulsive follow through over 4650SPX to suggest that wave iv is done.

As the market began a rally overnight, I outlined a pivot on the ES that had to hold, and then pointed us up to the 4650 region to potentially complete a 5-wave rally.  That seems to be what we completed this morning at today’s high. 

However, in order for me to now be confident that wave iv has indeed completed, I need to see a rally over today’s high, which should point us back up to the prior all-time highs to complete wave [i] of 5 of [3].  Thereafter, I would expect a corrective wave [ii] to set up the real break out to 4960SPX.  And, this is the set up for which I suggested many to wait to trade the rally more confidently to 4900+.  I am still of the same opinion.

With the back and forth action of late, I need to a bit more confident from the wave structure that we have indeed bottomed.  And, until that happens, there are two potential paths which can point us lower.   I have added the c-wave ending diagonal structure in blue on the 5-minute SPX chart, which would suggest a test of the 4540/50SPX region before this wave iv completes.  Alternatively, if we break below that support, then the yellow count begins to gain in probability, as outlined over the weekend.

For now, I need more confirmation that a bottom has indeed been struck, and that confirmation will come in a break back out over today’s high.  While we have a (1)(2) micro set up developing, I need confirmation to see it as reliable.  Moreover, a break below yesterday’s low will invalidate this potential.

So, I am going to remain a bit more patient as the market continues to swing back and forth in this region.  And, a break out over today’s high without breaking below yesterday’s low will go along way to pointing me back up to the 4960SPX as my high probability target.

Avi Gilburt is founder of ElliottWaveTrader.net.