How Much Whipsaw Do We Have To Endure Before We Finally Break 2600?

With the continuation lower today, I provided a number of charts and explanations in alerts throughout the morning regarding the differences in structure between the cash index and the futures.  Both those charts told me to key in on the 2630 region, which, if broken strongly, would suggest we are on our wave to complete the (c) wave of the a-wave in the 2450-2500 region sooner rather than later. 

Moreover, if we did see a sustained break down below 2630 we would need to drop down below 2600, which would then make 2630 resistance on all bounces, and point us down to the 2530 region for wave 3 of the (c) wave of the a-wave.   While that is still possible, we have not seen the needed sustained break of 2630 just yet.  All we have seen is a spike and reversal of that level, so no clear confirmation has yet been provided.

That led me to put out the following post during the day:

Thus far, the market has been unable to break below the pivot outlined this morning.  And, until we are able to continue below today’s low, I have to start looking higher yet again in another potential whipsaw situation. 

In the triangle pattern, we now have a more complex b-wave, as it is now presented on the chart, with todays lower low potentially completing it.  Now, while I noted that we needed at least one complex wave in a triangle, it does not mean we will not see another complex wave beyond what may have just bottomed as a b-wave in the triangle.

The action has continued to whipsaw the market, as we expected it would within a b-wave structure.  Moreover, it does not lend any confidence as to when we will eventually drop down to the 2450-2500 region to complete the a-wave of wave 4 just yet. 

That being said, should we rally back up to the 2810-2830 region in the SPX, that would finally provide us with a low risk shorting opportunity, as we would either drop in a d-wave to the bottom of the channel again or it could be the (c) wave in the bigger a-wave with targets below 2500.

For now, this looks like the best risk/reward set up I see at this time.  Until then, whipsaw will continue, at least as long as we remain above today’s low.  Below today’s low opens the potential for 2480 again, as long as we continue below 2600.

As I have harped on many times before, 4th waves should have you focusing on capital preservation.  So, not every time you see a “potential” move developing do you need to chase it.  Oftentimes, it will reverse and invalidate, leaving you whipsawed.  So, you have to be stalking low risk set ups, rather than trying to constantly trade in and out of the market. As I noted to a new member today, you will NEVER be able to get every move the market has to offer, so please get it out of your head that you need to be in the market all the time.  There are times it is best to be sitting on the sidelines and a 4th wave – especially a b-wave within a 4th wave – is usually the best time to watch the action from the sidelines while everyone else gets bloodied up and then stalk your low risk set ups.

For now, I cannot tell you what I see as a high probability pattern in the micro-sense.  However, what I can say is that as long as we hold today’s low, I expect much more whipsaw to come in the weeks ahead, with potential to rally up towards the 2810-30 region in a c-wave.  Should we see a break of today’s low with follow through below 2600, 2630 becomes resistance, and my target is 2450-80SPX.

1SPXdaily
1SPXdaily
60minSPX
60minSPX
Avi Gilburt is founder of ElliottWaveTrader.net.