Treacherous Is As Treacherous Does

Mama always said that the market is like a box of chocolates . . . during corrective action you never know what you are going to get.  😊

I have said many times that attempting to micro-count corrective action is akin to attempting to throw jello for distance.  And, with the current action, the market is certainly reinforcing my perspective on this.

What is most interesting is that even if the market does somehow resurrect that blue wave structure, it will still act like this with many starts and stops as even that rally will only be in 3-wave structures.  So, if the best possible structure we can hope for to take us to 3011 is that volatile, and will likely result in a strong down turn back towards the 2600SPX region, everything I see continues to point to this market being treacherous into the foreseeable future.

So, the immediate question is if the decline today is setting up a drop towards the 2600SPX region next week?  Well, to be honest, we do now have 5 waves down in a possible leading diagonal down.  But, as those who have followed me for some time know, I am not a fan of leading diagonals, as their reliability is questionable.  In fact, this can just as easily be a b-wave in a bigger a-b-c structure pointing us back up towards the 2865SPX region.

But, in order for me to even consider that potential, we will need to see our support box hold in the ES, and point us up in a CLEAR 5 wave structure back up towards the 2800 region, to set up a 1-2 structure for a c-wave rally. 

However, if the market only consolidates correctively in the coming day or two below this week’s rally high, then it makes it a much stronger likelihood that next week will see a lot more red, as we head down in the (c) wave towards the 2600SPX region.

Again, rallies cannot be trusted unless there is a clear and low risk set up, with very defined parameters.  Since the overall nature of the market seems to be changing, we may be moving towards shorting the rips rather than buying the dips.  So, unless there is a clear reason to look higher, I would strongly caution about long positions in this market.

Ultimately, I have not changed my perspective that we are either on the cusp of wave 4, or have already begun wave 4.  My feeling right now is that we have begun wave 4, unless the market can prove the blue count in the coming week or two.  But, even that will likely resolve with a strong decline towards the 2600SPX region for the a-wave of 4, even if it does manage to attain the 3011-3040 region.  So, with so much pointing to the likelihood of a visit of the 2600SPX region, I still caution against long side trades, and will only take ones that are strong set ups.  Otherwise, I will be looking for short entries as we move into 2019.

Should something change my perspective, I will certainly alert you.

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Avi Gilburt is founder of ElliottWaveTrader.net.