Whipsaw City - Market Analysis on May 3rd, 2018

There is not a single trader alive who emerges unscathed while attempting to trade within a 4th wave.  That is why seasoned and experienced traders find huge value in understanding where we are within the market structure, as they reduce the number of trades they do during a 4th wave, in addition to reducing the amount of risk they are willing to accept during a 4th wave.

As I have been warning for quite some time, if we broke that 2613SPX region, it was going to open the door to a tremendous amount of whipsaw.  You see, if this break down has now placed us in the green count to the downside, it seems to be structured as an ending diagonal.  That means we will be developing a-b-c structures all the way down until we complete this structure, likely into the end of the month. 

However, since we rallied off the lows struck today in 5 waves, it has still left the door open to the triangle pattern, as amazing as that may sound.

So, how do we address this market?

Well, at this time, I cannot say that either side is a heavily weighted probability.  But, what I can say is that as long as we remain below the downtrend line and 2662SPX, pressure will remain to the downside.  However, if the market is able to pullback correctively and then break out through 2662 SPX, it opens the door back up towards the 2730-2760SPX region for the (c) wave of the d-wave in the triangle.

Again, I have warned and will continue to warn about being too aggressive during a 4th wave.  Patterns break down all the time, as the market morphs between bullish and bearish, which burns both sides of the trade through the development of the 4th wave.  And, it is not likely that we are done just yet.

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Avi Gilburt is founder of ElliottWaveTrader.net.