For the last few weeks, Avi Gilburt has been highlighting "Danger Zones" in the market -- key upside retracement levels that could potentially boomerang the market back to the downside.
On April 21, as the S&P 500 entered Avi's "Danger Zone" above 4500, Avi sent out the following Market Update, noting:
"The market has now struck our DANGER ZONE. What does that mean? Well, it means we now have enough of a retracement off the lows to begin watching for 5-wave declines to warn us of the potential of the blue count taking us back down to 4000.”
He added, "One may want to consider lightening up on their long positions for risk management purposes until the market provides us with a high over 4637SPX."
By April 26, the index had dropped more than 300 points to 4175.
On April 27, as the market began to rally off this low, Avi added another "Danger Zone" box to his charts in the 4246-4329 region.
The index reached a high of 4308.45 the very next day, on April 28, before turning down to 4062.51 two sessions later -- this past Monday May 2.
And then again this past Wednesday, as the SPX popped nearly 125 points, Avi cautioned members about a Danger Zone with an upper end at 4286, writing:
"...if we hit that DANGER target, and then drop back below 4200, we are likely on our wave down in the yellow wave 5 towards the 4000 region."
The index struck the target that day and dropped to a low of 4106.01 on Thursday.
View Avi's Market Analysis from May 4 and also his article from April 27 with more detail about this wave counts.