Outside the Box: There’s more whipsaw trading to come in the stock market, according to Elliott Wave theory

As we have been saying for some time, with the stock market moving through a larger-degree 4th wave in Elliott Wave theory, we should expect whipsaw trading to continue.

During the progression of this 4th wave last week, we have been tracking two potentials in the market. I believe both will provide us with a rally. However, the question is from where will that rally begin?

As you can see on the attached charts, I have presented the potentials in green and yellow. At the end of the day, as long as the market remains below the 2,660/80-point resistance region on the SP 500

SPX, +1.38%

the green pattern is pointing us down to the 2,450-90 region to complete a larger-degree a-wave of wave 4. However, should the market be able to break through that resistance in an impulsive manner before breaking down below 2,585, that places us in the yellow count, pointing us up to levels of over 2,800 again.




The main question the market needs to answer is whether the (b) wave of the larger-degree a-wave of this 4th wave has completed. The green count presents us with the scenario where the (b) wave has completed, and the market should remain below 2,660 to complete 5 waves down in the (c) wave of the a-wave to a target region between 2,540-90.

If the market is going to break out us out over the 2,660 region before breaking down below 2,585, then it suggests that the (b) wave has not yet completed, and we would likely see a bigger c-wave rally before that (b) wave completes. Again, this is the yellow count.

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While I would actually prefer the yellow count, as it would cause even greater whipsaw and confusion in the market, which is the hallmark of 4th waves, I simply cannot maintain it as my primary as long as the market remains below 2,660.

In conclusion, I think the market can make it clear early in the coming week which path it wants to take. But as long as we remain below 2,660, pressure will remain down toward the 2,450-90 region. However, if the market is able to take us over 2,660, with follow-through over 2,680 in impulsive fashion, it would signal the potential for a c-wave rally back up over 2,800, with some potential to even exceed 2,900 based on its structure.

Lastly, I still think this correction will take us longer and deeper than most in the market are now considering, as my standard targets for a correction of this degree still resides in the 2,100/2,220 region for 2019.

See detailed charts illustrating the wave counts on the SP 500.

Avi Gilburt is a widely followed Elliott Wave technical analyst and founder of ElliottWaveTrader.net, a live trading room featuring intraday market analysis on U.S. indices, stocks, precious metals, energy, forex, and more, along with an interactive member-analyst forum and detailed library of Elliott Wave education.

Avi Gilburt is a widely followed Elliott Wave technical analyst and author of ElliottWaveTrader, a live trading room featuring intraday market analysis on U.S. indices, stocks, precious metals, energy, forex, and more, along with an interactive member-analyst forum and detailed library of Elliott Wave education.

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