Markets

Are Stock Market Shorts Being Shown The Door?

A generic image of a stock chart.
Credit: Shutterstock photo

By Avi Gilburt, ElliottWaveTrader.net

As the market continues to whipsaw market participants, it has certainly left many of you scratching your head.

As each day goes by, it offers me another opportunity to chuckle when I see so many attempts by pundits to try to explain what latest news events cause each whipsaw. And when they try to fit their square pegs into round holes, or, when they don’t have any pegs at all when there is no news to even attempt to explain a move, it just makes me wonder when these market participants will finally open their eyes as to how the market really works.

In fact, this past week, I penned a blog post to at least urge market participants to consider adding another tool to their tool box beyond fundamental analysis or news following:

It's Time For A New Tool In Your Investing Toolbox - Avi Gilburt

Whereas those attempting to follow the news have been terribly whipsawed, those that have used Elliott Wave analysis have had forewarning as to where these turns would occur.

For those that understand Elliott Wave analysis, and as I have explained before, the 4th wave within the 5-wave Elliott structure provide the most whipsaw as it is the most variable wave within the 5-wave structure. Understanding the market through this context can prepare you to expect this type of whipsaw, and a deeper understanding of Fibonacci Pinball allows you to have forewarning as to where these turns can occur.

So, in true 4th wave action, I noted last week that if the 2640SPX level were to break as immediate support, it would point us to the next lower support, which was around the 2616SPX region. The market bottomed at 2613SPX, and began a 65 point rally off that level.

In this coming week, as long as we do not break below last week’s low, we have a set up to rally back towards the 2737-2776SPX region.

Alternatively, should we break below last week’s low, then it opens the door to complete this 4th wave correction in the 2450-2495SPX region later in May. And, it will most likely continue in whipsaw fashion, as it would likely take the shape of an ending diagonal.

See long-term chart illustrating the wave counts on the SPX.

Avi Gilburt is a widely followed Elliott Wave technical analyst and author of ElliottWaveTrader.net (www.elliottwavetrader.net), a live Trading Room featuring his intraday market analysis (including emini S&P 500, metals, oil, USD & VXX), interactive member-analyst forum, and detailed library of Elliott Wave education.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Avi Gilburt

Avi Gilburt is an Elliott Wave market analyst and founder of ElliottWaveTrader.net, a live trading room featuring a team of more than a dozen analysts and a dynamic community of thousands of professional traders and money managers. Avi emphasizes a comprehensive reading of charts and wave counts that is free of personal bias or predisposition. His Elliott Wave analysis appears frequently on sites such as MarketWatch, TheStreet.com, and SeekingAlpha.

Read Avi's Bio