Setting Up Another Drop
February 5, 2014
By Avi Gilburt ElliottWaveTrader.net
The market has two potentials. If it is unable to move beyond the 1755ES region, then we can still see this as a micro 4th wave rise in the c-wave down, and I become VERY cautious on short positions as we move towards the lower blue box, and will see how it develops. A long position MAY be in order depending on how that plays out.
However, if we were to move beyond 1755, I cannot view this as a 4th wave, and would be in the yellow count camp. That would have me shorting with stops just over 1768ES, and as the market moved down from there - assuming it does not break out over 1768ES - then I would be moving stops down to the 1740ES region, just over the .618 extension. If it drops to the 1.236 extension to the 1690-1700 in very strong fashion, then it is all over and we see lower 1600's next.
We are close to invalidating the larger bullish counts at this time. In fact, XLF has invalidated this potential count already, so we will soon see if the SPX will do so as well, with a break down below 1700. The next week or two will tell us a lot about the longer term prospects within the market.
See charts illustrating wave counts on the Emini S&P 500 (60-min) and INX (weekly chart).
For more of Avi Gilburt, sign up for a Free 15-Day Trial to ElliottWaveTrader.
Avi Gilburt is author of ElliottWaveTrader.net, a live trading room and member forum focusing on Elliott Wave market analysis. 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 SeekingAlpha, where he is a certified contributor; MarketWatch; and TheStreet.com.