Whipsaw Not Done Yet

Today we saw the market open lower only to move a bit higher in the afternoon session only to hit its head on resistance leaving us in a very similar stance to where we sat yesterday. The big question still remains as to whether we are dealing with a triangle wave pattern for this potential b wave or if the market has other intentions. As of right now the market is certainly showing the common traits in that we typically see in a triangle wave pattern namely three-wave price action that is staying inside of the previous lows and highs. With that being said this corrective wave action is also what we will find when we are dealing with ending diagonal patterns. So with what the chart is showing us at the moment, these are the two patterns that I think are most probable at the moment. Now from a practical perspective, both of these patterns are ultimately pointing lower, and as long as the next move higher remains corrective in nature the pressure will remain down at least in the near term. 

The triangle pattern that we are showing in white would suggest that we have bottomed or are near a bottom in the (d) wave of that triangle. From here we would expect to see a three-wave move higher that holds under the 6020 high that was struck on January 6th and ideally holding within the triangle channel as laid out on the five-minute chart. From there we would be looking for a five-wave move to the downside to begin the larger wave c down targeting the 5730-5650 range. 

The Ending Diagonal pattern which we are showing in red actually has a similar path in that we would still be looking for a corrective move higher that holds in the 5947-5986 zone as part of the wave b of 3 within that diagonal. Under this case, we would also be looking for a five wave move to the downside to begin the next leg down under that case. So again from a practical near-term trading perspective, the two paths are very similar. The red ending diagonal case however would likely not move as deep or as sharp lower as we would be looking for a c wave of a smaller degree to fill out the wave 3 of the larger wave b. This smaller degree c wave would likely target the 5790-5730 region but we would better be able to define this range once we confirm a top and see the size of the initial five wave move to the downside. 

Now should we see a break of the high that was struck on January th at the 6020 level it would open the door for us to see a larger b wave as shown in yellow. As of right now however, the price action is much more supportive of seeing lower levels before that high is struck in either the triangle or Ending Diagonal counts. 

So while the market continues to be in whipsaw mode we should be coming to an end of this type of price action sometime next week if we continue to follow the path as expected. Again a move into overhead resistance followed by a five wave move to the downside will be the initial signal that we have begun that next leg lower. In the meantime we likely will continue to see sloppy and unpredictable wave action which will be difficult to navigate.