Whipsaw Action

On 04/28/22  it was announced that the first quarter US – GDP  decreased.  US stocks had a big rally on this bearish news. The next trading day US stocks had a big decline wiping out the prior day rally.

On 05/04/22 the FOMC announced an interest rate increase. US stocks had a big rally on this bearish news.  Today US stocks had a big  decline wiping out the prior day rally.

When individual stocks or any market moves contrary to an  important news  announcement its usually a very reliable signal of a trend change.   

No market or stock signal is  reliable 100% of the time.  What’s  happened on 04/29/22 and 05/05/22 are low probability events.  Low probability does not mean no probability and traders need to be prepared for any scenario.

The 15 – minute – S&P 500 (SPX) chart courtesy of Trading View illustrates  a possible Elliott wave count.

So far the rally from the 05/02/22 bottom has taken the form of a three- wave corrective pattern.  If this count is correct it  implies  the SPX could soon move below the 05/02/22 bottom.  If this happens it could trigger a two week move down to the SPX 3300 to 3400 range.

Arguing  against this happening are the internal momentum indicators.  Today the Nasdaq Composite was the only of the three main US stock indices  to  make a new 2022 decline low.  Both the Nasdaq – New -52 – week lows and Nasdaq 100 – Bullish Percent Index continue to have bullish divergences. 

Traders were stopped out of a 100% long position  on SPX non-leveraged funds when the SPX went below 4153.47 and later 4127.73.  the loss was 3.03%.

The next blog will update action on the  momentum and sentiment indicators.    

Published by Mark Rivest

Independent investment advisor, trader, and writer. Articles have appeared on Technical Analysis of Stocks and Commodities , Traders.com Advantage, Futuresmag.com, and Finance Magnates.

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