Taking Stock - Weekend Update

I need to pay more attention to the SP500!

Some excerpts from Avi Gilbert's post at Seeking Alpha today follow.

As we came into this past week, I had our members of The Market Pinball Wizard well prepared for the whipsaw action we experienced this past week. This next quote was from my analysis posted to our members last weekend:

[A]s I warned earlier this week, as long as the market respects the 4200SPX resistance region, then I still expect some whipsaw potential. You see, my main count has us completing wave iii of 3, with wave iv of 3 yet to be seen. Therefore, there is still some up/down action I expect in the coming week...

And, boy has it been a week of whipsaw. But the main point is that none of this comes as a surprise to those aware of the trend, and where we reside within the trend. In fact, as we were topping out on Thursday in a smaller degree structure, it was clear we were about to see a pullback, as I outlined to our members. And, at that time, the announcement was made about the Biden proposed new taxes on investments.

I have been doing this for a very long time, and I am always amazed at how news fits into the cycle. When the market is set up for a move, and a news event hits the wires, it always looks like the news event caused the move. Yet, when the market is not set up for that type of move, and a news event hits the wires, the market will often simply "yawn" and continue along its path. We have all seen this happen many times, that is, if we are paying close attention.

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So, when the news of Biden's proposed tax hikes hit the market and the market reacted to the downside, all I can say is that it fits our chart expectations rather nicely. And, if you think that the substance of that news is what truly mattered, then you have to ask yourself if the news was retracted the very next day as not only did we take back the drop seen on Thursday, but we ran to new all-time highs!? Or, did investors re-consider, and then realize that the tax hike is actually bullish for the market?

I continually warn readers of my articles that if you attempt to trade or invest based upon the news, you will often find yourself behind the curve. I wonder how many of you were terribly whipsawed this past week based upon the news.

So, I will make this easy for you this coming week. Our smaller degree support is in the 4160/70SPX region. As long as that holds on Monday, I am looking for the market to rally up towards the 4240/50SPX region before we see another pullback to set us up for the next major rally to 4300+. But, if we do not hold 4160 as support early in the week, then we will likely re-test the 4095-4120SPX region before we begin the next rally to 4300+.

In other words, 4095-4120SPX is the new upper support for the market, and our targets remain 4300+ as we move into the month of May. In fact, 4095 may become our new support floor for the rest of 2021 depending upon the action seen in the coming 3 weeks.