How to Tell (Without Getting Whipsawed)
By ChatGPT (OpenAI), prompted by Tim Bovee
December 8, 2025
Memo from the Prompter
Early this year, I brought ChatGPT into my trading workflow. I had experimented with earlier AI versions, but for my use-case they weren’t practical: the setup and friction outweighed the benefit.
That changed with newer models that can work with current market context more effectively. For a trader dealing with price changes updated by the minute, that shift was meaningful. Time matters. Being able to run multiple forms of analysis quickly—without cutting corners—matters.
In this partnership, I contribute decades of trading context and judgment; the AI does the grunt work: scanning many candidates fast, surfacing patterns and risk points, and presenting structured decision rules. I still make the decisions.
Recent PrivateTrader analyses have been driven by one recurring question from real, still-unfolding market action: Has one wave ended and the next begun? Elliott Wave labeling can be powerful, but in real-time it can also be ambiguous. So the practical question becomes: When is a reversal “verified” enough to act on—and when is it still just a story?
The essay below was prompted by those events, but the confirmation rules it describes are universal: they’re the same discipline you can apply across markets, timeframes, and wave degrees.
Main Text (ChatGPT)
Every trader learns this the hard way: the market loves to act like it’s reversing… right up until it doesn’t.
You see a fresh high, then a sharp pullback. You label it “the turn.” Then price snaps back up, makes another high, and your narrative takes a hit.
This is not a personal failure. It’s a feature of markets: crowds anchor to obvious levels—and when everyone sees the same “top” or “bottom,” the path of maximum frustration is usually to break that expectation first.
So how do we distinguish a real reversal from a fake-out?
My answer: don’t use one signal. Use a small set of independent confirmations—each one imperfect alone, but much more reliable together.
1) Break + Close beyond a meaningful level (not a vibe)
What it is:
Pick a level that reflects actual structure—usually the most recent swing low (for a top) or swing high (for a bottom)—and require a close beyond it, not just an intraday tag.
Why it’s better:
Intraday spikes are cheap. Closes are expensive. A close forces the market to hold its decision long enough that late buyers/sellers can’t instantly erase it.
How you back it up (logic):
If the reversal is real, it shouldn’t need to hide behind wicks. A real shift in control shows up in settlement behavior, not just momentary emotion.
How this fits a real, ongoing market example:
A rule like “I stay with the current count until we close beyond the prior key swing level (e.g., the prior session’s low)” is clean, tradable, and independently verifiable by readers. The exact number changes; the rule doesn’t.
2) Acceptance (the “next session stays beyond it / fails to reclaim” rule)
What it is:
After the break + close, require acceptance: price either remains on the new side of the level, or it tries to return and fails.
Why it’s better:
This is the simplest antidote to the market’s #1 trick: the one-bar breakdown that reverses immediately.
Operational version (the clean 2-bullet rule):
- Break + close beyond the pivotal level.
- Next session: the bounce attempt fails to reclaim that level (rejection), or price stays cleanly on the new side.
That “fail to reclaim” phrasing reduces whipsaws and reads well to non-quants.
3) Retest-and-fail (the highest-signal “simple” pattern)
What it is:
After a structural break, markets often retest the broken level from the other side. In a real reversal, that retest fails.
Why it’s better:
It gives you a clear structure: support becomes resistance (or resistance becomes support). It also pins risk and invalidation to a nearby price—high utility, low drama.
How you back it up (logic):
A meaningful level is meaningful because participants defend it. If price can’t reclaim it during a retest, you’ve just watched the defense switch sides.
Reader-friendly phrasing:
“I treat a reversal as real when the market breaks a floor, then proves the old floor is now a ceiling.”
4) Momentum confirmation (RSI/MACD/Ehlers as supporting evidence)
What it is:
Use momentum tools to support the structural evidence—never to replace it.
Common supporting signs at a top:
- RSI breaking down through a midline (often ~50)
- MACD rolling over and failing on rebounds
- Ehlers (or similar) showing a downshift that persists
Why it’s better (when used correctly):
Momentum can confirm that the market is losing “push,” but it can also whipsaw in chop. That’s why it’s supporting evidence, not the trigger.
Rule of thumb:
Momentum should weaken on rallies (in a topping process) and strengthen on selloffs. If it doesn’t, be cautious.
5) Volatility regime shift (optional, but powerful)
What it is:
Look for the tape to change character: range expansion, harsher pullbacks, and “urgency” replacing drift.
Why it’s better:
Many fake reversals occur in low-vol chop. Real reversals often come with a repricing of risk, which tends to show up as volatility picking up, not fading.
How you back it up (logic):
A true change in control usually forces participants to adjust quickly. That shows up as faster moves and wider ranges.
6) Elliott Wave–specific: don’t “call B” without a structural break
What it is:
In corrective advances, false peaks are common. The discipline is: do not switch to “B” just because it feels topped.
Why it’s better:
Elliott Wave is at its best when it stays anchored to objective levels. Without that anchor, wave labeling becomes story-time.
How you back it up (logic):
Corrections are messy by nature: overlaps, truncations, diagonals, and “one more push” are normal. So you demand proof: break + close + acceptance (and ideally retest-and-fail).
Define Verification and Invalidation (before you relabel)
If you publish wave calls in real time, this tiny discipline upgrade helps readers (and you) stay honest:
- Invalidation level: the price that makes the prior count definitely wrong (not “less likely”—wrong).
- Verification level: the price/structure sequence that makes the new count definitely right (or right enough to treat as the working count).
This prevents “narrative creep,” where labeling changes without price actually doing anything decisive.
The “Best Practical Stack” (my recommended default)
If I had to choose the most reliable approach that’s still simple enough to publish daily, it would be this three-step stack:
- Break + close beyond the key swing level
- Acceptance (next session stays beyond it or fails to reclaim)
- Retest-and-fail (support→resistance flip)
Why this stack is best:
- It’s mechanical (readers can follow)
- It reduces false positives (filters one-bar fakes)
- It’s time-efficient (fits real life constraints)
- It doesn’t require forecasting—only reacting to proof
That’s why the rule is boring on purpose: I stick with the current wave until the market proves me wrong. In real time, “proof” means structure first, then acceptance. Anything less is often just the market doing what it does best: offering an attractive story before it offers evidence.
Sidebar: Reversal Confirmation Checklist (Elliotician Edition)
Goal: Don’t switch from A to B (or from trend to reversal) until the market proves it.
- Define the pivotal level (structure): Use the most recent meaningful swing low/high.
- Break + close (not just a wick): Close beyond the level, not merely tag it intraday.
- Acceptance (next session test): Next day stays beyond it or the bounce fails to reclaim it.
- Retest-and-fail (best simple proof): Broken level acts as the opposite: support → resistance (or resistance → support).
- Momentum agrees (supporting / optional): RSI/MACD/Ehlers confirm the shift. Momentum alone is not a reversal call.
- Only then relabel the wave: If 2–4 are true (and 5 supports), you can switch the working count with confidence.
Default discipline: If the checklist isn’t satisfied, treat it as noise, chop, or a false peak—and keep the prior wave count.
Disclaimer (Publishing Rights & Market Advice)
Publishing / rights. Portions of this article were generated with the assistance of an AI language model based on prompts and editorial direction from the publisher. The publisher is solely responsible for what is published and for ensuring publication complies with the rules of the hosting platform and all applicable laws. This content does not grant any special publishing rights, licenses, or endorsements. Do not include third-party copyrighted text, charts, or proprietary material unless you have permission to use it.
Not financial, legal, or tax advice. This article is for educational and informational purposes only. It is not investment advice, legal advice, tax advice, or a recommendation to buy, sell, or hold any security or derivative. Trading involves risk, including the possible loss of principal. Past performance (or historical pattern behavior) does not guarantee future results. Consider consulting a licensed financial professional and/or qualified legal or tax advisor before acting.
No guarantee / accuracy. Market analysis is uncertain and can be wrong. This material may contain errors or omissions; use it at your own discretion and risk.
Tim Bovee, Private Trader 
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