Author Archives: ElliottWaveTrader

Don’t Feed the Bears

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by Avi Gilburt

In a recent update, I pointed towards the 2,335 SPX region as the next likely target in the market. This week, the market has finally obliged, and taken us to our next waypoint.

As I have been noting for several weeks, the market has been much more bearish than I had expected with only a slight drop off the all-time highs. Moreover, my ideal expectations had us dropping even lower towards the 2,335 SPX region before setting up another rally attempt.

But, the fact that the market has become so bearish of late, even though we have not dropped much off the highs, tells me that the market may only be setting up the bears for a whipsaw they may not soon forget.

When I look across the web and read what many are “feeling” right now, most seem to still believe the market has gone farther than it should. Many are now calling this the end to the “Trump Rally.” Many even believe that the market has hit its high for 2017. Week after week, we see one top caller after another coming out with reason after reason as to why the market is just “too high.” The market has supposedly so far surpassed its fundamental valuation that many are absolutely convinced we have seen a blow-off top.

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Bullish Set Up Still In Place for Miners

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by Avi Gilburt, ElliottWaveTrader.net

Originally published on Sat Mar 18 for members of ElliottWaveTrader.net:  Last weekend (Mar 11), I noted that we needed to stay over 21.60 on Monday and complete 5 waves up to give us a bullish set up going into the Fed announcement.  On Monday, the market gave us our 5 waves up off the prior week’s low, and on Tuesday, we saw a deep retracement of that initial upside structure, which certainly scared many people in the complex. 

The morning of the Fed day on Wednesday Mar 15, I sent out a “Pre-Fed Warning:”

“. . . please focus on the simplicity of where we are.  Micro support is 21.20, with support below that at last week’s pre-market low of just below 21.  As long as we hold those supports, we have a set up in place to break out.”  

As we know, the market broke out rather strongly after the Fed’s announcement.  But, please do not make the mistake of viewing the announcement as the “cause” of the rally.  Remember, sentiment was set up to take us up no matter what the Fed said.  And, the fact that we went up even though most believed that a rate hike was certainly going to cause the dollar to rally and the metals to drop provided us with another example of how sentiment trumps all supposed market forces.

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The Metals Rally Has Been Delayed, But Not Cancelled

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by Avi Gilburt, ElliottWaveTrader.net

First published Sat Mar 4 for members of ElliottWaveTrader.net:  Three weeks ago, as the GDX was consolidating just below its .764 extension, the market had a clear set up to break out.  However, when it did not do so over the following week, I noted in our trading room at Elliottwavetrader.net that I was hedging my portfolio because when a market has an opportunity to break out, and chooses not to do so, the market is often signaling it wants to pullback before the actual break out.  This seems to be the path the market has now taken.

My Perspective

In the past, I have noted that when the metals complex is in a larger bullish posture, I will always look towards the more bullish of the patterns as my primary, because experience has taught me this market often leaves people behind with shallow retracements:

“. . . based upon the larger degree perspective, with seeing 5 waves up from the 2015 lows, and then another 5 waves up from the December 2016 lows, I am on the hunt for the heart of a 3rd wave in this complex.  When we are looking for a heart of a 3rd wave to take hold, they OFTEN do not provide much in the way of pullbacks.  For that reason, I have always defaulted to a more immediate break-out scenario potential, since, otherwise, you can be left in the “dust” (pun intended), wondering where your pullback went.

Along those lines, the market has been consolidating near the highs for quite some time now.  And, as I noted last week, when the market has made a number of attempts to break out, and is unable, it often falls back into more of a correction, in order to take another running start at the heart of the 3rd wave.  So, with the inability to break out when it had a break out set up last week, I noted towards the end of the week that I would be hedging my account in consideration of that potential, and while we were still right at the highs.

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Wasn’t The Dollar Supposed To RISE On A Rate Hike?

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The dollar has been one of the biggest contrarian trades I have seen in years.  Every time the market is so certain about the direction it will run, it does the exact opposite and often in extreme fashion.  In my last weekend update, I noted how we called the multi-year rally off the 2011 lows when the market was expecting the dollar to crash due to all the QE.  And, I also noted how the dollar has been moving down after the Fed has raised rates, despite the common expectations that the dollar should rise.

Some days, if you listen really closely, you can almost hear the dollar laughing as it moves “unexpectedly.”

The same has happened with the Chinese Yuan. Recently, China spent 1 trillion US Dollars (a quarter of their FX reserves) over the past 3 years in an attempt to prop up the Yuan. However, the Yuan still lost close to 14% of its value against the USD over this time period.  Moreover, our lead analyst of our Forex Service at Elliottwavetrader.net, Michael Golembesky, appropriately advised a short in this market despite the Chinese “intervention.”  In fact, Mike and I wrote several public articles on this potential trade.  And, as you know, he has been quite successful in that trade, even though most others in the market would not consider such a trade in the face of the unprecedented action by the Chinese government.

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What The Heck Are the Miners Doing?

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by Avi Gilburt, ElliottWaveTrader.net

First published Sat Feb 25 for members of ElliottWaveTrader.net:  As the GLD and silver continued in their paths higher this week, there is no suggestion from price action that they have met the top to this current rally.  However, the lagging in the miner complex certainly has made many heads turn.

Now, I have always preached “each chart on its own,” and this is a great example of why.  You see, until this past week, silver was leading the complex, with the GDX not far behind it, and GLD bringing up the rear.  This “leader-board” is purely based upon the Fibonacci extensions which they have each struck during this last multi-month rally.

With silver breaking out through 18.20, it has now moved up to its 1.236 extension, whereas the GLD has only slightly moved through its .764 extension.  Yet, the GDX still consolidating below its .764 extension.  But, the fact that GDX has still not been able to break through its resistance has left it in a position where it can still pullback down towards the 21.50-22 region, but, clearly, that would not be my preference at this time.

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The Stock Market Is Not Even Close To A Major Top

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by Avi Gilburt, ElliottWaveTrader.net

The stock market is too high.  The fundamentals don’t support these heights.  This rally is completely “fake” because it has been “manipulated.” The market is in “nosebleed” territory.  We are in a blow-off rally. The market is about to crash.  Yes, we have heard it all for months now.  Maybe even for years.  And, such perspectives have caused many to miss one of the best rallies we have seen in years, as they expect the market to top “any day now.”

But, the simple truth is that the market is in the heart of what us Elliotticians call a “3rd wave”, and they are relentless and the most powerful segment of a 5-wave Elliott structure.   In fact, we have been within the heart of a 3rd wave since early November when we went against the common “market-think” and called for a strong rally to 2300 and beyond on the S&P 500 (SPX), even though Trump won the election.  But, it also means that we still have to complete waves 3, 4 and 5 before a long-term top is seen, as I have been noting since early 2016, which you can see in a chart of our market calls in the link below.

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Are You Still Waiting for a Metals Pullback?

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As the majority of the metals market seems to be awaiting a “pullback,” the metals market, like the equity market, has been quite stingy.  But, as I noted in my mid-week update, “by no means am I going to say that I “expect” more of a pullback to be seen, as the minimal number of waves are in place right now to support a break out in the complex within the next few trading days.”  I am still of the same perspective.

On Friday, I did an interview for a financial show, and prior to that interview, the interviewer me told me that most of their guests, who are normally bullish the metals complex, do not think that the metals are going to be breaking out anytime soon.  In fact, he was quite surprised when I explained to him that I see a set-up which can ignite a strong rally in the metals complex at any time now.

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