Well, everyone else has been calling for a market crash, so I thought maybe I should too. But, while I think the market will likely crash again, I don’t think it is going to happen just yet, as I still believe this bull market has several more years to run.
When I peruse the articles on Seeking Alpha, it seems to be en vogue today to be bearish. The headline articles discuss how the market has now moved into being a bear market, or that the VIX is about to skyrocket, or the market is overvalued, discussions of black swans, the impending debt crisis, etc.
Turn back the clock to early 2016 and 45% lower in the S&P500, and were we not reading the exact same articles?
And, of course, this time is certainly different. There are a whole new set of issues that we need to worry about, right?
I mean, are the issues with which we are now grappling much worse than what we faced back in 2016 and 2017 when the market saw one of its strongest rally in years?
Think about it. Are we dealing with anything worse than the cessation of QE, North Korean atomic threat, major terrorist attacks worldwide, Brexit, Frexit, Grexit, Trump election, rising interest rates, and many more I don’t even care to list.
Now, if you have been an active member of the market over the last several years, and you have not come to the realization that all these “issues” mattered not to the market as it continued to soar, then you have not been paying attention. All these issues are purely bearish noise which a prudent investor learns how to tune out. Rather, a prudent investor understands when this noise simply helps build that wall of worry which the market climbs.
Have you been a prudent investor these last two years? If not, don’t you think it is time to take stock as to what you did wrong, and how you can correct that in the future?
And, if you do not have the tools to recognize what is bearish noise then maybe you can come join us at ElliottWaveTrader.net. We foresaw this rally years ago, as well as the correction within which we are now mired.
As to our immediate future, I am going to give you one number to watch in the coming week: 2645SPX.
As long as the market holds over 2645SPX early in the coming week, we are setting up to rally towards 2720SPX.
However, if the market breaks down below 2645SPX with an impulsive 5-wave structure, then we will be setting up to drop to the 2530-2555SPX region over the next week or so.
Now, for those who are going to read this article, and view this as my being indecisive, I want to remind you that my job is to give you guideposts to understand which path the market will take in the coming week. Anyone who can tell you with certainty what the market WILL do is truly clueless about how non-linear markets work.
Moreover, when you understand that the market has been mired within a 4thwave correction (the most variable wave within Elliott’s 5-wave structure), then you understand we are not yet set up for the trending move, as whipsaw will likely continue to be the name of the game.
For the last several months, the stock market has been desperately trying to shake both the longs and the shorts out of their positions. But, this is nothing new to those who understand how 4th waves take shape.
Once the market dropped in February down to our target for this 4th wave between 2424-2539SPX, I expected a rally to take us back over 2720SPX. After the rally back up to as high as 2800SPX from the 2532SPX low, I noted that the easy part of this 4th wave was likely done, and the action will likely become much more complex from that point forth. And, the market as certainly been much more choppy since that time.
And, as I noted during the week to my members, seasoned and experienced traders find huge value in understanding where we are within the market structure, as they reduce the number of trades they do during a 4th wave, in addition to reducing the amount of risk they are willing to accept during a 4th wave.
But, understanding that we are in a 4th wave also suggests that there is likely another rally around the corner; the 5th wave. So, I still expect that this market will see another rally, potentially into 2019, which takes us over 3000 in the SPX.
Avi Gilburt is a widely followed Elliott Wave technical analyst and author of ElliottWaveTrader.net (www.elliottwavetrader.net), a live Trading Room featuring his intraday market analysis (including emini S&P 500, metals, oil, USD & VXX), interactive member-analyst forum, and detailed library of Elliott Wave education.