Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Following The Stock Market "Heard" Can Get You Into Trouble

Stock-Markets / Stock Markets 2018 Nov 07, 2018 - 12:43 PM GMT

By: Avi_Gilburt

Stock-Markets

So, I heard that good news is now bad news and bad news is now good news in the market. Or was that bad news is bad news and good news is bad news? Or, was that bad news is bad news and good news is good news? To be honest, I just can’t keep up with all the convoluted ways people try to explain how to view the market based upon news. And, it changes all the time.

Last week, I heard the dollar rally was causing the market to tank. Well, by Wednesday this past week we had rallied 130 points off the lows in the S&P 500, and the dollar continued to rise along with us at the time. This is another Foghorn Leghorn market moment for analysts:


Don’t bother me with facts, son. I’ve already made up my mind.

Lastly, all I heard on Monday was how we were certainly going to crash. In fact, if you had viewed any media site that day you would have seen all the bearish headlines and expectations for impending doom. Most specifically, many were certain we would crash on Wednesday since it was a quantitative tightening day. Well, they sure tightened something all right . . . the noose around those thinking that the Fed controls the market and overstaying their welcome on the short side, as Wednesday provided us with a 50+ point rally.

It certainly seems as though if you followed everything you heard this past week, you were likely on the wrong side of these sizable market moves.

But, the simple reason for the strong rally we experienced was that the bearish boat was too heavily weighted on one side, so it clearly tipped over and took on water. And, on Wednesday, the market took out many of those on the short side of that boat who were expecting it to crash for one reason or another. It sure does not seem like anyone reminded investors that they were not supposed to fight the Fed on Wednesday.

Amazingly, there was no news associated with the rally (and even opposite news on Wednesday). So, what will all those who believe that news drives the market do? I am quite sure they were like deer caught in the headlights during the short squeeze this past week. In fact, one Bloomberg commentator noted: "no particular news today . . . sometimes bounces happen." Now, that was helpful.

So, let me get this straight. According to Jeff Miller (whose “Weighing The Week Ahead” series I strongly urge you to read), there was “no satisfying explanation” for the market drop from 2940, and according to Bloomberg this recent rally simply “happened.” So, why did the market move so dramatically?

Well, our ElliottWaveTrader.net subscribers know that we don’t need news or explanations to understand how the market moves. Our subscribers were put on notice that once the market broke below 2880SPX, it opened the door for the market to drop to the 2600SPX region. And, on Monday, the market bottomed out at 2603SPX and began a strong rally. And we were able to call for this action before the market even topped. So, do you think news really directs the market or is there something much more powerful that directs the market?

In the coming weeks, these are the goal posts you should follow. Ideally, the market will provide us with more of a pullback. And, as long as we hold the 2640SPX region, I am looking for a rally back over the 2800SPX region.

But, I will warn you that, depending upon how that rally takes shape in the coming weeks, Santa may be delivering coal this year for Christmas. Much will depend on the action at the end of November and early December, as the risks of a major correction have risen quite high.

So, for those who followed my analysis over the last few months, and stopped out of your long positions on a break down below 2880SPX, this pullback in the market is giving you an opportunity to ride the market back up on the long side. However, you will have to remain extremely vigilant if you intend on holding your long positions beyond the 2820SPX region.

If any of our Fibonacci Pinball supports are going to break on our way higher with a 5-wave structure to the downside, I will likely be looking to the short side of the market, with the 2200SPX region as my primary target to the downside. And, if the market tops anywhere over 2820SPX, and then begins an initial 5-wave decline, we will likely see market action similar to what was seen in 2011.

After being a staunch bull for years, my bear suit has been cleaned and pressed, and laying on my bed waiting for the signal from Mr. Market to don my freshly cleaned suit. And, should that signal present itself, the downdraft may be faster and larger than what we just experienced in October.

See charts illustrating the wave counts on the S&P 500.

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.

© 2018 Copyright Avi Gilburt - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in