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
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
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

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Market Crash Warning - The Trap Door Has Opened

Stock-Markets / Stock Markets 2019 May 27, 2019 - 06:44 AM GMT

By: Avi_Gilburt

Stock-Markets

I love reading about all the good news in the market. This past week, we saw U.S. jobless claims dip to 211,000, and they are now near half-century lows. We also saw U.S. consumer sentiment reach a 15-year high. So, what could go wrong?

Well, as Professor Hernan Cortes Douglas, former Luksic Scholar at Harvard University, former Deputy Research Administrator at the World Bank, and former Senior Economist at the IMF, noted:

. . . financial markets never collapse when things look bad. In fact, quite the contrary is true. Before contractions begin, macroeconomic flows always look fine. That is why the vast majority of economists always proclaim the economy to be in excellent health just before it swoons.

Moreover, the fact that consumer sentiment is hitting major highs is often a warning to the financial markets.


As Alan Greenspan also noted:

The cause of economic despair, however, is human nature’s propensity to sway from fear to euphoria and back, a condition that no economic paradigm has proved capable of suppressing without severe hardship. Regulation, the alleged effective solution to today’s crisis, has never been able to eliminate history’s crises.

And, when the market made a new all-time high in April, and some of the major banks and analysts were still calling for a “melt-up” to begin at that time, it seemed quite clear we were hitting euphoric levels, especially with the market rallying non-stop off the December 2018 lows.

In fact, when AAPL hit the 215 region on the first day of May, many thought me crazy for shorting it at that time, especially when it was hitting those highs after what was supposedly a phenomenal earnings announcement. But, that has been one heck of a profitable trade for which I was supposedly crazy to enter.

Indeed, we were seeing points of euphoria throughout the market.

I have also seen many note that one cannot foresee a black swan event which “causes” significant market declines. While they may be correct in suggesting that one may not be able to foresee an “event” before it occurs, but markets do not crash without warning. Rather, one needs to have a set up in place before that occurs. As Ralph Nelson Elliott correctly noted:

At best, news is the tardy recognition of forces that have already been at work for some time and is startling only to those unaware of the trend.

And, currently, the market is setting up in a manner which can shave off hundreds of points in a very short period of time. While I cannot guarantee this will happen, as life offers no guarantees, I can alert you to the fact that the set up for such a decline is now in place. And, should some news event hit the wires to seemingly “cause” the market to drop precipitously over the coming weeks, please do not tell me this was a “black swan” event which was unforeseeable. The set up is currently in place.

Moreover, we constantly track the market in our service, and will be following the market down in order to make sure the impending drop follows through as expected. Should we see any counter indications, we will adjust accordingly in real time. That is the beauty of our Fibonacci Pinball methodology, as it keeps us on the correct side of the trend the significant majority of the time, and provides us early warning as to when we may be wrong so that we can adjust rather quickly.

While the micro structure can still push us higher towards the 2855/60 region, and maybe even stretch us as high as the 2900/20SPX region over the coming week, the next time we break down below the lows we struck this past week will suggest that the market is falling through an opened trap door. And, assuming we follow through immediately below 2770SPX, that can present us with a waterfall event similar to what was seen in the fall of 2018, in January of 2016, in August of 2015, and in August of 2011. The same set up is now in place.

But, as I have said before – fret not. This drop will be a major buying opportunity to load up on the long side, as it will set us up for our trip to 3500SPX+ that I expect as we look towards the 2022/23 time frame.

I would like to take this moment to recognize all those that gave their lives in the service of our country. It is due to your and your families’ sacrifice that we are blessed to live in peace and comfort, while enjoying the freedoms provided by the framers of our Constitution. To you, we owe a debt of gratitude which we will never be able to repay. So, the least I can do is salute you this weekend, and also show appreciation to all those who have served and who currently serve in the armed forces. And, yes, I include my own beloved father who served in both the Israeli and American armies, as well as one of my sons who currently serves. Thank you from the bottom of my heart.

View charts illustrating Avi's wave counts on the S&P 500.

Avi Gilburt is a widely followed Elliott Wave analyst and founder of ElliottWaveTrader.net, a live trading room featuring his analysis on the S&P 500, precious metals, oil & USD, plus a team of analysts covering a range of other markets. He recently founded FATRADER.com, a live forum featuring some of the top fundamental analysts online today to showcase research and elevate discussion for traders & investors interested in fundamental rather than technical analysis.

© 2019 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