Are The Bears About To Fumble?
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
Do you think we will ever see a week of market moves associated with news events for which you will not shake your head?
Week after week I think analysts say something so stupid that I just want to scream. As I have pointed out so many times over the years, I keep hoping that some form of sanity will grip pundits one day. I keep hoping that they may wake up and recognize the error of their ways. But, alas, I continue to long for that day.
So, whenever the market moves, everyone goes through the exact same thinking process: “Hey, look. The market just saw a big move. Let’s go see what news caused this move.”
Is this not the structure of almost all the analysis you see presented? Let’s look at this past week, for example. During the week, the futures took a strong downturn. And within hours, every analyst was certain that it was “caused” by Gary Cohn’s resignation.
So, let’s think about this. For how long has this resignation been telegraphed? I think we all knew it was coming. So, are you going to tell me that the market did not already have this “priced in?” You see, this is where this type of analysis gets really fuzzy.
When some form of “surprise” news comes out, and the market moves in the opposite direction than most expect, pundits are quick to note that the bad news “was already priced into the market,” which is why the market seemingly ignored it. But, when a news event hits the wires after it was widely telegraphed beforehand, yet the market sees a sizable move, you mean to tell me that news known before the announcement was not priced in?
When you begin thinking in an intellectually honest manner about the market, you begin to see how ridiculous most “analysis” presented about why the market moves really are. In fact, do you even realize they are trying to explain a move in hindsight, yet are often stumped for a reasonable reason for the move? Yet, this still remains the pervasive manner in which the public and analysts view the market.
When the market bottomed in early February, we set our sights on a rally to take us back to at least the 2727SPX region. And, I did not need to provide you with any "reason" as to why this will occur. Yet, it still happened, and I still have no need to go back to explain "why" it happened. I just accept that there is a power much stronger in this market than the "news." It is a power which guides the market in its general movements, and often provides advanced notice of these movements, assuming you know where to look.
Once we got to the 2727 region, I noted that the easy part of this move up has likely been done, and it will get much more difficult from that time on. My preference was to see a more protracted wave (4) take us back down to the lows struck in February, and potentially even a bit lower.
For those that read my analysis carefully, you would understand that I was quite skeptical that a one and a half year 3rd wave would be corrected by a week and a half long 4th wave pullback. That is not typical of what we normally see, despite the size of the drop. So, while the drop did hit the top of our target region for wave (4) within 3 points, I expected a more protracted correction from a timing perspective.
For this reason, I stood aside from the market action once we struck 2727, as I wanted to see how the market would resolve within this region.
Last weekend, I noted that I think we can see a rally during the coming week. However, the upper target I presented to my members at ElliottWaveTrader.net was the 2765-2770SPX region, and Friday took us a bit above that resistance.
In fact, the market closed on the next resistance level I noted to my members at 2787SPX right on the money. And, the action early next week can provide us a strong clue as to whether our correction has completed.
If the market moves strongly through 2787SPX, that is an indication that the probabilities are rising that the low for wave (4) are potentially in place. And, as long as the market is unable to see a sustained break below 2754SPX on all pullbacks from this point forth, it opens the door for us to continue this rally to 3000+ in 2018. And, should the market continue to rally, we will continue to raise our support levels for use as stops for long positions.
However, a sustained break of the 2754SPX region keeps the bears in control, and still points us towards at least the 2600 region, and potentially as low as the 2440SPX region, depending upon the structure as it develops.
As you can see, the coming week will likely provide us with a point of inflection. And, as the bears were moving into scoring position again, they may be fumbling the ball on the bulls 15-yard line. See charts illustrating the wave counts on the S&P 500.