Sentiment speaks: prepare for volatility
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
While some of you think that I dismiss your comments to my articles, I will be honest with you that some comments make me think, whereas some just make me scratch my head.
Last week, I outlined one of the issues that many have with EW, and that is related to the provision of a primary count and an alternative count. And, I addressed that concern as follows:
Again, this is simply based upon a lack of understanding as to how Elliott Wave analysis works. I have addressed this argument many times before, but I think it is worthwhile to address it one more time.
First, one has to ask themselves if any methodology will provide "definitive" guidance in the financial markets? Remember, we deal with a non-linear environment, and need to apply a non-linear methodology to obtain the greatest success within such an environment.
Elliott Wave analysis is a non-linear methodology which ranks probabilistic market movements based upon the structure of the market price action, and its goal is to track the strongest drivers of our markets - fear and greed, or, as we generally refer to it - market sentiment.
But, not only does our analysis provide a primary perspective, which turns out to be correct approximately 70% of the time, we have objective parameters to tell us early on if our primary perspective is wrong so that we can adjust our positioning quite quickly. In fact, we provide you with that alternative perspective at the same time we provide you with our primary expectation, and let you know when to adopt that alternative perspective before it even happens. I know of no other methodology that can provide this type of objective analysis as part of its standard procedures.
As I have said many times before, this is no different than if an army general were to draw up his primary battle plans, and, at the same time, also draws up a contingency plan in the event that his initial battle plans do not work in his favor. It is simply the manner in which the general prepares for battle. We prepare for market battle in the same manner.
After writing publicly for almost a decade, many of the 60,000 followers we have on Seeking Alpha recognize the difference in our analysis approach, beyond the accuracy thereof. We strive to view the market, and utilize our mathematically based methodology, in the most objective fashion possible, even if it is counter to the general "beliefs." Moreover, it provides us with objective levels for targets and invalidation. So, when we are wrong in the minority of circumstances, we are able to adjust our course rather quickly, rather than fighting the market like many others you may read.
Yet, I still get a lot of push-back when it comes to understanding our non-linear approach to markets. Then I took a step back and tried to see the world from the eyes of those who are resistant to Elliott Wave analysis and utilize fundamental analysis. But, that simply confused me even more. Let me give you an example.
If you asked people before the jobs number came out if it would cause the market to rally, you would have had two camps of thought.
One camp would claim that a lower than expected jobs number would cause the market to rise since it makes the bigger stimulus package from Congress more likely.
The other camp would claim that a higher than expected jobs number would cause the market to rise since it means that the economy is doing well and that should cause the market to rally.
And these people that buy into this type of analysis claim that I speak out of both sides of my mouth? This is what made me scratch my head. Many of you are willing to accept this type of "analysis" about markets - which is made after the fact - and, yet, you claim that my analysis is too amorphous?
Let's be honest. I provide specific levels of supports and targets which work as guideposts to our primary analysis. This is extremely objective and one does not have to do any guessing. Price is clear and the structure either remains within the guideposts for the primary count, or it does not. And, if it does not, then we adjust to the alternative count. This is the most objective type of an analysis you will ever find on the market and it is provided prospectively before the market moves. And, this is what we do for our members on a daily basis.
I am 59 so I've been investing for decades. What Avi Gilburt has done combining Elliott Wave Theory to what he fondly calls "fibonacci pinball" is nothing short of revolutionary. Membership in his Market Pinball Wizard group has literally changed my whole attitude about investing. I cannot thank him enough. Before Avi, I bought at the wrong times on fundamentals or technical patterns and then sat around and waited for the market to validate the price I put on the stock, all the time stressing out over whether I made a good call or a bad call. (Sometimes I waited years.) Now, I can chart the probable path of price with a high degree of certainty. I can buy at the right time and sell at the right time. I am no longer a "buy and hope" investor or someone who panics and gets out too early. Not only is the stress gone, but it is actually fun to chart my stocks and then watch to see how closely price follows my projected path. It's not 100% certain, nothing is, but the wonderful point about Avi's method is that it tells you right away if the price isn't following the pattern you laid out. At that point you can exit the trade or re-evaluate. I have seen a lot of stock technical analysis come and go, but I've never, EVER, seen anyone even come close to the accuracy Avi has repeatedly demonstrated. It's almost magical to see price come often within dollars or even pennies from the target. The first time I watched that happen it lifted the hairs on both of my arms. It was almost eerie. If you want to make[...] money and/or reduce your stress level and live a happier life, do yourself a favor and join The Market Pinball Wizard. If you just want to use Avi's guidance on when to buy/sell, you can do that on the site. If you have time and want to take the extra step of learning how to do your own stock charting, that's even better. Either way, the lessons you learn from being a member there will forever change the way you look at a chart.
So, let's look at the other analysis perspective outlined above. The two camps presented above have no objective basis as to what they would do if the market acted opposite of what they viewed as "reasonable." Moreover, this reasoning is only provided by the pundits AFTER the market moves. Is this truly the objective perspective with which one should approach the non-linear environment we call the stock market? And these people take me to task for my methodology? I think this is actually quite amusing... not to mention, dishonest.
Then it got me to thinking about those that similarly claim "inflation is going to kill the stock market." And, they have continued to make this claim for many years, as we have been hearing this diatribe for quite some time. In fact, this crowd was so certain that the market entered into a long-term bear market back in March of 2020 that we all heard them crowing gleefully as to how they have been right all the time, and that 2020 was only the start of the bear market. Meanwhile, as the market has continued higher and higher, amazingly, they continue to claim they are right. You want to talk about a real headscratcher? In fact, this sounds more delusional than anything else.
Folks, if you are more concerned with names and titles as to what you want to call the market, whether it be "bear," "bull," "inflationary," "deflationary," or any other name you choose to assign, rather than focusing on being on the correct side of price, then you have simply lost your way as an investor. Do you really want to be more concerned about being right about a definition rather than seeing your investment account grow?
If your goal is to claim that "inflation will kill the stock market" until the market finally hits a multi-year top, then all you will have to your name is a "perma-bear" title, as you certainly would not have made any money in the market while you waited for the market to prove you right.
In caring primarily about my subscriber's money, I am much more focused on giving them a reasonably probable plan to place into action, with an objective, clear line of demarcation as to when that plan should be abandoned. And, our sole focus is to remain on the correct side of price the great majority of the time to increase our profits. Anything less than that is simply only to feed an ego about being right, and it shows no care for those who follow that particular analyst or writer. And, that is how one goes broke.
So, you will never see me standing around and calling the market a name until it eventually proves me right. As I have said so many times, my subscriber's money is much more important to me than my ego. So, you need to ask yourself what is more important to you: ego or profitability?
As some of my members posted:
I'm a relatively novice trader and a member of Avi's service for nearly two years now and feel compelled to tell anyone who cares to read this just how fantastic of a service Avi and his team provides. The analysis is absolutely unreal. I have followed multiple calls over the nearly two years and have back verified multiple calls and am just astonished at the accuracy. I used to spend hours and hours pouring over SA articles trying to decipher the never ending blathering of why stock A was going to [go] up, only to find in the comments, 1000 reason why stock A was going down - an utter waste of time. Avi's analysis is ZERO bias..no book to talk,[...] no spin, no ego...no manipulation or clickbait articles. Just incredibly accurate analysis to trade. So, unless you like debating endlessly with 00s of strangers why ATT is the best investment ever or the worst investment ever.... dozens of times per month...I suggest you UNLEARN what you think you know. I would like to say THANK YOU to Avi. The learning I have gain and shift in perspective is truly incredible!
So, this week, I am going to try to keep it simple, even though the market is presenting a very complex structure. For those that want the detail regarding the complexity I am seeing in the market right now, you can join us for a free trial in our service, as I just provided a multi-page analysis on my perspective this past weekend.
Our main support remains in the 4115-4150SPX region, as I outlined the previous weekend. And, last week, the market pulled back to within 18 points of that support. As long as the market continues to respect that immediate support, I am looking for a rally next towards the 4330-60SPX region in the coming weeks, at which time, we will raise our support. Ultimately, I see this as only an initial target on our way to an ideal target exceeding 4400SPX later in June.
But, I must warn you. Based upon the structure of the market at this time, even if we do go to 4400SPX in the coming weeks, it will not be an easy climb. Rather, the structure is presenting as quite a volatile one within this segment of the uptrend.
Furthermore, should we complete this structure in the coming weeks, then I would expect a very strong reversal after this structure completes. And, I think that reversal can be quite fast and strong and target the 4166SPX region again. This type of decline will re-set sentiment to the point where we can then substantiate an expectation for a rally to 4600+ later this year.
So, in summary, we have entered into a very treacherous market environment, which will likely last over the coming two months. And, I do not see the next multi-month trending market move setting up for several months.
I have said this many times in the past and it is worth repeating. I have not come across any other analysis methodology which provides market context better than Elliott Wave analysis. In fact, do you know of any other analysis methodology that provides context for the market? I do not. This is the type of context that allowed me to be quite confident of the potential for the market to drop to the 2200SPX region when we were in the 3000SPX region, and then to rally to over 4000SPX when we were down in the 2200SPX region last year.
And, our Fibonacci Pinball method of applying Elliott Wave analysis has provided us with this type of guidance and market context for many years, and has placed our followers and subscribers in a much better position to be profitable than most investors in the market.