Bulls Are Running Wild

Look.  I will not say that I am bearish the stock market in the bigger picture.  I have made no secret of the expectation I have for the market to be able to rally as high as the 4100 region over the coming 3-4 years.  However, I do not see it as a high probability that we have begun that rally at this time, even though many may disagree with me.

This would not be the first time I have been in this position against most “feelings” in the market, it would not be the 10th time, and it is likely probably multiples beyond that.  And, the great majority of the time, I was correct for maintaining my expectations based upon my analysis.  At this time, I have to still view the market as having more downside potential than upside potential, until proven otherwise.

Even though the market has broken out today through the 2911 region, and opened the door to the 2965-90SPX region, as outlined on the 5-minute chart, I have yet to see a completed and clear 5 wave structure in the SPX chart since the December lows.  There have been too many failures of 5-wave structures for me to think that the 2965-90 region is a slam dunk at this time. 

But, as long as the market holds over the 2890SPX region, the set up is certainly in place for us to complete 5 waves up from the June low.  However, if the market breaks below 2890, and follows through below 2870SPX before completing 5 waves up, we still have the recipe for a major market decline in place.

Even if the market does complete 5 waves up into the 2965-90SPX region, I am still not convinced we have begun that major rally pointing to 3800+ from here.  As I have outlined in prior updates, the market is going to have to pullback correctively off the top it can strike within that region, and then break back up over that high in strong fashion to convince me that this is a 3rd wave pointing us to the 3500+ region (with its ultimate destination north of 3800 for all 5 waves).  Should that occur, I would likely have to adopt that perspective.

But, until such time, and even though we have rallied back up this high yet again, the underlying stocks which drive this market are still not supporting the potential that this next major rally has begun in earnest.  So, forgive me if I still view this market quite skeptically.  Again, should it prove otherwise, as I have outlined above, then I will reconsider. 

Keep in mind, I have also made no secret that I put most of the cash I raised back in the fall of 2018 when we broke below 2880SPX into the TLT, which has now rallied 17% since my initial entry.  And, anyone that followed me in that move has plenty of cushion to allow this market to prove itself, as this market has not made much upside progress since 2018, whereas the TLT position has returned a tidy sum on our cash.  While I may miss 4-5% of the upside in the market from the 2880SPX region to allow it to prove itself, the repository of my cash raised in the fall has made that up by several multiples. So, I intend to remain patient.  I am still not convinced that I need to be a bull for the next 3-4 years just yet.  I still think the bears have one more shot at this market, and I am going to wait until proven otherwise.

Avi Gilburt is founder of ElliottWaveTrader.net.