Getting Even More Cautious Now
By
Avi Gilburt
As I have been highlighting of late, the IWM has been the chart that is a strong signal for me regarding whether the overall equity market is topping. Until today, I had been viewing it as still within wave 4 of its [c] wave. However, with the move over the 204.77 prior high, I am now more inclined to view it in the ending diagonal structure, as was priorly outlined in yellow. Right now, it has become my primary count.
Based upon this count, I am viewing the pullback off today’s high as the start of the b-wave of wave v in that ending diagonal. This now accelerates my view regarding a potential top to be struck to sooner rather than later.
What this also does is makes me question the extent of the next move higher in the SPX. So, I am going to note that our next resistance region overhead is the 5150-5185SPX region. And, yes, that could actually act as the top to this rally. But, should we clear that region, it will then become support for a rally that is pointing to the 5300-5350SPX region.
But, before you assume that a top is DEFINITELY going to be struck, I want to clearly state that I am not going to consider a top as having been struck unless I see several indications.
First, I am going to need to see a strong break-down below 4946SPX. Second, I MUST see a completed ending diagonal in IWM, followed by a CLEAR 5-wave decline reversal to suggest that the c-wave down to the 130-150 region has indeed begun. Should that occur, I will likely strongly suggest to our membership to raise more cash.
So, for now, I am seeing the set up developing for a potential major top to be struck in the coming weeks. But, of course, I am not going to suggest acting upon it until the market actually provides us with an initial confirmation of that potential. Of course, if you are more conservative in your approach to the market, you can consider raising cash into the next push higher in the market. But, for many investors, it may be wise to allow the market to provide us with an initial confirmation, as outlined above.
