I Am Forced To Add An Alternative


Since the current primary count is rather clear to me, which is that we are rallying to complete a more extended wave 3 pointing towards the 1.236 extension of waves [1] and [2] in the 4600SPX region, it forces me to come up with an alternative count.  And, since I have absolutely no reasonable bearish alternatives on the charts, the only bullish alternative I am able to come up with at this time is really uber-bullish.  But, it is simply an alternative right now, for which I have no conviction at this time.

So, allow me to repost it from an update I posted earlier today:

“Folks, I have been struggling as to whether or not I even present this potential, but since I really have no other "alternatives" at this time with us approaching the 4600SPX region, I am going to at least present it to you.  As I said last night, I want to be clear that this is only an ALTERNATIVE and it is only being presented because I have no other reasonable alternative to present.  You see, this is a bull market, and I really have no reasonable bearish alternatives to present.  So, the only ALTERNATIVE I can reasonably entertain is a bullish one.

Not only is this a lower probability based upon my view of the market for various reasons (lack of 3 hitting the target, lack of a real wave 4 in a retracement percentage, not jiving with many other equity charts, etc), but there are many other factors in addition that suggest this is lower probability.  So, again, I want to reiterate that this is only an ALTERNATIVE and I think it is reasonable to expect a bigger wave 4 pullback down towards the 4240-70SPX region.

So, without further qualifications, this is the alternative.  It would suggest that waves 3 and 4 are already completed, as shown on the chart (extremely shy of both ideal/standard targets), and that we have waves i-ii of wave 5 in place already.  

But, the ONLY way I can even consider this potential is if we go directly up to 4630SPX from right here, and then pullback correctively to hold the pivot box, and then rally back over 4630SPX.  This would then point us towards 4860+ to complete wave 5 of [3] sooner rather than later.

Again, since I have no other reasonable alternative to present, I am forced to at least present this as an alternative at this time.  But, again, I want to note that this structure is not supported by other charts like EEM or IWM, it did not hit appropriate targets for both 3 and 4, in addition to many other facts that really do not support this resolution. 

The factors that made me consider this includes the fact that we are in bull market, the fibs line up to 4860+ (our target for wave 5 of [3], and that I need an alternative count, as there is no bearish alternative I can even present with a straight face.

For now, my preference remains that we see a test of 4240-70SPX for a wave 4, unless the market proves otherwise.   But, at least you now know when that would change.”

So, for now, I am still well within the count which suggests that we revisit the .764 extension of waves [1] and [2] from the 1.236 extension, which is based upon the standards we normally see in an impulsive structure.  Therefore, I am expecting we revisit the 4240-70SPX region for wave 4 of [3].  But, as long as we continue to hold support, I am looking for us to continue to push higher towards 4600/4630SPX to complete wave 3.

Now, this would be another good opportunity to caution against shorting during a 3rd wave, even one that simply grinds higher, as we have been experiencing.  As I have said many times, while it is reasonable to take some profits in charts that are approaching their targets, and then move them to other opportunities that arise in the market, trying to short during a 3rd wave in the market is a fools errand.  As for me, when I began to raise money about a month ago, it gave me the opportunity to buy positions in the IWM and EEM, as I have outlined in our trading room.

As I reiterated many times, both of those charts presented us with much greater upside potential relative to their downside risk.  And, that is why I chose those two products to allocate some of the money I raised towards.   

Lastly, this is probably a good opportunity to also make a point regarding EEM.  With the continued move higher, I think the wave 4 count seems more reasonable at this point in time.  Clearly, if we are able to continue through 54, then I have to begin to assume we are rallying to complete wave i of the next major rally phase to 67+.   But, for now, this looks like it may still revisit the 47.60 region before this corrective runs its course.   And, just in case I am wrong, I have highlighted the next buying opportunity during a wave ii pullback.

In conclusion, I still see strong potential for this market to rally much higher later this year and into 2022.  But, my preference remains for us to revisit the 4240-70SPX region for a wave 4 pullback before that occurs. I know I am wrong in this expectation if we see a break out through 4630SPX, which is clearly not my expectation at this point in time.   But, ALWAYS remember that this is a bull market which likely has much higher to run, so please respect it accordingly.

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Avi Gilburt is founder of ElliottWaveTrader.net.