Market Machinations Killing Bears And Annoying Bulls

I am putting out today’s update a bit early, because I want to adjust some of the short-term wave counts, and apologize for the changing perspectives of late, as the market has been quite difficult on the smaller degree counts.  So, allow me to explain my ongoing thought process so it hopefully may become clear to you.

This past week, the market broke its immediate bullish impulsive count to 2330+, and it made us view other potentials, with the primary one being an expanded flat for wave 4.  Last night, we had a very clear 1-2 structure to the downside, which would normally provide us with a sizeable double digit downside follow through today.  It would then complete the c-wave of 4 at much lower levels, towards our support box below.  This was a very nice set up, and provides follow through the great majority of the time.  Overnight, the market began the downside follow through, yet, when we opened this morning, the bulls took the reigns and invalidated a really nice downside impulsive structure for this c-wave.

So, as I say, when the market has an opportunity to follow through on a clean set up, and then invalidates that set up, it often is telling us something.  In this case, either the market is going to continue lower to complete the 4th wave as an ending diagonal (which will be quite frustrating for the next week or so), OR, the market has completed a running flat for wave 4, and will begin its run in wave 5 soon.  To this end, I noted several times that, during the 3rd wave rally back in 2013, I was expecting a standard 4th wave pullback in the market within that 3rd wave, yet, the market only provided us with a running triangle in a very high consolidation.  And, I fear that could happen here again.

So, I want everyone to recognize that, if the bigger 4th wave does take hold, we could have downside potential of around 50-60 points, whereas the upside from here is at least 120 points.   Therefore, while my “preference” and primary count is still looking lower for the 4th wave, I think the prudent perspective would be to view any further downside as a gift to the bulls, but to not get aggressive with any potential downside, especially if it would cause you to miss the run to 2400SPX next. Remember, this is a bull market, and our long term targets are still in the 2537-2611SPX region.  Our next higher target region resides in the 2400-2440SPX region for wave (iii) of (3), and I don’t want to lose site of the bullish side of the market while attempting to catch part of a 4th wave pullback.

Avi Gilburt is founder of