Seeing Some Extremes - Market Analysis for Nov 4th, 2019

While many are being converted to the bullish side of the market due to the price action, I still wish I could join the bulls at these levels, especially since my long-term targets for the SPX are much higher.  But, the structure of the market does not allow me to do so at this time.

As I wrote earlier today:

The fear of missing out is palpable right now, as the market continues to extend.  But, I wanted to take a moment to make you understand what you must believe in order to assume we are on our way to 3800+ already.

If you are going to assume the larger 4th wave completed in December of 2018, and the rally off that low into the high struck at the end of July was wave i of 5 (as shown in blue), then you must accept a wave ii which retraced to a bit less than the .382 retracement of wave i, and which only took about a week, relative to the 7+ month long wave i. 

Based upon historical norms, the potential for that to be the accurate wave count is quite low.  Again, as long as we remain below that next resistance region overhead on my chart, I cannot accept what would normally be a very low probability potential.

But, I just wanted you to at least be aware of what you needed to accept as the wave structure if you believe we have begun that rally to 3800+.  I am certainly not there yet.

Not only is the structure of the market not supporting strong upside continuation to my eyes, and not only has the NAAIIM money manager index risen to 89 from 66 within one week (which is likely even higher this week), we are seeing put/call ratios at extreme levels which have portended larger degree tops in the past.  Moreover, we are seeing short positions on the VIX at levels that have also marked larger degree tops.

Additionally, Luke Miller’s Bayesian analysis is providing us with a 70% probability that we see the low 2800 region from where we now seem to be topping out.  Moreover, I am fearful to even tell you the downside targets he is seeing on the next major market weakness.

Lastly, much of Garrett’s world market analysis is also suggestive to topping out in major markets across the world.

So, more and more warning signs are developing as the market pushes higher.  But, in the meantime, the structure off today’s high is not suggestive of us having topped just yet.  It looks rather corrective thus far. Therefore, I will need to see a break down below 3060ES to even begin the confirmation process of topping.  Yet, I also want to note that the risks continue to rise in ways that are quite similar to what we experienced in early 2018.

Avi Gilburt is founder of