Tale Of The Tape

With the strong bullish follow through today, the market has now moved towards the major resistance region I was recently highlighting.  So,  I wanted to address a question that is undoubtedly on everyone’s mind at this time:  can the wave [3] of [iii] can begin sooner than we had initially expected?

So, rather than telling you yes or no, I will tell you it is certainly a possibility, as this is a bull market.   But, let me present to you the various “facts” I see in the market, and you can judge for yourself.

First, if the market has indeed completed wave [ii], as presented on the 60-minute SPX charts, there are two “facts” that really do not fit from a high probability stand point.  First, it is quite rare to see a .236 retracement for this degree of 2nd wave.  While it is certainly possible, it is not terribly common.  

Second, what I am presenting as a c-wave does not really count as a completed 5-wave structure.

However, the counter point is that we have seen a 5-month rally in wave [i], followed by a 2 month consolidation, which is not unusual for a 2nd wave.  It is a bit on the short side, but still within reason. 

Next, there are still many stocks that have completed their 2nd wave pullbacks which have been highlighted in the StockWaves300 list.  And, it is possible they may take control if the market does break out sooner rather than later.

The counter point is that many of the bigger tech stocks have not completed their corrective pullback structures, which is why the NQ looks exceptionally unusual to have considered its pullback as completed.

Lastly, the IWM is likely presenting the most bullish potential count of the 3 charts.  As I have been highlighting the yellow count on that chart, we have come down to the trend line, and have held the potential yellow wave [2] support.  However, I would expect we get back up towards the prior high to complete a better wave 1 of [3] if we are indeed preparing to break out sooner rather than later.

When I review all the charts as a whole, I would say that I still prefer to see more of a 2nd wave pullback to a standard expectation.  But, if the IWM provides us with a strong indication that its wave 3 of [3] of [iii] has begun, I am not going to stand on ceremony, and I will have to assume that the 2nd wave has completed, and we have begun the 3rd wave across the various charts we track.

For the last 2 months I have been imploring those willing to listen to be building your long portfolios because the larger degree structure is presenting as rather bullish for 2021.  While I certainly did not expect us to begin the major part of the 3rd wave this early, many individual stocks are primed to begin that potential.  But, the main question is if the stocks that are not will be able to pull us down sufficiently during November to provide us more of a standard pullback.  The micro structure – especially after last night’s action – has clouded this determination.  So, I think it is going to take us a few more days before the market makes this clear.

For now, I prefer more of a pullback, but I am retaining an open mind.

One last point, if the market has indeed complete wave (ii), then all 5 waves is pointing exactly to the 6000 region as a 2.00 extension.  So, there is still plenty of upside to be seen if we have already bottomed.  I just want to be more confident. 

Avi Gilburt is founder of ElliottWaveTrader.net.