The Bulls Have Been Relentless

With the market now having moved through the down trend line from the all-time highs in both the IWM and the SPX, the bulls have been making a statement loudly and clearly:  We are back and want to stay.

And, while the bears are typified by the old commercial line “help, I’ve fallen and I can’t get up,” I don’t think this one-way market will continue too much longer.   But, one must respect the ability of the market to be able to push through this resistance in the manner in which it has this week, as I did not expect to be able to move through it this quickly. 

I want to focus today again on the IWM.  As I have been saying for two months now, this chart truly provides the cleanest picture for the long term bottom being in place, and us completing wave (1) of wave V of Primary wave 3 off the lows.  I have gone through why I believe the pattern and the technicals support such a conclusion so many times, I will not repeat that here.  But, I simply want to reiterate what I have been saying about his being a very strong chart to support the bullish side of the market.

For now, I still struggle as to whether wave iii has completed or not.  As we have noted, as long as we remain below the 114 region, specifically, as long as we do not take out today’s high, I can still view this as a b-wave rally, but in an expanded flat for wave iv.  Again, it means that the market should not break back out over today’s high.  However, should we see a break out over that level tomorrow, then it is clear to me that the 5th wave of wave iii will likely extend to the 118-119 region in the IWM, which can potentially make this wave (1) take us into the middle of May, and even test the long term resistance region in the 120 region for all of wave (1).

In the SPX, continued strength into tomorrow would suggest we head up to at least the 1.618 extension, which would still count as wave iii of wave (1) as we have in the IWM – of course, in extended fashion – with the expectations of wave iv and v to still take us to at least the 2131SPX region, but, more ideally, into the 2165SPX region by mid-May as well. 

And, since we have enough waves in place right now to actually consider all of wave (1) completed in the SPX, I have become quite cautious and unwilling to trade the upside from this point forth in an aggressive fashion.

Lastly, I want to re-post something I wrote today, which I really think everyone needs to read to be maintain a view of the forest rather than just the trees or leaves:

I know to many people, it "feels" like the market will never come down again, especially with how strong it has been to take us up through resistance this week.  But, I want to caution you about letting your "feelings" guide your investment decisions.  Remember how it felt down in the low 1900's when we were looking for 2080+ -  it sure did not "feel" right.  So, unlike Yoda's instructions, you cannot trust your feelings.

So, whether we are completing only wave iii of (1) or all of wave (1) is not as important as understanding what will trigger that bigger move to 2500-2600, as that is the meat for which you want to be focused upon.  So, if you see my green arrow pointing up in the summer, THAT is what I am awaiting.

Back in January and February, when the market was dropping strongly, we were warning everyone here that the market may very well be setting up a global melt up scenario.  While I still believe that to be the case, I also believe that caution should still be used up here.  The global melt up will only be confirmed by a corrective wave (2) pullback, as shown on the 60 minute chart, followed by a move back over wherever we make a high for this potential wave (1).  Until such time, I am going to remain cautious, but once that confirms, our targets will likely take us to 2500-2600SPX.  So, there is plenty of time to get long for a 20% move, even if you want to wait for confirmation.  Personally, I will be awaiting such confirmation before becoming aggressively long.

60minuteIWM
60minuteIWM
IWM Daily
IWM Daily
1turnchart
1turnchart
Avi Gilburt is founder of ElliottWaveTrader.net.