What May Be My Biggest Miss This Past Decade

I have been providing analysis to people following my work for a bit over a decade now, and have been doing so publicly through our Elliottwavetrader site for over eight years. And, with as much success as we have had over the last 8+ years, I have gotten questioned of late why I missed this strong move higher into the end of the year.  Since it is a very fair question, I wanted to take a moment to address our history and perspective, and it may lead you to some understanding.

Before I begin, I want to highlight that all our work is based upon a probabilistic analysis perspective.  And, when you read about our successes during the past decade, you will realize that our ability to identify high probability patterns and turning points has led to amazing results over the last decade.  Yet, due to the nature of this work being probabilistic in nature, there are times the market will not follow what we view as the higher probabilistic path.  Remember, we deal in probabilities and not certainties.  So, let’s delve into the examples.

Back in July of 2011, when the Fed was throwing QE at the market and everyone was calling for a dollar crash because of it, I was calling for a multi-year rally in the US Dollar (DXY) from the 74 region, which ultimately lead me to an ideal target of 103.53 – the 1.618 extension off the 1-2 structure low back in 2011.  When you consider that the market was looking for a dollar crash at the time and I was calling for the exact opposite expectation when calling for a 40% rally in the DXY (especially because you “cannot fight the Fed”), I am sure you can understand how many were laughing at my perspective at the time.  As we now know, the DXY hit a high of 103.82 five and a half years later, and it has been the high in the DXY for the last two years.  It seems my DXY call of five and a half years earlier was off by 29 cents.

Back in August of 2011, during the parabolic rally in gold wherein we were seeing days of $50 or more increases in the price of gold, I called for a top to the rally in the $1,915 region. For those that remember that time period, everyone in the market was quite certain gold was on its way to strongly eclipse the $2,000 mark.  And, as we know, gold topped within $6 of my target, taking almost everyone else by surprise.

Throughout the years, there have been many, many more smaller degree market calls we have made that have exhibited the power of our Fibonacci Pinball method of Elliott Wave analysis.  Yet, throughout that time, I was constantly chided that while I was able to get “lucky enough” to call the top to the metals in 2011, I would not be as lucky in being able to call the bottom as well.

Well, back in late 2015, I began telling our subscribers that I was starting to buy back into the metals complex in a big way.  Moreover, in September of 2015, we were so confident in our expectation that the metals complex was bottoming out, we rolled out a Metals Miners service on Elliottwavetrader in preparation for the bottoming we expected in the complex.  And, in early December of 2015, I penned the following summation to those willing to listen:

 “As we move into 2016, I believe there is a greater than 80% probability that we finally see a long term bottom formed in the metals and miners and the long term bull market resumes.  Those that followed our advice in 2011, and moved out of this market for the correction we expected, are now moving back into this market as we approach the long term bottom.  In 2011, before gold even topped, we set our ideal target for this correction in the $700-$1,000 region in gold. We are now reaching our ideal target region, and the pattern we have developed over the last 4 years is just about complete. . . For those interested in my advice, I would highly suggest you start moving back into this market with your long term money . . .”

As we know now, not only did we catch the bottom in the complex, but Doug Eberhardt of buygoldandsilversafely.com even noted how well we did when I bought gold the night it struck the lows in December of that year – which I even posted that I was doing in the trading room that night:

“I can attest to your accuracy on actually buying both gold and silver from us as close to the bottom as one could. With gold you called it to the letter and your limit order which was placed well in advance executed perfectly. The silver limit orders were within a tight range of the lows as well . . . Your timing on buying the dips is uncanny Avi! People should be aware of this.”

At the time, I was also preparing for a pullback in the equity market at the end of 2015, which would set up what I was expecting as a “global melt-up” in many risk assets throughout the world.  (Yes, I was even expecting gold to rally with equity markets into 2016). And, as we moved into early 2016, I began pounding the table in the 1800-1900 region in the SPX that we were setting up to rally strongly to 2600+. 

Again, I reiterated this expectation as we pulled back into the 2100SPX region into the elections in November of 2016, as I exclaimed that we are still setting up to rally to our targets of 2600+ “no matter who wins the election.”  And, at the time, most were expecting that the market would crash if Donald Trump would win the Presidency.  Yet, the market followed through on our expectations despite the common expectations to the contrary.

As we now move towards the bond market, those that have followed it over the last decade know quite well that we have seen more false top calls in this market than any other.  Then, on June 27th, 2016, we penned our own “top call” on bonds, entitled “Beware Of Bonds Blowing Up.”  But, the difference between our call and all the others was that the bond market actually topped within two weeks of our call, and proceeded to decline 22% over the next two and a half years.

As the bond market began to turn extremely bearish in the fall of 2018, with the Fed still strongly within its rate raising program, I told our subscribers that I think we are striking a major bottom in bonds, and I was going long the TLT in the 112/113 region, with a minimum upside target in the 134/136 region.  Again, I was laughed at by many because you simply “cannot fight the Fed.”  Yet, as we now know, TLT struck a low of 111.90 and began a powerful rally.  While I suggested to cash in longs in the 140 region and after a 24% return, the TLT went on to strike as high as 148.90. 

Then, on September 1st of 2019, I warned those willing to listen that I see an impending top in bonds, which should result in at least a sizeable pullback.  Thus far, that call has marked a top to the bond market for the last four months which has since seen a 10% pullback.

Also in the fall of 2018, when everyone was uber-bullish the stock market, I called for a drop to the 2200SPX region when the market broke below 2880SPX.  As the market moved through this decline, I modified my bottoming target to the 2250-2335SPX region.  As we now know, the market bottomed at 2316 in the futures, and began a rally towards the target I provided (a target I set even before the market dropped in December), as you can see from this attached chart:

Based upon my expectation for a rally off support, my upper most target for the rally off the 2300 region was in the 3011 region.  In fact, I did not expect that we would move through the 3040SPX resistance off that low until we saw a larger degree decline.  And, here we may be coming to my biggest miss in the last decade, just as we close out the decade. As we speak today, the market is now 7% over the target I set back in December of 2018.

In my larger degree expectations, I have maintained for quite some time that this market was likely heading to 3800+ before the bull market off the 2009 lows would conclude.  And, we staunchly maintained that expectation even during the market decline in December 2018, whereas most others were calling for recessions.  Moreover, I am still of that expectation.  Yet, I also expected that the market would revisit the December 2018 lows before we would begin that rally to 3800+.

You see, our analysis methodology tracks market sentiment.  And, we believe that market sentiment is what drives all markets.  Moreover, market sentiment leaves various footprints in the sand, as it generates patterns in the market which are often quite predictable – at least from a probabilistic perspective. 

So, while we recognized in real-time that the pattern into the December 2018 low was a bottoming pattern which should turn us up for a larger rally, that bottoming pattern did not look like a completed larger degree 4th wave pattern which would support the start to the 5th wave rally to 3800+ for the last segment of the bull market off the 2009 low.  It was a very unusual and incomplete bottoming pattern in the larger degree for anything more than a corrective bounce.  In fact, to have assumed that bottoming structure would complete the entire correction would be to assume a lower probability expectation based upon the structure.

Over the years, I think you can tell that following our higher probability patterns of market sentiment have kept us on the correct side of many markets, and able to identify accurate, high probability turning points in all those markets.  Yet, clearly, there are going to be a minority of times where the lower probability pattern does play out.  That is simply the nature of non-linear markets, and that may be what we are seeing off the December 2018 low.  And, as I have written in my recent analysis on the stock market, the structure of the next market pullback in the first quarter of 2020 will likely provide me the answer as to whether that is the case.

But, as I have also said in the past, when the market broke down below 2880SPX in the fall of 2018, I raised cash from long-term positions, and then placed money into the TLT in November of 2018 for the 24% part of the rally we caught in the TLT.   So, while the stock market is now 12% higher than the point at which I suggested to raise cash, those that followed my analysis have still outperformed “buy-and-holders” by double.  Moreover, that does not even include the gains we earned during 2019 in the metals market, as we caught most of those moves throughout the year.  So, even though I may experience the biggest miss seen in our analysis in a decade due to the equity market taking what I viewed to be the lesser likely path, those following all our analysis should have still outperformed due to the TLT and metals performance.

While I wish I was able to be perfect in all my analysis, unfortunately, that is simply impossible.  Yet, our history has proven that our ability to identify the higher probability paths exceeds most in the market, especially over the longer time frame.  But, unfortunately, that does not mean we will be perfect.

So, if the market proves in early 2020 that the lower probability pattern played out off the December 2018 low, we still have over 20% higher that I expect in the various markets we track before the bull market off the 2009 lows likely comes to an end, with some markets potentially setting up for more than 30% higher.  Moreover, there are a whole host of individual stocks which are setting up for significantly greater returns over that period of time, and I will be focusing upon those in the coming months.

One way or another, we see tremendous opportunity for long investors in 2020.  Whether the market will revisit the lows of December of 2018 before we climb to our long-term bull market target of 3800+ or not is something we will likely be able to determine in the first quarter of 2020.  Yet, whether it does or not, we still expect to outperform the overall stock market due to the opportunities being presented to us in all the charts we track across the markets.

And, lastly, once the market provides us deeper clarity of the shorter-term structure over the coming months, it will solidify a pattern in the market which will likely guide us for the next 3-4 years.  I said the same back in late 2015, and the market certainly delivered for us, which is evidenced by the accuracy of our analysis from 2015-2018.  I expect the same type of clarity to be seen starting in the first quarter of 2020.

I want to take this opportunity to thank you all for your support during the years I have been providing my analysis on Elliottwavetrader.  I also want to wish you all a happy and healthy holiday season.  May the upcoming year bless you and your families with health, prosperity and happiness. And, I look forward to a very profitable 2020 with you.

Avi Gilburt is founder of ElliottWaveTrader.net.