This was quite a week we just had in the markets. Was your head spinning?In this week’s article, I am going to discuss the employment report published on Friday, as well as a report that was put out by the Fed this past week.Employment ReportEarly in the week, we saw an 80-point decline in the SP500. Was there any consensus reason cited for such a decline? Nope.Then on Thursday, we saw a major ramp up in buying in the SP500 right into the close, as well as the overnight session. Was there any consensus reason cited for such a strong rally? Nope.And, now comes the big head scratcher.
I am sure you are asking yourself “what the hell does Avi buying a hat have to do with this metals update?”Well, now that we have the potential for all three charts I track to have 5-waves up off the recent lows, I now have something to hang a bullish hat upon. (smile)As we can see from all three charts, we can now count the minimum number of waves in place for aa 5-wave rally off the recent lows. But, that does not mean we turn recklessly bullish. Rather, it means that the market has given a basis from which we can now look more bullishly at the complex.
Earlier this morning, I wrote the following update to get everyone appropriately focused upon where we reside in the market:Let's take a few moments to set our parameters in SPX based upon our Fibonacci Pinball structure. The bulls should be given the benefit of the doubt as long as we remain over this week's low, and I am going to interpret the chart from that perspective.As we know, we are tracking a wave v of 3 with an ideal target in the 4400SPX region. That we can see from the 60-minute SPX chart.However, we are also trying to track the structure which is going to take us there.
While silver has broken through it’s a=c resistance and can even push higher yet for a more appropriate wave 1, GLD and GDX still leave us with questions as to their intent. As you can see from the attached 8-minute chart of GDX, this week we saw a spike and reversal right at the top of our resistance box, and what seems to be a corrective pullback since.GLD has also provided us with a spike high and reversal this week, followed by what seems to be a corrective decline off this week’s high.Both of these chart are soooo close to providing us with a 5-wave structure off the low.
I am not supposed to be here right now, but I wanted to at least put out a morning note about the market action today.We are testing the 4140SPX lower end of support I have been referencing. But, it seems we are testing it with what may be a 5th wave of a c-wave down. What that means is that we can see a spike below 4140, with a reversal back over it. If this is how we close out the day, then I will likely be viewing today's drop as completing the wave  in blue I have been tracking as an alternative.
With the gap up today, the market is still well holding our important support region. And, as long as we continue to hold support, we can be setting up to attach the 4400SPX region sooner rather than later.Today’s gap up can be viewed in two main ways. First, the bullish pattern would view today’s action as an a-b structure within the wave [v] of wave  structure we have been primarily tracking. Alternatively, there is some potential that the wave [iv] in this region is taking shape as a triangle. Should the market head down from here to re-test Friday’s low, then the triangle is the primary count.
Today started out rather well, with the market gapping up exactly to our next target for wave [iii] of , within wave v of 3. However, the decline off that target dropped a bit further than I wanted to see in the ideal structure. After completing wave [iii], we really should have held the 4185SPX region for wave [iv] in a standard Fibonacci Pinball structure. But, since we did not form that structure, we have to ask ourselves what the market is trying to do in here?Let me start by again referencing that this is a bull market and our glasses should be bullishly biased when we view the market structure.
Believe me when I tell you that I am just as disappointed as you are with the action in the metals. While the bullish count is certainly not dead, the fact that we could not complete a standard impulsive Fibonacci Pinball structure is quite disappointing, and does leave the door open for a lower low in the complex still.As you can see from the 8-minute GDX chart, we broke the support for the ideal impulsive Fibonacci Pinball structure, which has only left us with a leading diagonal as a possible 5-wave structure off the lows.
As it stands right now, we have a micro structure that is pointing us up to the 4213-4222SPX region for wave [iii] of  of v of 3. Yet, if the market breaks below today’s pullback low, it puts that potential in jeopardy in the near term. Ideally, we should remain over today’s pullback low, and rally through 4200SPX to complete wave [iii] of , potentially by tomorrow.However, if we fail to generate escape velocity, then I fear we may not pass another test of the micro support below us, and unleash a c-wave down – now presented in yellow – which can still point us back down to the 4100SPX region.
Based upon where the market was positioned as we came into this week, I expected we would see a resolution between the two paths we were tracking early in the week. But, I did not take into account the “Fed Freeze.” What I refer to is that is seems that every time we come into a Fed week (as there is a Fed meeting this week, with an announcement on Wednesday at 2PM), the market just slows down until the announcement. And, sometimes, we then get three days of action all within a 24-hour period thereafter. It’s almost like the market catches up on its structure because it just stopped before the Fed announcement.
I am writing the update a bit earlier today, since I have an afternoon doctor appointment. But, there is nothing to really add to the analysis at this time.Our support remains the 4160/70SPX region. As long as we hold that region, then I am expecting a continuation rally through 4200SPX in wave [iii] of  of v of 3. Should we see that break out through 4200SPX, then 4170-4185SPX will become our new support level. And, I believe that support level should even hold through a wave  pullback (assuming we complete wave  from here).
I cannot stress this enough, but people still question the efficacy of this proposition. I can no longer count how many times the market is set up to pullback or start an imminent rally, and we have a news event announced which catalyzes the move. So, to reiterate, I do not view this drop as being “caused” by the news, as the market was already topping out in a 5-wave structure off yesterday’s low. Rather, the news catalyzed a pullback that was to be expected.
Well, folks, there really is nothing much to do at this point in time. I am going to allow the market to complete the first bigger degree 5-wave structure off the recent lows so that I can begin to turn aggressive on the metals complex. As for now, I think the GDX provides us with the best picture of what the market needs to do to complete that initial 5 waves up. As you can see from the attached 8-minute chart, the chart is quite self-explanatory.
The reason I hate double bottoms is that often clouds the micro bottoming structure. Yet, that is what we have to deal with at this time on the SPX.Before I move into the micro structure, I want to again reiterate that my main count still holds as a wave iv pullback within wave 3 of  of [iii]. And, I maintain that perspective for as long as we hold over the 4100-4120SPX support. We would need to see a break down below the .382 retracement of wave iii (the 4095SPX region) for me to even consider the alternative in yellow.
With the market making it likely that we are in the midst of a wave iv pullback, I noted last night in an update after the market closed that “[i]f the night monkey's keep us below 4168ES, then we should be setting up for a c-wave down.”The overnight action respected our resistance, and we began what seems to be the c-wave down today in wave iv. As I noted yesterday, my suspicion is that the 4100-4120SPX support an be held within this wave iv, and as I am writing this, we seem to be developing a 5th wave down within the c-wave of iv.
Throughout the years I have been writing on ElliottWaveTrader, Seeking Alpha and other sites, many readers have recognized that we have been quite accurate in our market prognostications, yet they have had a hard time understanding the lens through which I view the markets.I want to first start by stating that in all the years I have been doing research and analysis into financial markets, I have not found a single form of analysis that provides market context as does Elliott Wave analysis. In fact, it was the reason I was so confident in my expectation that the market would exceed the 4000SPX region even though we were down in the 2200SPX region last year.
I bet you read the title of this update and said to yourself “Avi, you have such a grasp of the obvious." (smile). But, with the break below 4168SPX this morning, the market provided us with an preliminary signal that wave iv is likely in progress, as I noted this morning.So, the question now is how much of a pullback are we going to get?Well, as I also noted this morning, I have a suspicion that we will likely hold the 4100-4120SPX region on this wave iv pullback. If you look at the 5-minute SPX chart, you will also notice that I have a modified blue count.
This article will be published on Seeking Alpha on Sunday morning:Ever since the market crash in February and March of 2020, so many investors, authors and analysts have been on high alert for the next shoe to drop.In fact, I can no longer count how many articles (along with comments) I have read which have called this market one name or another, while looking for the next crash.
I have been saying many times that if the market was going to head directly to the 4400SPX region, then we would begin to see strong extensions in this segment of the rally. We may finally be seeing hints of that.When I wrote yesterday’s update, the market was hitting its head on the 4150SPX minimum target I had for this segment of the rally. Moreover, when we broke below 4135, I added another note that highlighted the 4110-20SPX support below. I also noted that we would need to break that support to suggest that a test of 4070SPX was in progress, with the potential for the yellow count rising at that time.
It's crunch time in the metals complex. There is no hoping, no wishing, and no guessing. The metals are at an important juncture.As the structure shows on the smaller degree time frames, which is also relatively evident on the daily time frames, the market is sitting at resistance. And, until we see GLD break out over last week's high, the set up can easily point us to a lower low. So, there really is not much more for me to say at this point, as I think I have said it all many times before. The market simply has to make a decision here and now.
As I speak, the SPX has now been hitting its head on the 4150SPX resistance we have been looking towards as our minimum target for this current move up in this micro wave structure. And, as long as we hold over 4135, it can still make a run to the next target in the 4175SPX region.Keep in mind that the inability of the market to move through 4150SPX right here will keep that yellow count within probabilities higher than I would prefer at this time. But, the higher we go through 4150SPX, then the less likely it becomes.
As we head into the earnings season - which I think kicks off tomorrow, we are seeing many of those who are bullish actually turning bearish, and saying that we MUST have a pullback, as we are "sooooo overbought."Can they be right? Maybe. Would I bet on it in the middle of a 3rd wave? NOAs far as being "overbought," I want to remind you again about how we view "overbought" signals during a 3rd wave:https://www.elliottwavetrader.net/market-update/Elliott-Wave-Intro-Part-6-201812255057922.htmlMoreover, while there is still some potential for a bigger pullback towards the 3950-4000SPX region, remember that it is only an ALTERNATIVE at this point in time.
I have said many, many times in the past that one of the major benefits of Elliott Wave analysis is that it puts the market into context. And, yesterday, that context told me to expect a potential whipsaw environment until we are ready to break out over 4200SPX, and point us to 4300SPX next.So, last night, I asked members in the chat room what they think I saw in the 5-minute SPX chart which alerted me to this? In other words, what keyed me in to the whipsaw context for which I warned yesterday? So, I am using this as a learning opportunity as to how Elliott Wave can potentially benefit you in ways you may not have realized.
From time to time I am able to provide you warning as to when I see the potential for the market to whipsaw market participants. And, I am now seeing us approaching a time where that potential rises.If you look at the 5-minute SPX chart, you will see that I am primarily counting the current move higher as a wave  in wave iii within the larger wave 3 of  if [iii]. Yes, I know that is a mouthful and you will likely have to look at both the 60-minute and 5-minute charts to understand the full meaning of that wave count.
While I cannot tell you with certainty that we are about to see a market melt-up, I can tell you that the set up is now in place to melt up to the 4400SPX region through the spring.Before I go into my expectations, there are a few issues I would like to address, which seem to almost always come up in the comments section to my articles.Many of you have taken strong exception to the fact that I really do not bother with the news. Your perspectives are often based upon your personal experience of seeing the markets move when news is announced.
by Avi Gilburt - 4 weeks ago
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