Are We Trying For 7000 Again?
By
Avi Gilburt
The 7000 mark has been the focus of almost every analyst and investor for many months now. And, yes, there is certainly a path there at this time. So, while I am going to lay out the path, I am also going to provide you a splash of cold water presented in the IWM daily chart.
First, it is quite clear that the market has held the important 6550SPX region for at least the 5th time in the last 3 months since we broke out over it. And, it is still represents the opening of a trap door should the market finally see a sustained break down through it.
But, barring an impulsive decline beginning early next week, a bullish resolution would likely be seen with a corrective pullback in a (b) wave, as represented on the attached 5-minute chart (which will be adjusted once we have a confirmed high in place. Should we see such a corrective pullback to the support box on the 5-minute chart, it would provide an opportunity to add some long trades in a higher confidence and higher probability set up for a rally towards that mystical 7000 region. And, I have adjusted the 60-minute chart accordingly.
At this point in time, the analysis is really that simple.
Yet, I do want to add a little warning from the risk management side of the trade. I posted this alert in the trading room over the last hour:
Just to put a little fear in those that are uber bullish of the overall market right now, I do have to at least point this out as it is not an unreasonable count - especially if this begins to turn down in impulsive fashion.
There is a potential leading diagonal down that has completed in IWM off the recent highs. Moreover, one of the things we know about diagonals is that they retrace rather quickly and often quite deep, even leading diagonals.
While I am clearly NOT a major proponent for strong probabilities of diagonals, I am at least going to keep this in the back of my mind if the next decline is clearly impulsive. From a risk management standpoint, you MUST at least be aware of it.
So, in very simple terms, as long as the next pullback is clearly corrective, we have a buying opportunity for a (c) wave rally in December. However, if that next pullback is clearly impulsive, it could have some significant ramifications based upon the IWM chart. So, while the bulls are clearly in charge right now, please be aware that this likely will change in a very quick way once the market finally strikes its long-term top and begins to break support.
