Despite all the negative talk regarding how FAANG and trade wars are going to crash this stock market, we have not even been able to see a decent pullback, much the less anything resembling a crash. Yet, our expectation for 2018 was that the S&P500 will begin a rally to 3000+, with the exact path being the only question which we have been trying to answer.
This past week provided the market plenty of opportunity to give us that pullback we have been looking for in the b-wave for the SPX and the wave (ii) in the IWM. While the IWM has formed the start of a nice pullback structure, the SPX has pushed a few points higher than I had wanted to see within this pullback structure.
While I do recognize that many pullbacks through the years in this bull market off the 2009 lows have been shallow, I really have a hard time “counting” a completed pullback even into the shallow low struck this past week in the SPX. You see, that bottom was struck on a 3-wave structure. And, since triangle’s and w-x-y patterns bottom on a 3-wave structure, neither of those patterns fit the current structure in the SPX. And, when I couple this with the ideal a-b-c structure being formed in the IWM, it still makes me look for a (c) wave decline in the coming week.
Therefore, I still maintain the expectation that we get that (c) wave down in the coming week. But, at the same time, one has to often be reminded that we are still in a bull market, and shorting within a bull market is not advisable, as surprises have always come to the upside. That is why most investors should be using the pullbacks as a time to buy, rather than as an opportunity to short. You will have plenty of opportunity to short once we begin the 30% correction we expect in 2019. Until then, I still think investors should be looking to buy the dips, and I still want to see one in the upcoming week.
As far as our larger degree structure is concerned, we are still attempting to identify the path which takes us over 3000, and based upon how the path develops, we will be looking for a potential market top around the 3011 region in SPX (the minimum target we have for wave (5) of v of 3 off the 2009 lows), or the more extended 3225SPX target. And, once we near completion of the structure for wave (5), we will then begin preparations for the 30% correction we expect in 2019.