Avi Gilburt: Are You Too Scared to Be Bullish?
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Initially published on Sat Nov 12 on ElliottWaveTrader.net: We certainly had a wild week last week. In fact, I am still laughing at the market action.
As I warned members the weekend before the election, the market was completing an ending diagonal in our target pullback zone, and the move out of that diagonal would be a "violent move in the opposite direction, which takes us back to the point from which it began and it does so very quickly. That means that once we complete this diagonal down, and the market turns up strongly, it "should" not stop until we get back towards the 2180SPX region."
On Monday Nov 7, the market provided us exactly what we were looking for, and that was a massive and "violent" move off the lows to let us know that the pattern to the downside had completed. Moreover, the move up was what we call "impulsive," which provided further strength to the bullish thesis and structure.
Then it happened. Trump shocked the world by winning the election. And, while the election was swinging in his favor the S&P500 futures began to tank. In fact, it dropped over 100 points, and actually targeted the lower end of the target region we set for this correction months ago.
And as we were hitting bottom, I noted in our Trading Room at Elliottwavetrader.net that I have seen action like this a handful of times over the last 10 years in the futures, and we could very well be right back to where we were when the market closed for business on Tuesday afternoon by the market open on Wednesday. And, amazingly, even before he was announced the winner of the election, the futures market bottomed and began to rise. No one could come up with a good reason why it began to rise, as it was still the same Donald Trump that was winning the election that supposedly caused it to decline. And, yes, we not only opened near where the market closed on Tuesday, we even added another 24 points of gains that day.
Ultimately, the cash index showed no indications of what occurred on Tuesday night, and we always view "cash as king." Moreover, the pattern in the cash index continued to rally that week, and we struck the high we were targeting in the 2180SPX region, as noted last weekend.
As long as the market maintains over support noted on the 60 minute chart, and we follow through over resistance, then we are heading to our next target between 2280-2300SPX for wave 3 of (iii), which will then set us up for a pullback towards the 2220SPX region, with the next higher target being in the 2370-2400 region to complete wave (iii) of (3). This will likely take us into January of next year.
As the market continues higher, we will continue to move our support higher, as we have done this week. At this point in time, it would take a break down below last Friday's low in both the SPX and RUT to invalidate the current set up we now have, which is ultimately pointing to the 2537-2610SPX region in 2017.
Avi Gilburt is founder of ElliottWaveTrader.net, a live trading room featuring analysis by Avi and a team of analysts covering U.S. indices & stocks, bonds, precious metals, energy, forex and international markets.
