It's been a couple of weeks since my last article, so I figured it would be a good time for an update.
I left readers with the idea wave 4 was in place of the ending diagonal, a lot of has happened since then and we have actually hit my target of 1735-1750SPX and some more.
I have been working this ending diagonal pattern for a number of weeks, with the new all time highs, we now have enough gyrations in place to suggest the markets could well be setting up for a strong move lower.
With this last high now in place, it's now that I am looking back to the bearish camp and a potential move lower, with many bears having thrown in the towel, I think the conditions are setting up nicely for a substantial reversal, if you look around, the bears that were too early in selling the rally have pretty much given up, despair and despondence is rife.
Equally the bulls are all out singing "Kumbaya my lord" as they are still betting that the FED will be the savior and this market can't possibly move lower ever again.
Whenever a market is so one sided, generally I like to take the other side, although timing is crucial, this is where Elliott Wave patterns can help close the gap between being too early to fade a move.
Over the past month I have been expecting a new all time high in the SPX. We now have that new high and potentially the final piece of the jigsaw puzzle.
Friday could have ended that move, the short term the structure looks complete, enough to suggest that we should be on guard and actively looking for evidence of a move lower.
If I am right about this idea, then I am expecting a big move lower, a move that will likely shock most market participants.
However we need to see a strong break back under 1740SPX as the 1st clue.
The euphoria about the stock markets reminds me of the peaks in Gold and Silver back in 2011, pretty much most participants were convinced that the markets would never move lower or it was impossible for Gold and Silver to move lower with all the money printing.
Well that thesis has been squashed and annulled, yet here we are with the SP-500 making new all time highs like it's going out of fashion and the same market participants back in 2011 arguing that Gold and Silver would never go down are telling us the same thing, that the US stock markets will never go lower.
The stock market can never go lower, or will never move lower because of the FED.
The FED is not in control of the markets, they are simply providing the confidence for people to buy stocks, sentiment is the main driver of the stock market right now.
When sentiment has had enough, things will reverse, and reverse in a big way, and likely to surprise many traders that get caught "holding the bag".
But when it happens, no one will see it coming expect for a few people, and when it does reverse, we will be there trading the decline. Just as members of WPT, who have been trading the upside of this move.
Readers need to decide if they want to be caught holding the bag, trying to get off the boat before it sinks, or think independently outside of the box.
Back when I was looking for a major peak on Gold and Silver, I was seeing similar market circumstances that I am seeing now on the US stock markets.
I suspect the US stock markets are setting up for a large reversal, and those that not prepared for such a move might just wish they got off the boat before it capsizes.
If you are an independent thinker and looking for a non biased opinion, come and join us, having followed this market higher in the face of all the bearishness, and now seeing the bears all fold and scream, I believe it's now that the markets could finally see a large reversal.
Until next time,
Have a profitable week ahead.