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Are You Getting Ready For The Next Crash?

First published on Seeking Alpha pre-open on Monday November 16:  I have read one article after another calling this market delusional, wrong, crazy, impossible, dangerous, a bubble, etc. And what is common amongst all these articles is that none of the authors expected the market to rise this high. Moreover, they all point to Covid as the primary reason for their bearishness. So, when they don’t understand what is going on, they resort to name calling.

But, calling the market names will not help your investment accounts. Moreover, has basing your market perspective on Covid helped your investment account? Rather, it behooves you to seek out a better way to understand the market.

I know many of you are now getting ready for the next crash, which many seem to be expecting due to all the Covid news. But, let me ask you a question: Did the worst news about the death rates and national economic lockdown stop the market from rallying 64% and 1400 SPX points from the bottom in March? Yet, you are now assuming it will this time!? Is this time different?

Well, maybe you are right. But, I am not seeing the same downside set up we had in February, so I certainly question the “common-think” I keep reading about regarding the market being about to crash.

In fact, I actually think the market is setting up to rally to the 4000-4100SPX region over the coming months. The only question with which I am struggling is how deep of a pullback will we see in the coming week or two before that rally begins in earnest.

You see, based upon our understanding of Elliott Wave, after the market completed a 5-wave rally off the March low, we normally see a retracement of .382-.618 of the prior rally. Thus far, the market has only provided a .236 retracement, which is normally quite shallow and unusual.

Yet, many stocks within the market have provided us with their standard .382-.618 retracement during September and October, which is why I have been focusing the members of The Market Pinball Wizard on buying those stocks during those months.

But, the question still remains as to whether there is one more drop in the SPX to take us to that target region or if the shallow retracement is all we are going to see before we head to our next target in the 4000-4100SPX region.

So, while most of you will continue to focus on the Covid news, I am focusing on the 3335-3400SPX region. As long as any further weakness in the coming week or two holds that support, then we will set up to rally to 4000-4100SPX next. However, if we see a sustained and impulsive break of the 3335SPX level, then it opens the door to a more standard pullback to the 3050SPX region before we head to 4000-4100 after Thanksgiving.

Those of you that recognize that the Covid news has simply been a distraction which kept many investors out of the market (with some even shorting) during one of the strongest rallies in market history will prepare yourselves appropriately for the next rally to 4000-4100SPX. However, those of you that are simply not burdened by the facts of what occurred in the market from March through September will continue to bury your heads in the sand and believe that the Covid news is driving the market, while you prepare for the market to crash. Good luck to all.

 

Avi Gilburt is a widely followed Elliott Wave analyst and founder of ElliottWaveTrader.net, a live trading room featuring his analysis on the S&P 500, precious metals, oil & USD, plus a team of analysts covering a range of other markets.

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