Every time I branch out to read articles being presented throughout the internet each week, it simply makes me shake or scratch my head. Moreover, I stand in amazement at anyone who attempts to base their investment portfolio upon such information.
As I have said many times, after many years of market study, I have found no better analysis methodology that provides market context better than Elliott Wave analysis. It provides forewarning as to melt-up set-ups in the market, as well as periods of market volatility.
Last week, I warned our members that we were entering a period of time which will present a choppy and difficult market to navigate. And, the market certainly delivered within our expectations. And, did interest rates or exogenous events tell me this was going to happen?
No, it was simply my crystal ball, which I read with the benefit of my Elliott Wave analysis, based upon our Fibonacci Pinball methodology. Or, maybe it is the voodoo which so many of our readers assume our methodology is based upon? Unfortunately, only those who lack any knowledge of our methodology would dare characterize our analysis in such a manner. Yet, our members really don’t care as they have handily outperformed the market for many years following our analysis, as you likely have seen in the comment section to our articles.
In fact, my recent analysis of the energy market warned our members to expect a nice pullback in the complex. And, the market certainly followed through with our expectations this past week, as oil provided us with the biggest pullback we have seen since October of 2020. While our members were quite prepared for the volatility we experienced this past week, I am left shaking my head at how the media is trying to explain the same volatility. In fact, these are just two of the titles presenting the “reasons” for the volatility seen this past week in energy market:
“Crude plunges 7% amid vaccine worries”
“Oil drops 7% on Europe vaccine snag, U.S.-Russia tensions”
Sorry, but I have to chuckle reading those titles. And, if you are being honest with yourself, you would too. Do you not see quite clearly how the media and article writers present “analysis” to you? It is incredibly superficial in nature, and extremely unreliable. Moreover, it will never provide you with advance notice of a market move, as it is not designed to do so. Rather, they see a market move, and then look to the news to see what has been happening in the headlines to attempt to explain a market move after the fact.
While we were prepared for this pullback before it occurred, most market analysts and pundits simply try to explain a market reaction after it has occurred. Is this really how you expect to outperform the market?
So, what will the market do in the coming weeks? Well, I am going to attempt to distill a very complex structure in as simple a manner as possible. And, it is all based upon whether the market can make new all-time highs before we see a sustained break down below 3850.
Should we see a new all-time high in the coming week, then we will likely see one more retest of the 3900-3950SPX region before we melt-up to the 4300+ region during the spring.
However, should the market see a sustained break of the 3850SPX region in the coming week, we have opened the door to retest the 3700SPX region before we begin that melt-up phase to 4300+.
Now, if you are one of those readers who have a difficult time with this if/then logic, my answer to you is to learn how to accept it. This is the most reasonable manner in which one should be approaching a non-linear environment such as financial markets. And, if you think you can approach it with a closed-minded finite perspective, then you will undoubtedly become a bag-holder or market chaser at one time or another, if not the majority of the time.
It is up to you to view the market objectively in order to recognize when the next melt-up phase will take hold. Should we see the market action I just described above, please do not fight it or call it names. Simply try to recognize the market clues and align your account with what the market is telling us.
Lastly, I want to remind those that read my analysis that it is based upon probabilities, as there is no such thing as certainty within non-linear environments such as the financial markets. The majority of the time, the market provides us with a relatively clear path and provides us strong goal posts as it moves through its structures. But, none of my analysis is meant to be seen as a certainty. And those that have followed me for many years know how well we have done in the markets we track, and being flexible and listening to the market has certainly kept us out of trouble and kept us profitable.
It is your responsibility as an investor to view the market action objectively despite all the contrary news or noise presented around you. And, that my friends is one of the most difficult lessons that Mr. Market teaches to those who do best within our financial markets. Oftentimes, you must unlearn that which you have been erroneously taught for decades in order to learn the most profitable lessons Mr. Market has to offer.
As Isaac Asimov so aptly noted, “[y]our assumptions are your windows on the world. Scrub them off every once in a while, or the light won't come in.”
This will be my last public update for the next few weeks, as I will be taking off time for the Passover holiday. I want to wish everyone a happy holiday season over the coming weeks.