Best of the Week
Most Popular
1. Next Financial Crisis Is Already Here! John Lewis 99% Profits CRASH - Retail Sector Collapse - Nadeem_Walayat
2.Why Is Apple Giving This Tiny Stock A $900 Million Opportunity? - James Burgess
3.Gold Price Trend Analysis - - Nadeem_Walayatt
4.The Beginning of the End of the Dollar - Richard_Mills
5.Stock Market Trend Forecast Update - - Nadeem_Walayat
6.Hindenburg Omen & Consumer Confidence: More Signs of Stock Market Trouble in 2019 - Troy_Bombardia
7.Precious Metals Sector: It’s 2013 All Over Again - P_Radomski_CFA
8.Central Banks Have Gone Rogue, Putting Us All at Risk - Ellen_Brown
9.Gold Stocks Forced Capitulation - Zeal_LLC
10.The Post Bubble Market Contraction Thesis Receives Validation - Plunger
Last 7 days
Israel’s 50-Year Time Bomb, Pushing Palestinians to the Edge - 19th Oct 18
Bitcoin Trend Analysis 2018 - 19th Oct 18
History's Worst Stock Market Crash and the Greatest Investing Lesson! - 19th Oct 18
More Signs of a Stocks Bull Market Top and Start of a Bear Market in 2019 - 19th Oct 18
Stock Market Detailed Map Of Expected Price Movement Before The Breakout - 18th Oct 18
Determining the Outlook for Gold Mining Stock - 18th Oct 18
Investor Alert: Is the Trump Agenda in Peril? - 18th Oct 18
Stock Market is Making a Sharp Rally After a Sharp Drop. What’s Next? - 18th Oct 18
Global Warming (Assuming You Believe In It) Does Not Affect Gold - 18th Oct 18
Best Waterproof Compact Camera Olympus Tough TG-5 Review - Unboxing - 18th Oct 18
Silver's Time Is Coming - 17th Oct 18
Stock Market Volatility Breeds Contempt - 17th Oct 18
Gold 7-Year Bear Market Phase Is Over - 17th Oct 18
Gold - A Golden Escape - 17th Oct 18
Tec Stocks Sector Set For A Rebound? - 16th Oct 18
Real Estate Transactions are Becoming Seamless with Blockchain-Powered Data Sets - 16th Oct 18
Important Elements of a Viral Landing Page - 16th Oct 18
Stephen Leeb Predicts 3-Digit Silver and 5 Digit Gold?! - 16th Oct 18
BREXIT, Italy’s Deficit, The EU Summit And Fomcs Minutes In Focus - 16th Oct 18
Is this the Start of a Bear Market for Stocks? - 16th Oct 18
Chinese Economic Prospects Amid US Trade Wars - 16th Oct 18
2019’s Hottest Commodity Is About To Explode - 15th Oct 18
Keep A Proper Perspective About Stock Market Recent Move - 15th Oct 18
Is the Stocks Bull Dead? - 15th Oct 18
Stock Market Bottoms are a Process - 15th Oct 18
Fed is Doing More Than Just Raising Rates - 14th Oct 18
Stock Markets Last Cheap Sector - Gold - 14th Oct 18
Next Points for Crude Oil Bears - 13th Oct 18
Stock Market Crash: Time to Buy Stocks? - 12th Oct 18
Sheffield Best Secondary School Clusters for 2018-19 Place Applications - 12th Oct 18
Trump’s Tariffs Echo US Trade Policy That Led to the Great Depression - 12th Oct 18
US Dollar Engulfing Bearish Pattern Warns Of Dollar Weakness - 12th Oct 18
Stock Market Storm Crash, Dow Plunges to Trend Forecast! - 12th Oct 18

Market Oracle FREE Newsletter

Trading Any Market

Nothing Can Bring Down This Stock Market Except . . .

Stock-Markets / Stock Market 2017 Nov 06, 2017 - 06:23 AM GMT

By: Avi_Gilburt

Stock-Markets

This past week, we experienced yet another horrendous terrorist attack in New York City. And, amazingly, just like what occurred after several other terrorist attacks that have been experienced over the last year, the market rallied right after the attack.

It has almost gotten to the point that people now expect the stock market to rally after a terrorist attack. Have we really become this warped in our thinking? Must we hold fast to ridiculous notions that news is what drives the stock market to the point that we have to resign ourselves to believing that the market will rally “because” of a terrorist attack? Do you not see how ridiculous these perspectives really are?


Yet, if the market dropped after a terrorist attack, there is no question in my mind that every analyst and their mother would be absolutely certain that the market dropped specifically due to the terrorist attack. Every article the next day would have been pointing to the attack being the definitive “cause” of the market drop. And, if I then challenged this false exogenous causation theory, the response I would receive is “don’t you believe your eyes?” Yet, not a single analyst dares to suggest that the markets are rallying because of news of terrorist attacks despite seeing many instances of this occurring over the last two years. Do, they not believe their eyes?

Are you starting to see my point yet? Do you see through the intellectual dishonesty of maintaining these old perspectives of what moves the market?

I cite this study often, but I think the recent rally after the New York attack should drive this point home even further. In August 1998, the Atlanta Journal-Constitution published an article by Tom Walker, who conducted his own study of 42 years’ worth of “surprise” news events and the stock market’s corresponding reactions. His conclusion, which will be surprising to most, was that it was exceptionally difficult to identify a connection between market trading and dramatic surprise news. Based upon Walker's study and conclusions, even if you had the news beforehand, you would still not be able to determine the direction of the market only based upon such news.

And, this past week’s stock market action further supports Mr. Walker’s conclusion. But, we have to begin to look at markets in a more intellectually honest manner in order to be able to see it. However, I am quite certain that the next time a news event coincides with a market move, all the usual suspects will be out front screaming how the news event was the certain cause of the market movement. And, therein lies the intellectual dishonesty inherent in most financial reporting and analysis today.

Price pattern sentiment indications and upcoming expectations

Before I begin this week’s expectation, I want to make a point about last week’s analysis. I noted that if the 2572SPX level broke early in the week, it opened the door to a drop down to lower support in the 2520-50SPX region. Many seemed to read that as suggesting that a break of 2572SPX would certainly drop us to the lower support region. But, that is not how Elliott Wave analysis works, nor is it how we use it to set up trades. Allow me to explain.

You see, a standard impulsive wave structure targeting the 2611 region directly had that 2572/74SPX region as support which would have taken us directly to the 2611SPX region this past week. However, the break down below 2572 added more complexity to the pattern.

In order for the break down below 2572SPX to point us down to the lower support, we would have had to see a 5-wave impulsive structure break below 2572SPX, which would then suggest we are heading down to our lower support region. However, the drop below 2572SPX only provided us with a 3-wave drop, which is most often viewed as a corrective drop. But, it also meant that we had to prepare for much more volatility and whipsaw because the upside structure then morphed into what we call an ending diagonal. That structure provides for the volatility and whipsaw for which we had to prepare, and which the market provided us for the rest of the week.

So, as I presented in a blog write up a few weeks ago, Elliott Wave analysis is to be used in logical progression, which is why we always provide our analysis within an if/then context. And, while we broke below 2572SPX, and it “opened the door” to drop down to the 2520-50SPX region below, the market never provided the requisite set up pointing down there after we broke 2572SPX, which caused us to continue to look higher within our primary structure.

But, based upon earlier break of 2572SPX, and the further overlapping nature of the market structure, there is much more complexity in this structure, which can provide us with further whipsaw before a top is struck. If the market should break 2570SPX in the coming week, it makes it much more likely that this break will have us target at least the 2555SPX region, with potential to drop as deeply as the 2520SPX region. But, that will still set us up for a rally back up towards the 2600+ region. However, as long as the market maintains over 2570SPX, I still see us heading to the 2600+ region before this wave (3) rally off the February 2016 lows can even be considered completed.

So, I would complete the title of this article by saying that nothing can bring down this market except when we finally complete this structure for wave (3). (smile)

See charts illustrating the wave counts on the S&P 500 (INX).

Avi Gilburt is a widely followed Elliott Wave technical analyst and author of ElliottWaveTrader.net (www.elliottwavetrader.net), a live Trading Room featuring his intraday market analysis (including emini S&P 500, metals, oil, USD & VXX), interactive member-analyst forum, and detailed library of Elliott Wave education.

© 2017 Copyright Avi Gilburt - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules