My General Perspective On The Market

As I read much of the commentary being pushed around the internet now, we see generally see a broad range: on one end there are perma-bears calling for the mother of all market crashes, and on the other are those who are pounding the table about the fundamentals of the market still being strong, which should keep us quite bullish for the long term.

Doesn’t it amaze you that there is something for every extreme and much in between?

If you want to be bearish, there is much to support your perspective. And, if you want to be bullish, there is an equal amount of information to support that perspective as well.

But does that not suggest that all this information is really superfluous in the ability to determine whether you should be a bull or bear? While you can choose your personal desire from a smorgasbord of perspectives, would not one consider that to be confirmation bias rather than objective market analysis? And boy, do market analysts and participants love to discuss these fundamentals to explain why one will exert more pressure on the market than the other will, depending upon their initial bias.

As for me, price means everything. If the price structure of the market is bullish, then I will be bullish. If the price structure of the market is bearish, then I will be bearish. And when the market presents a pattern that tells me I need to be extremely cautious, you will hear that from me as well, as you did during the August and September time frame within the equity market.

I know I speak negatively about fundamentals. But, the main issue I have is that once you believe a certain “story” about what the market must do, the objectivity needed to accurately and objectively analyze the market will be compromised. So, while many think it is a weakness of analysis to ignore fundamentals, I only do so in order to assure objectivity in analysis.

Anyone who has been closely following the market for the last three years would know that there have been a plethora of “stories” that kept many bearish during the 64% rally we experienced from 2016 until 2018. We had Brexit, Grexit, terrorist attacks, rising interest rates, North Korea, Trump, cessation of quantitative easing, quantitative tightening, trade wars (our last 9% rally in the market began after the trade wars began), and many other reasons the market was going to imminently top. And anyone who bought into any of those “stories” missed one of the best rallies seen during a two-and-a-half-year period.

Because I do not buy into the “common speak” or the “stories” that sway most others in the market, I was able to solely rely on price to maintain a strong bullish bias during that run. And, to be brutally honest, I have not seen anyone able to identify turning points as well as my analysts have through the years. While we clearly have not been perfect, we have retained a very high accuracy rate (based upon what our members have tracked through the years) specifically because we will not be swayed by the same market speak that is taken as gospel by the rest of the market.

I want to remind you of the wise words of Ralph Nelson Elliott, penned almost a century ago:

At best, the news is the tardy recognition of forces that have already been at work for some time and is startling only to those unaware of the trend... kings have been assassinated, there have been wars, rumors of wars, booms, panics, bankruptcies, New Era, New Deal, "trust busting", and all sorts of historic and emotional developments. Yet all bull markets acted in the same way, and likewise all bear markets evinced similar characteristics that controlled and measured the response of the market to any type of news as well as the extent and proportions of the component segments of the trend as a whole. These characteristics can be appraised and used to forecast future action of the market, regardless of the news... Those who regard news as the cause of market trends would probably have better luck gambling at race tracks than in relying on their ability to guess correctly the significance of outstanding news items... To sum up our view, then, the market essentially *is* the news…

The causes of these cyclical changes seem clearly to have their origin in the immutable natural law that governs all things, including the various moods of human behavior. Causes, therefore, tend to become relatively unimportant in the long term progress of the cycle. This fundamental law cannot be subverted or set aside by statutes or restrictions. Current news and political developments are of only incidental importance, soon forgotten; their presumed influence on market trends is not as weighty as is commonly believed.

R.N. Elliott, Nature's Law, 1946

To that end, while my ideal target for wave 3, set quite some time ago, was the 3011-3225SPX, I had to recognize – from an objective standpoint – that the break down below 2880SPX would place the market at serious risk of not attaining my ideal target for wave 3. And, as we now know, we came up 70 points shy of our longtime target. Yet the structure of the market prior to breaking down below 2880SPX certainly caused me concern even before we broke 2880SPX, as I conveyed to our ElliottWaveTrader members in August and September.

Again, while I will not always be right, as I am a human being attempting to analyze a non-linear environment, I know the points at which I have to change perspective. So, while I cannot guarantee perfection in my analysis, I can guarantee intellectual honesty in assessing the market using the most objective standards at our disposal, without being swayed by the common market think.

So, as we move into what seems to be a larger-degree 4th wave pointing down to the 2200SPX region as we look into 2019, I am strongly suggesting you take a perspective of caution, and not be swayed by any bullishness that may be generated by the next rally I am expecting to commence in November. Yet, if I see something that suggests wave 3 will continue to extend, I will certainly alert subscribers of that potential. However, my primary expectation is that the market is likely setting up to provide market participants with the most pain seen since the 2008-09 decline. But, no matter how this market continues to react in the coming months, I guarantee that you will receive the most objective and intellectually honest analysis from me. I know of no other way.