Florent Molinier
I know many of you are trading “correlations”. So, for those who don’t already know my take on this, let me repost something I wrote a while back:
“What a correlation represents is when two the markets trade in opposite directions or in the same direction for a period of time.
Now, since we understand that each market trades in its own pattern, what correlations really mean is that these markets trade for a period of time in these relative directions. So, it can mean that one market is trading higher in a 3rd wave while the other is trading higher in a 5th wave. Or maybe one is trading lower in a C wave while the other is trading higher in a 3rd wave. . etc
Unless you understand how to analyze each chart individually, you’ll never know when an apparent correlation will break down – and it almost always does.
This now brings me to all the articles I hear about how the rising dollar drives the market down. Yet, should we ignore that the dollar has been in a long-term uptrend alongside the S&P500 since 2008/09, when both bottomed? Do we just close our eyes or ignore certain facts when they don’t fit the narrative we’re trying to present? Or should we approach everything with an intellectually honest and consistent perspective? When you want to come up with a theory, I urge you to consider all the facts. And, when there are facts that don’t fit your “theory”, then you have to be honest enough to drop that theory.
Again, understanding where each chart sits in its own individual wave structure will not only help make these apparent correlations utterly worthless, but it can also tell you when these apparent correlations are likely to break down.
Another example is when I hear the discussion about rising bond yields causing the market to drop this year. Well, we’ve had many other periods where yields were rising, and yet the market was rising at the same time. Also, has anyone bothered to realize that the market is up 7% since hitting a low on October 13th while rates have continued to climb quite steeply since then ? In fact, it was the best week for the market since June, but it was also one of the worst weeks for bonds over the same period. So please spare me the arguments that the speed of bond movement is what drives the market down.
Now let’s move on to my market perspective. For those who have asked me, I still have major issues calling the long-term top as having been hit in the S&P500, and have explained my reasoning in detail to members of The Market Pinball Wizard. But, clearly, due to the depth of the decline in 2022, which was less than my initial expectations that I outlined at the end of 2021 for the pullback I expected in 2022, this must be something I have to take into account. Therefore, the nature of the current rally will probably tell me a lot.
So far, the bulls have done exactly what they needed to do to maintain the upward pressure in the market that we expected on October 13th. If you recall from my last Sentiment Speaks article, I noted the following about the bottom hit that day:
“In fact, before the market opened on Thursday morning, and as it hovered near recent lows, I sent out an alert to our members at 8:56 a.m. noting my expectations for a low reached and noting that “[t]it should now be the high point of the sell off which completes the downward pattern. The market bottomed half an hour after my alert.
Since that low, the market has proceeded in an almost classic upward fashion. Once we were done with the trading day of this Thursday, October 13, I laid out my expectations for a pullback in the market. And, on Friday, we saw the setback we expected. But, while most thought the pullback was going to point us to lower lows, we explained how the market was likely bottoming near the 0.618 retracement of the rally from Thursday’s low, which should drive us to a rally the following week. And that is exactly what the market presented to us on Monday and Tuesday of last week.
While I was away due to a religious holiday these two days, Garrett Patten, who is one of our senior analysts in our StockWaves department, filled me in and explained that he was expecting another pullback from Tuesday morning’s high at the market open. And, we spent the rest of the week in this retreat.
On Friday morning, I posted the following alert to members of The Market Pinball Wizard at 8:43 a.m., just as the market was hovering at its smaller key support level that we calculated and described in futures:
“It’s pretty straightforward this morning. We need to find a bottom near the open and start rallying strongly, or we are headed towards the wave b target.
Within minutes of my message, the market began the rally we saw on Friday. Needless to say, later that day, members of The Market Pinball Wizard voiced their opinion again:
“Avi your MPW lets me see the market in a whole new light. It’s like everything slows down, and you have the ability to make decisions that until now weren’t available to me. Your system gives me quickly let it be known that my bias/direction is incorrect, allowing adjustments to be made that save me thousands of dollars. This morning it saved me 20% profit. Also thank you for your engagement, updates. day are still just as timely.
“Avi your advice is supernatural. Make a fortune today based entirely on your main goals and guidance. Left to my own devices, I would have freaked out, quit and lost A LOT of money.
Again, I’ve noted this many times before. I can’t always be right 100% of the time. In fact, this year represents some of my false calls, as I clearly did not expect the market to fall so deeply when I was preparing our members at the end of 2021 for a pullback in 2022. But, nevertheless, those who followed us Over the years, we have all found that we are far more right than wrong. Additionally, I provide clear parameters of when I’m wrong and when we need to adjust our expectations, as noted in the member’s quote above.
Now, to keep things relatively simple, I will say that I think we are heading into the 3900-4000 region next. The only question is the depth of the next pullback we see. As long as we stay above Friday’s low, I think we are heading towards the 4000SPX region in the next two weeks or so in what can be a very strong rally. Also, if we follow this pattern, I can still hold the potential for the market to head to new all-time highs.
However, if we break below Friday’s low, I would still hold the main expectation that the market can rally back to 3900+ in the coming weeks. But that would make me doubt the potential for a new all-time high, and might make me consider that any rally we see that can take us back into the 4100-4500SPX region would just be a corrective rally that wouldn’t make a new all-time high. . I won’t go into this prospect’s reasoning in a public post, but if you’re interested in understanding the “why”, please join us at The Market Pinball Wizard for more details on my analysis.
Housekeeping questions
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As for upcoming presentations, I will be presenting in person at the MoneyShow in Orlando on October 31, then hosting a panel discussion on November 10 with Elliottwavetrader analysts Garrett Patten and Ryan Wilday regarding our stock views. , gold, bond and cryptocurrency markets for 2023.
Lastly, I will be traveling over the next couple of days, so I’ve asked the editors to close the comments section as I won’t be available to respond.
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