Beyond Reasonable Expectations - Market Analysis for Jul 10th, 2024
By
Avi Gilburt
I have said this before and I will say this again – this feels, acts and is structured very similarly to the action we saw in the SPX back in late 2019 into early 2020.
Nonetheless, the market is clearly beyond any reasonable expectations I had set for us many months ago. While I had outlined many years ago that my ideal target for this final 5th wave off the 2020 low was in the 5350-6000SPX region, I did not have a reasonable wave structure pointing that high, and to be honest, I still do not.
As I outlined in detail in the live video for the full membership this morning (please do watch the video if you have not already), almost everything that I am seeing is strongly suggestive that this is a topping structure, and does not have any strong potential to take us to 6000SPX. Based upon the structure, the technicals, the great majority of the stocks in the market, Bayesian probabilities in excess of 80%, and other charts like IWM, the significant preponderance of the evidence suggests we should be striking a top. But, because I was already feeling the potential this could turn into a 2019-2020 scenario many weeks ago, I have strongly warned about aggressively shorting this market until a break of support.
At this time, I am clearly of the same opinion.
Yet, with the market moving through the 5580SPX region, I noted that I would have to “come up” with some bullish interpretation. Again, this is NOT even close to what I would consider a high probability or primary wave count. But, I have added notations to my 5-minute chart which would cause me to begin looking to 6000SPX. Yet again, I am going to reiterate that this is not my primary expectation and based upon the probabilities calculated by our Bayesian expert Luke Miller, it has less than a 20% probability. But, since we deal in probabilities, we do have to consider that there are a minority of times that the lesser probability scenario does take hold. Again, while it is “possible,” I still do not see this as probable.
In the meantime, I would say we would need to see a breakdown below 5446SPX to take this potential off the table. But, please recognize that there is very little short interest in the market at this point in time. And, it is the short traders that provide liquidity in the market, especially once we begin breaking below supports. They provide those corrective bounces when they cover their shorts. But, when there is very little short interest, as we currently have, we have an environment where many can be running for the exits and bounces will be negligible. That is the type of environment this situation creates, and yes, it is somewhat dangerous. So, if you are trading on the long side, PLEASE make sure you know where your stops reside. Also, consider that you cannot assume they will be filled in this type of environment, so you have to monitor them closely if we begin to break support.
As for me, I am still maintaining my prior focus on oil equities, metals and metals equities (for which I will be doing an update shortly), and bonds. I still see those as the providing the greatest probability of profits as we look out towards the last half of 2024.
