S&P 500: An Impulsive Pullback Is Anything but a Buying Opportunity

I’m going to begin this replace with a presentation as to how we received right here for the advantage of these studying my articles for the primary time, and I’ll then take it ahead with parameters as to the place I believe we’re going.

For people who have adopted me, you’d know what we referred to as the underside to the again in October 2022, regardless of most market contributors anticipating us to have head a lot decrease on the time because of the worse-than-expected report on the time.

As you’ll be able to see, we had been anticipating a backside out there, with an additional expectation of a rally that may first take us to the 4150/4200SPX area, adopted by a pullback in the direction of the 3800/3900 area, finally taking us again up in the direction of the 4300+ area. And that’s precisely what we’ve seen ever since we caught the underside again in October. However you needed to battle your feelings to have the ability to see this potential at the moment.

As one of many feedback famous:

“Slowly however certainly I’ve grow to be much less and fewer involved/concerned with seeing if different elements align with waves (fundies/techs), and turning into extra absorbed merely into the waves. It has been exhausting, because it’s human nature to attempt to correlate absolutely anything. After I simply comply with instructions/waves, my success is nearly as good or higher than Avi’s famous 70% charge.”

But, once I printed my perspective about my goal many months in the past, this remark I obtained appeared to signify the overall feedback from many readers:

“4300 isn’t occurring”

But, right here we’re.

To get right into a bit extra element, when the market was many hundred factors decrease, I offered a particular goal of 4311-4375SPX. However, when the market approached the 4300SPX area, the construction was telling me that we’d doubtless attain even larger.

So, I modified our goal to the 4375-4433SPX area nicely earlier than we even broke over the 4300SPX area. For people who know of our blue field targets, you’ll be able to see my latest goal set right here:

Now that the market has gotten to our excellent goal zone, it’s time to grow to be a bit extra cautious, as I wrote final week:

“The market nonetheless has extra room for the upside, however I believe it’s time for everybody to be tightening their threat administration. As soon as this rally completes, I’m anticipating a sizeable drop out there. And, as I’ve outlined many instances earlier than, the character of that drop will inform me if we’ll proceed larger to 4500/4600SPX subsequent, or if the market is beginning a drop to 2700/2900SPX.

Sure, I do know these are majorly totally different outcomes, however the market has the potential for both decision based mostly upon the character and construction of the rally off the October low. So, till I see how the market drops within the coming months, I intend to tighten up my threat administration, so I’m not caught holding the bag within the occasion this rally presents us with the excessive we see out there for the subsequent two to a few years.”

Because the market has developed its construction over the past a number of weeks, it has actually offered us with much more data that we will use in our positioning.

First, whereas we’ve reached our goal, the market can actually nonetheless squeeze a bit larger over the approaching week or two. So, we’ve to acknowledge our higher assist is at 4370-4395SPX. And if we’re capable of squeeze larger, I’ll elevate that assist once more. However, as soon as we break assist, the MAJOR key area we must watch is the 4185-4275SPX area.

You see, if the market pulls again in a corrective style into that assist area, then we will arrange our subsequent rally again to the 4800SPX area. Whereas I do know many will probably be taking a look at that assertion in absolute disbelief because of the “market atmosphere,” do you consider it to be extra surprising and not possible than our expectation of 4300+ from the 3500SPX area at a time when everybody was so sure we had been heading decrease based mostly upon the “market atmosphere” at the moment?

So, please permit me to open your thoughts to the potential for brand spanking new market highs. Whereas I’m not saying this may occur, I’m merely saying to maintain your thoughts open to the potential, which will probably be clarified by the market over the approaching a number of months.

For people who learn my work intently, you’d know that I’ve had a giant subject with the market prime struck on the finish of 2021. Whereas I used to be anticipating a big pullback into 2022, I didn’t suppose on the time that we’d break the 4000SPX area.

Furthermore, I used to be additionally on the lookout for the market to rally to 5000+ earlier than the main bear market I used to be anticipating thereafter would start in earnest. The primary cause was that I used to be not capable of rely a stable 5-wave rally accomplished into that top off the March 2020 low. And, I nonetheless have this subject.

Because of this, I famous even again in October of 2022 that I’m going to be watching the market construction very fastidiously, as I’m leaving the door open for the market to nonetheless be capable to rally again to the 5000+ area earlier than a multi-year bear market begins. And I’m nonetheless of this opinion.

So, whereas the market can nonetheless push larger within the coming week or two, I’ve now turned fairly cautious. I’ve raised money from the varied charts which can be hitting the targets we set many months in the past and have raised the stops on these positions that also look like they’ve additional to run.

What is going to get me to think about deploying the money that I raised will rely on how the market pulls again to the 4275SPX area within the coming months. If that pullback is clearly corrective, then I’ll doubtless be layering into lengthy positions. Nevertheless, if that decline is clearly impulsive, then I will probably be making ready for a decline that may level us as deep because the 2700-2900SPX area over the approaching yr.

Once more, I do know these outcomes are fully diametrically opposed. However that’s the posture the market is presenting proper now. And I’m going to be viewing the market from as goal a lens as I humanly can, and can wait to see how the subsequent take a look at of the 4275SPX area will take form earlier than I make any bigger diploma assessments.