Worst Jobs Report In History - And The Market Continues To Rally

May 12, 2020
Elliot Wave Technical Analyst & author @ Elliott Wave Trader

I think there has been more hair torn out in frustration during this rally off the 2200SPX region lows than at almost any other time in market history. The frustration in trying to understand this market is ubiquitous.

As the unemployment numbers get worse and worse, the market continues to rally higher and higher. In fact, the futures rallied 70 points off the overnight low struck on Wednesday night even after the negative employment data was announced Thursday morning, and then rallied another 60 points off the overnight low struck on Thursday night despite the worst employment report in history being presented on Friday morning.

As I continue to peruse the Seeking Alpha public articles, I see more and more articles being published that tell everyone exactly what they already “know” as a certainty: We are setting up for a major crash in the market as we usher in the next Great Depression.

Yet, has the market not taught you that it is not driven based upon this type of reasoning? Trying to reason with the market (which is emotionally driven) is like trying to reason with your spouse when they are being emotional. How well does that work for you?

But, think about it, folks. Does the market ever do what the great majority expect it to do at major inflection points when people get the most emotional? Yet, everyone is so certain that the market is going to crash. And, this is even after a 35% crash has already occurred. I think they call that “recency bias,” which has now been layered on top of the confirmation bias many readers seem to be coming to Seeking Alpha for at this point in time. Well, they do say that bearishness sells.

This same emotional phenomena is why it is so hard to buy the lows when they do hit. In fact, I have a confession to make. As the market was bottoming out towards the end of March in the 2200 region, I was presenting to my 6000+ subscribers my expectation for the market to bottom and begin a rally back up to the 2600-2725SPX region. At the time, I posted my own investing/trading plan and how I was staggering my additions to my market holdings.

Yet, when I went to hit the buy button, I have to be honest in saying that this was the most difficult buying I ever encountered. The fear was palpable on March 23rd as we were striking the bottom of the support target on my SPX chart. In fact, as I was noting to my members that I was buying long positions, quite a number of them (mostly the new ones) were telling me I was crazy because it was “so clear we have lower to go” because of the virus issues.

Well, I have to also admit that this was not the first time I have been called crazy, and I doubt it will be the last time.

Back in 2011, when gold was in the midst of a parabolic rally wherein it saw days of $50+ price rallies, I posted public analysis that said you should sell at $1,915. And, boy was I called crazy then – even though gold topped within $6 of my target.

I was again called crazy for going long gold in the December of 2015 the night we hit the bottom In fact, our ability to be able to buy the lows in metals has been noticed by Doug Eberhardt – a fellow Seeking Alpha Contributor (one of a few I highly respect) and the owner of Buygoldandsilversafely.com - when he said this to me in our trading room at Elliottwavetrader.net:

“I can attest to your accuracy on actually buying both gold and silver from us as close to the bottom as one could. With gold you called it to the letter and your limit order which was placed well in advance executed perfectly . . . Your timing on buying the dips is uncanny Avi! People should be aware of this.”

And, then when we bought silver in March when it spiked below 12, he said this to our members:

“Avi has the magic touch. Listen to him . . . I want to explain to you all what Avi did for you. He got most of you to buy the metals before the premiums shot up and before everyone ran out of product. This is the 2nd time he has done this and kudos to him for doing that for you.”

Again, I was viewed as crazy at the end of 2015 when I called for a correction in the market from the 2100 region back towards the 1700-1800 region, which would then set up a “global melt-up” in 2016.

I was also called crazy when I told my members that I was going long bonds in November of 2018, and even wrote about it publicly. Everyone thought I was nuts because the Fed was still raising rates. Yet, we caught the exact lows that month.

This has happened many, many more times than I am even citing in this article. So, I am quite used to be called crazy at this point, and I now wear it as a badge of honor, since it often means that it will likely be the right move.

Now, admittedly, as I outlined to our members at the time, I was uncertain as to whether the bottom we were striking in March was going to be THE low, or if we would have one more marginally lower low yet to be seen. This is why I also outlined my own buying plan which takes into account both those possibilities through a layered buying approach which is based upon my Fibonacci Pinball method of Elliott Wave analysis.

As it stands right now, the market is sending us more messages that a bottom has indeed been struck relative to the evidence that it can potentially see a lower low still. Ultimately, the market is going to have to complete a 5-wave rally structure back up tows the 3200SPX region in the coming months to convince me a long term bottom has indeed been struck, which will then begin a larger degree pullback likely taking us into late summer, or even the fall, which should likely be aggressively bought. You see, if the market completes 5-waves up off the March low, then it would confirm my expectation that we are going to rally to 4000+ in the coming years, with strong potential for a blow-off top to be seen as high as the 6000 region.

In the coming week, much will depend upon how the market reacts early in the week. If we see the futures sustain a break out over 2942ES, then we are likely heading up to the 3000-3060 region over the coming week or two. However, if the market is unable to break out over that level, and turns down impulsively below 2870ES, then it opens the door to re-test the 2700-2750SPX region.

Now, for those that may be confused by my analysis, please understand that the stock market is not an environment in which we can expect certainty. Rather, it is a non-linear environment. Therefore, one must approach the market from a non-linear perspective. To this end, we have a primary perspective within our analysis. Yet, if the market deviates from the structure we would expect within the primary analysis, we immediately move to our alternative perspective in order to adjust our positioning to minimize losses and re-align with the market price structure.

Lastly, I want to remind those that read my analysis that it is based upon probabilities, as there is no such thing as certainty within non-linear environments such as the financial markets. The majority of the time, the market provides us with a relatively clear path and provides us strong goal posts as it moves through its structures. But, none of my analysis is meant to be seen as a certainty. And those that have followed me for many years know how well we have done in the markets we track, and being flexible and listening to the market has certainly kept us out of trouble and kept us profitable.

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Avi Gilburt is a widely followed Elliott Wave technical analyst and author of ElliottWaveTrader.net, a live Trading Room featuring his intraday market analysis (including emini S&P500, metals, oil, USD & VXX), interactive member-analyst forum, and detailed library of Elliott Wave education. You can contact Avi at: info@elliottwavetrader.net.

It is estimated that the total amount of gold mined up to the end of 2011 is approximately 166,000 tonnes.

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