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Sentiment Speaks: Are The Bears About To Fumble?


  • Following the news continues to be useless.
  • The bears have a downside set up in place.
  • What the bulls need to do to make the bears fumble the ball.

Do you think we will ever see a week of market moves associated with news events for which you will not shake your head?

Week after week I think analysts say something so stupid that I just want to scream. As I have pointed out so many times over the years, I keep hoping that some form of sanity will grip pundits one day. I keep hoping that they may wake up and recognize the error of their ways. But, alas, I continue to long for that day.

So, whenever the market moves, everyone goes through the exact same thinking process: “Hey, look. The market just saw a big move. Let’s go see what news caused this move.”

Is this not the structure of almost all the analysis you see presented? Let’s look at this past week, for example. During the week, the futures took a strong downturn. And within hours, every analyst was certain that it was “caused” by Gary Cohn’s resignation.

So, let’s think about this. For how long has this resignation been telegraphed? I think we all knew it was coming. So, are you going to tell me that the market did not already have this “priced in?” You see, this is where this type of analysis gets really fuzzy.

When some form of “surprise” news comes out, and the market moves in the opposite direction than most expect, pundits are quick to note that the bad news “was already priced into the market,” which is why the market seemingly ignored it. But, when a news event hits the wires after it was widely telegraphed beforehand, yet the market sees a sizable move, you mean to tell me that news known before the announcement was not priced in?

When you begin thinking in an intellectually honest manner

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This article was written by

Avi Gilburt profile picture

Avi Gilburt, CPA., is an accountant and lawyer by training and the founder of Elliot Wave Trader, where along with his team of analysts, he specializes in identifying the major turning points and market trends so you can invest more confidently while applying appropriate risk management.

Avi is the leader of the investing group The Market Pinball Wizard where they help members gain a more real-time understanding of where the market is likely heading. Features of the group include: daily S&P 500 directional analysis, intraweek metals analysis, weekly expanded analysis on the S&P 500, metals, USO, and USD, weekly live webinars where we walk you through the charts we are tracking, and community chat with direct access to Avi and his team of analysts to ask questions. Learn More.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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Comments (138)

2440 is not low enough of a target. I’m sure you have adjust wave counts now. Timely vacation Avi.
1234gel profile picture
I must admit I do trade Natural Gas based upon the inventory reports that are made public.... and it works well for the reason the major traders do the same. I am not yet at the stage I pay attention to "storms" in the Northeast, or what the chances are of 'Stormy" Daniels suing the Pres.
Avi Gilburt profile picture
No public updates for now, as I am going on vacation. If you need any analysis, feel free to join one of my services, where my analysts will be providing constant updates on all products I follow.
insightful?informed decider profile picture
The enemies of Trump also happen to be the enemies of America.
Sun Tzu
“If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.”
Awake&Watching profile picture
"The enemies of Trump also happen to be the enemies of America"

The last time I heard this kind of dribble was when Fox News was saying it was unpatriotic to question G.Bush....

It seems like every day (for better or worse) we are all getting to know more about Trump, but are still not looking forward to "the result of a hundred battles". Trump in no Sun Tzu
well we are below 2754 .. seems like Fridays gap will fill, at least before back up, enjoy the range chop will probably last a couple more months imo
Just my opinion but, I don’t think it smart to btfd at this time. I’m preparing for a market crash myself. Watch the ftse100 index they seem to be one step ahead of us in the business cycle. Housing market already falling apart in England. Debt crisis just ahead with bursting bubble to accelerate. Look at all the problems around the world it is just a reflection of changing sentiment. All of the sudden problems that were ignored in the recent past with a change in sentiment all of the sudden matter. Contrary to the Uber bullish consensus this is not just a normal correction in imho. Despite being accused of being a troll on this blog, I’m just trying to help people not lose money listening to overly bullish financial forecasts of near term 3000 plus on the S & P. If you recognize the ridiculous over valuations in the market and believe a crash is imminent you are accused of being a doomsday kook or freak. I would say smart! Crash’s alway catch people of guard they don’t come with proceeding neon sign’s but come with proceeding market advancements and Uber bullish expectations of near term markets (ie, “global synchronized growth”). The everything bubble has to pop sometime and the power’s that be seem to want to blame Trump and protectionism for causing it.
snosaint profile picture
" Despite being accused of being a troll on this blog, I’m just trying to help people not lose money listening to overly bullish financial forecasts of near term 3000 plus on the S & P. If you recognize the ridiculous over valuations in the market and believe a crash is imminent you are accused of being a doomsday kook or freak. I would say smart!"
It would seem from what you stated, that you should write an article that details what you foresee and help even more people.
we are at end of quarter, should hold up and possibly retest highs by then, after that, we may retest Feb lows if things consolidate at these levels 3k seems like a logical target this summer. Avi is correct that the sentiment is still positive and the charts reflect that, so far... we are currently building higher highs and higher lows, we hold 274 area today/monday I bet its back up to 280
Not sure if bears should press the short side heading into end of Q... though that was a strong pullback from 280
“Big trends ignore news” -Avi
JOE STERN profile picture
United Airlines is in the news with another public relations disaster involving a poor little dead dog. We will probably laugh about it when Saturday Night Live gets a hold of it, but it has got to be affecting their ability to sell seats at a profit. You think this news might affect the stock price?
Personally I think UA should have gone out of business years ago. It must be one of the world's worst airlines, which I've done my best to avoid for more than a decade.
snosaint profile picture
believe me there are worse...try spirit. I did ...once!
insightful?informed decider profile picture
" Means a sustained impulsive drop for two weeks or more just ahead. Read the T-leaves. Sentiments speaks! "
Seems to be unfolding that way,I haven't seen PM dealers so negative since the early 80's after the Hunt brothers spike in PM's. Dealers are not even offering spot on coins that brought a nice premium 6 months ago.Sentiment ? Must be .
5 wave structure in gold futures at 9:00 am today at small degree. I was anticipating a $100 drop in gold futures and then a strong rally. However, we might be starting a rally now. Will look for more 5 waves up tonight and tomorrow in gold futures. Looks somewhat promising to me. In light of the fact that the Dow is on the verge of crashing. Yes Avi, I believe in the dooms day Scenario now, not in a few years. Wave iii of 3 starting in the Dow. Means a sustained impulsive drop for two weeks or more just ahead. Read the T-leaves. Sentiments speaks!
Wave 4 or 5 we will see soon!
Sentiment speaks; Are the bulls about to fumble?
Unclear to me why anyone wants to debate what moves markets. The market makers “control” the markets. There’s nothing much more to that debate.

Neither of us will ever influence the market, so trade what you see and follow volume.

Seems to me that several guys on SA, like Avi, have dedicated their career to putting together a business and created a product/service that some people are willing to pay, for that helps them see the market from a different perspective and to help them follow what the market makers are doing within a defined time period. I’m not one of them, but I appreciate anyone able to run a successful business and create value.

Anyone pondering over what moves markets or creates trends is wasting their own time.

Instead, trade what you see. Follow the market and follow volume.
whipsawKid profile picture
After reading in here, and thinking a bit, I just want to point out that the market IS most definitely driven by events. Not day-to-day, and NOT what the Pundits always think is important, but by LIFE itself. Markets are based on what humans do OF COURSE, they were created by humans!!! And run by humans. And if you look closely at the theory of Chaos, markets follow Chaos theory more than the usual Keynesian theory. Im not saying Keynesian
is wrong, but just not the only way markets move. Chaos theory is about the reactions to something after an event happens to effect it. The example they use is when one puts a drop of ink into water, what happens to the ink as it distributes itself in the water. Same can be said about stocks, as large events have actually effected markets, such as recessions, interest rates, war, etc. So Yes, I agree with AVI for daily news, but dont forget the big trends.
Avi Gilburt profile picture
Big trends ignore news.
Hi Avi, if wave(4) was done, what's ur target of wave(5)? thanks
arthur_bishop1972 profile picture
Think he mentions it in a previous article (3011-32xx)...
insightful?informed decider profile picture
Sentiment at coin shows is the lowest I have seen since the early 80's.Too many sellers ,not enough buyers . Sentiment?
Prophecy106 profile picture
Avi - Is there any precedent for a Wave 4 not even coming close to the .382 retracement level? Based on the early-2016 lows, SPX should retrace to at least ~2,474. Anything is possible, but remaining true to EW principles and guidelines should make it quite clear that it's highly unlikely that an 18-month wave 3 would be followed by a two-week wave 4, especially one that didn't even come within 50 points of the standard .382 retracement level.
IamTheWolf profile picture
Plausible answer, this is not THAT wave 4.
I thought it was interesting last week when SPX and DJIA were retreating, small cap IWM held firm and even gained ground.
JOE STERN profile picture
I don't believe conspiricy theories any more than the supernatural forces. The CBs that are buying bonds and equities are trying to stimulate some growth in their economies by pumping up the money supply. The commercial banks and many other entities are selling their bonds and buying equities, trying to replace the interest from the bonds with dividends and capital gains. Noone wants to be stuck with a large position in long duration bonds as interest rates rise, except the CBs who don't mind losing money.
I responded above.
insightful?informed decider profile picture
JS, "Conspiracy theories" are the name used for the false argument created by statist's to keep their status quo mentality intact.That's how they move us towards globalism so effectively.They tell the same lie over and over and when called on it they call their opponent a "Conspiracy theorist".As for the supernatural,you can ignore it if you want but that doesn't make it any less real.
Anyone who mentions the term 'supernatural forces' as a progenitor to stock prices is immediately disqualified from being taken seriously in any capacity for me. Why don't you do some basic research on Quantitative Easing and the Plunge Protection Team? Governments and banks are buying equities at an alarming rate with no regard for price value. This is to pay for their past excesses and misguided spending. The only question you should be asking yourself at this point in the market cycle is, "When are the banks and the PPT going to pull the plug and take their gains?" Which will definitely result in a drop of more than 20%, meaning beyond correction territory into recession or flat out depression territory.
arthur_bishop1972 profile picture
Avi was being facetious when he said 'supernatural forces'. He means sentiment, but he's had this discussion/debate/argu... so many times, I think he likes to have a little fun with his wording from time to time.

I'll let him respond to the rest of your comment, if he cares to.
Avi Gilburt profile picture

If you believe in the PPT, then you have clearly not even bothered to look at market history . . . it proves they do not exist:


I'm quite disappointed in your intellectually lazy approach to the PPT and the looming pension crisis. The purpose of the PPT does not work in absolute terms, as you suggested in that article you linked. One example of the PPT is using moral persuasion to convince central banks to either lend them money or have the banks themselves use money to place a buy after a major correction. I'm sure it's much more complicated than, 'prevent any down-turn, buy any dip, hold off a recession forever'. That's child's thinking.

As for your idea about a long term bull cycle continuing, I have some news for you.

The Looming Pension Crisis:

The biggest generation in history is beginning to retire. In April 2017, the first baby boomers started turning 70 ½ years of age. The pensions, both state and private, are underfunded massively. This generation has their biggest allocation they’ve ever had in their lifetime to equities, at a point in time where we are due a recession. Whether we get it this year or next year doesn’t matter. At a point when they are retiring in the millions, they are going to have up to 70% of their portfolios in equities. In recessions, bad things happen. If you look at the average recession since 1980, it’s a 37% down-draw into the stock market. You don’t need a math degree to figure this out, it’s a really bad outcome. 2007 highs, the average American had 1.277% of their portfolio in the bond market. Now at a time when retirees are going to be forced to sell their equities, they really need to own bonds for income. A, they have no income because the fed has taken that away from them. B, they’re going to be forced to buy instruments at 5,000-year highs. It’s a whole collision of bad things crystalizing around a generation that have had it really good their entire lives, and think they are going to go off into the sunset and canoe, play gold, garden, but the reality is they’re not going to have enough money to retire and could face some serious problems in the coming years.

How bad is it really going to get for people?

According to the U.S. government, the average American has $186,000 saved for retirement. If you go to BlackRock, it’s $136,000 (they just brought the median down by subtracting the wealthiest 1% from the rest of the pack). If you take the average boomer, they have $1.1 million in retirement assets: equity portfolio, house, some bonds, and savings. When you strip out some numbers and take the median instead of the mean, which gets rid of the 1% problem (wealthy people), the numbers collapse. Instead of 1.1 million, the average boomer / the median boomer, has $200,000. Return assumptions are fixed at 6-7%, because some people refuse to go down and assume 2%, the magic of compounding makes that a big problem. Even at 7%, you’re talking about an income of about $9,000 a year, which is about $35,000 shy of the ideal retirement income of about $45,000 a year.

The scale of the problem is so big, that people choose to ignore it or assume we will somehow fix it due to the culture we’ve created over the last 20 years, ‘It Will Be Fixed’. It will become a problem and something will have to be done, but by then, millions of Americans are going to see their retirements just completely vanish. It’s something people aren’t talking about because A) it’s a big problem that most people can’t get their head around because the numbers are so big, and B) because people don’t really want to hear it.

When people retire, their spending collapses. But in this case, it will be much worse than just cutting back spending. Retirees are going to be forced to sell their homes, students are going to be forced to renege on student loans, and move in with their parents, things are going to happen that are driven by demographics. These are long-term multi-decade trends that you can’t change overnight because it’s a slow moving train.

Once the baby boomers start realizing the situation they will be in come the next 1-20 years, they will begin to vote for politicians who will promise them more money. The government will be forced to do several things, either giving people money or changing legislation which will massively reduce their taxable taxation revenue. There aren’t any more options due to the massive debt in the world, $200 trillion. We’ve spent away all our options for the future. My hunch is that the government will be forced to write checks, because the other end of it would be catastrophic. Means-tested checks, it won’t be fair, but they have to do something because it’s too big of a problem, but the government will likely wait until enough pain has been dealt that they have no choice but to do something.

How do investors play this?

Get out of equities. Obviously if you are old, grey-haired and looking towards the sunset, you want to get out now while there is still a chance of not losing everything. As a millennial, I desperately don’t want to lose 40-60% of my portfolio and wait another 10 years to get it back. At the top end of the wealth pyramid, people have 70% of their assets in equities, these retiring boomers. Some people might consider themselves wealthy, but if you take a 40% cut on 70% of your assets, you’re no longer a wealthy individual. You’ve extrapolated a certain standard of living and that’s going to cost you a certain amount, as the theory goes.

In 2017, Boomers started turning 70.5 yrs old. There’s an IRS law that requires minimum distributions or force people the year they turn 70.5 to sell 5% of their IRAs or 401ks, and have to sell them every year. These are forced sells. Because there are tax implications, it’s going to make sense for Boomers to retire early, before they have to start selling these accounts because once you get the income from these IRAs and 401ks, it puts them in a whole new tax bracket. Things are going to start happening that a lot of people haven’t thought through and aren’t aware of.
Agree to look for consolidation here vs a new bear or new highs... I am looking for a dip next couple to shake off that crazy move friday then a new high to 280 this week, no new highs until late May/June imo, possibly 3k by Aug before election jitters
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