Sentiment

Avi Gilburt

"THE BEST in This Business" --PSK (ElliottWaveTrader)

Stock Market Is Sending A Lot Of Mixed Messages

Well, it seems that “inversion” has become the word of the day, as the yield curve everyone follows has now inverted.  Moreover, the drum beat of slowed growth and recession has begun to grow louder and louder.  Is this something to fear?

Well, my perspective is that this is simply going to provide an opportunity to those savvy enough to view it as such.

When the stock market was still at 2800 on the S&P 500 (SPX) back at the end of 2018 and before we began the plunge down towards the 2300 SPX region, I penned the following warning:

“My perspective remains that the market will likely drop down towards the 2100/2200 region in 2019/2020.  And by the time we approach those regions, the majority of economists will likely move towards agreement that we are in recession, just about the time when I will likely be viewing us as bottoming out in the stock market, and beginning to look back up to 3200+.”

Those recessionary worries have begun in earnest over the past several days as the yield curve has now inverted and everyone and their grandmother “know” what this means.  Of course, we are heading towards a recession.  Right?

Well, while the economists may want to label further weakness in the markets over the coming months, I will simply view it as an opportunity to move back to the long side of the market when everyone else is fearing the worst.

Baron Rothschild, an 18th century British nobleman and member of the famous European banking family, made a fortune buying in the financial panic that followed the Battle of Waterloo against Napoleon. During that time, is credited with saying "buy when there's blood in the streets, even if the blood is your own."

I think this is the type of thinking we will have to adopt over the coming several months when I expect to see our next bout of stock market weakness.  While my ideal target is in the 2200 SPX region, I may have to revise my buying opportunity in the 2520-2640 SPX region, depending upon the path the market takes over the coming month. 

Please keep in mind that my expectation remains that the market will likely rally to the 3200+ region before the bull market which began in 2009 concludes.  Moreover, I still think there is strong potential for the next rally I see to last into the 2022 time frame.  So, you may want to prepare your shopping list now so you are prepared to act when most are preparing their bunkers and expecting the worst in the coming months.

Avi Gilburt, co-founder of FATRADER, is the lead moderator of the forum and covers Market Sentiment. Founder of ElliottWaveTrader, with over 4000 members, Avi is renowned for being one of the most accurate and widely read analysts on the Web.
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