Does Bull Market Have One More Wave?

03/23/2020 9:39 am EST


Avi Gilburt, Esq


Despite, or because of, the recent market crash, there could be one more wave higher in the bull market that began in 2009 reports Avi Gilburt.

You Won't Believe What I Am Thinking Now

So, how many of you followed reckless bulls into this mess?

I know many of you took me to task for missing some of the rally in the S&P 500.  But, as I had been trying to warn you, the iShares Russell 2000 ETF (IWM) and the iShares MSCI Emerging Markets ETF (EEM), as well as a host of other charts, were warning me that something was just not right about the move in the S&P.  

Then, when I publicly posted that I was shorting the EEM in January and February, how many of you thought I was crazy?

If you were following my public analysis, you would know that if the S&P 3100 towards the end of the first quarter, it opened the door to revisit the 2200.  

For those that have been following me, I want to share with you excerpts of my recent letter.

“The last point I want to address is something I am being asked many times over the past week. The question is whether we could have topped out on the monthly chart earlier than I expect, and that we have begun the bigger wave (IV)?

This is certainly possible, but it is not probable. I know it feels so terrible right now but it always feels terrible during a correction. Have you ever been through a correction that feels good? So, ask yourself if your feelings are what is driving your view of the bull market having concluded or is it based upon analysis?

The market has been tracing out a larger degree 4th wave in the SPX, and it can be most clearly seen in the sideways action in the IWM since 2018. In fact, you can even compare the sideways action seen in the IWM to the sideways action seen in the SPX between 2000-2009, albeit at a lower wave degree in the current 4th wave structure. And, more importantly, the great majority of stocks in the market confirm this potential. 

Clearly, the action over the next few weeks will give me a stronger indication regarding our larger degree perspective. But, as it stands right now, I am simply viewing us as completing a c-wave within wave 4 off the 2009 lows (which I really wanted to see last year). And, since Elliott’s structures are 5-wave events, and we topped out at 3400 on a three-wave structure off the December 2019 lows (which is most commonly a b-wave), the evidence leads me to conclude that we need a 5th wave to 4000+ in the coming years before the bull market off the 2009 low completes.

And, if you really want to remain very conservative and wait for confirmation, you can always choose to buy some positions once we are completing 5 waves down in the coming weeks, and the rest you can buy after we break out from a 1-2 upside set up. There is always more than one way to invest in the market, and if we are potentially going to 4000-6000 in the SPX, there will be plenty of meat still left on the bone.

 Frost & Prechter have described the character of a c-wave, and you can then decide for yourselves if that is what we are dealing with:

“Declining “C” waves are usually devastating in their destruction. They are third waves and have most of the properties of third waves. It is during this decline that there is virtually no place to hide except cash. The illusions held throughout waves A and B tend to evaporate and fear takes over. “C” waves are persistent and broad.”

This explanation outlines what we are currently dealing with. In fact, keep in mind that the IWM and SPX both topped on 3-wave rallies off the December 2018 low, which supports them as being b-wave highs, followed by this c-wave “devastating” decline.

The more I zoom out to review the structure off the 2009 lows, the more confident I become that this is a 4th wave off the 2009 lows. Even the theory of alternation supports this being a c-wave of wave 4. That theory suggests that waves 2 and 4 will alternate in time, size and shape. In our case, wave 2 in the 5-wave rally off the 2009 lows was a very quick and shallow event. When you look at it on the monthly chart, you can barely even see it, as it was a quick three-month pullback. In comparison, wave 4 has now taken us over two years and has presented as a very complex expanded flat. This falls well within the guidelines of alternation.

I have to say that these facts reinforce my perspective that this is a c-wave decline in wave 4 off the 2009 lows. And my confidence will increase once we are able to see an appropriate wave [4] bounce in the coming weeks to set up our bottoming structure.

Yet, with everyone so understandably concerned about us having already begun wave (IV) on my monthly chart, I will say that if we would see a direct break down below 2060 in the SPX, that would cause me concern about that potential. Otherwise, this action is well within the larger parameters of a c-wave “crash-type” event which is seen during a-b-c corrections.

Even in the lower probability event that we would see a direct break of 2060, which could begin to suggest that we really are in wave (IV), keep in mind that there is likely going to be a corrective b-wave rally back up which will likely target the 2900-3000 region before we enter into a much more protracted bear market. This will offer you an opportunity to extricate yourself from your holdings in the lower probability scenario.

In the meantime, please take a look at the daily chart of the SPX. We are now hovering over a major long-term support region which has been on our chart for several years. I expect this region of support to hold for this c-wave decline, and this has been my expectation ever since we topped in wave 3. In fact, I was even surprised we did not test this support last year, but now I understand why.

When we were rallying over 3100 in late 2019 into early 2020, I told you that the price action we see by the end of the first quarter of 2020 will likely tell the story for the rest of 2020 and years beyond. I still think that to be the case. In fact, the action we see in the next two to three weeks will likely tell the story for the rest of 2020, and potentially many years beyond. Once we finally see that 4th wave bounce in the coming week or two, then we will have a much better feel for the bottoming structure we are developing in this decline. So, let’s try to stay focused on how the market reacts in the coming weeks before we make any long-term determinations, especially rash or emotional ones.

I still do not think we have bottomed in this c-wave “crash.” And, when the 4th wave bounce finally materializes, then I can be much more certain that we are setting up the completion to the c-wave of wave 4.

So, when everyone around you was extremely bullish in late 2019 and early 2020, did it serve you well to join the herd? And, now, when all those same people are telling you that we are going to be in a bear market for quite some time, do you think it will be advisable to join that herd?

The next few weeks will be very important to making determinations about the long-term implications of this decline. As it stands now, this decline is exactly what I had expected to happen, but there is no question I thought it would have been something we experienced last year. But that really does not suggest that my longer term perspective should be adjusted. And, until I see evidence to the contrary, I am going to be looking for bottoming signals in the coming weeks, followed by more bullish signals supporting the potential for this market to set up a multi-year rally to 4000+. So, the next few weeks are going to be of utmost importance as to how the next 3 years will take shape for the equity markets.

Avi Gilburt is a widely followed Elliott Wave analyst and founder of, a live trading room featuring his analysis on the S&P 500, precious metals, oil & USD, plus a team of analysts covering a range of other markets.

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