During the last two weeks, I had the pleasure of traveling with my wife, Sharise, as we hosted our members on a cruise through the Caribbean, states Avi Gilburt of ElliottWaveTrader.net.

We then flew to New York, where we spent time with my father—whose health has been recently failing—and had the opportunity to see Andrea Bocelli in concert at Madison Square Garden.

If you have ever had the pleasure of hearing Mr. Bocelli sing, then you would know how his music can touch your soul. But, if you had the opportunity to learn his life story of perseverance, it would touch your soul that much more deeply.

In a loving note to his family, Mr. Bocelli penned the following words:

"Never forget there is no such thing as happenstance. That's an illusion that lawless and arrogant men invented, so that they could sacrifice the truth of our world to their laws of reason."

After writing publicly for over a decade, I have come to understand the simple brilliance behind Andrea Bocelli's words, as we are all constantly bombarded by those who "sacrifice the truth for their laws of reason."

With regard to truth in the stock market, I think Robert Prechter said it best:

"No truth meets more general acceptance than that the universe is ruled by law. Without law, it is self-evident there would be chaos, and where chaos is, nothing is [. . .] Man is no less a natural object than the sun or the moon, and his actions, too, in their metrical occurrence, are subject to analysis [. . .] Very extensive research in connection with human activities indicates that practically all developments which result from our social-economic processes follow a law that causes them to repeat themselves in similar and constantly recurring serials of waves or impulses of definite number and pattern [. . .] The stock market illustrates the wave impulse common to social-economic activity [. . .] It has its law, just as is true of other things throughout the universe."

Mr. Prechter's work was built upon the work of Ralph Nelson Elliott, who penned the following almost 100 years ago:

"But the market has its law, just as is true of other things throughout the universe. Where there is no law, there could be no center about which prices could revolve and, therefore, no market. Instead, there would be a daily series of disorganized, confused price fluctuations without reason or order anywhere apparent. A close study of the market [. . .] proves this is not the case. Rhythm, or regular, measured, and harmonious movement, is to be discerned. This law behind the market can be discovered only when the market is viewed in the proper light, and then is analyzed from this approach. Simply put, the stock market is a creation of man and therefore reflects human idiosyncrasy [. . .]

Very extensive research in connection with [. . .] human activities indicates that practically all developments which result from our social-economic processes follow a law that causes them to repeat themselves in similar and constantly recurring series of waves or impulses of definite number and pattern [. . .]

The causes of these cyclical changes seem clearly to have their origin in the immutable natural law that governs all things, including the various moods of human behavior. Causes, therefore, tend to become relatively unimportant in the long term progress of the cycle. This fundamental law cannot be subverted or set aside by statutes or restrictions. Current news and political developments are of only incidental importance, soon forgotten; their presumed influence on market trends is not as weighty as is commonly believed."

So, with this understanding as to how markets are structured, I still get a kick out of when people try to explain to me how a news event caused a certain move in the market. And, when the market moves in the exact opposite manner in which one would expect from the substance of a news event, the mental gymnastics performed by these same people is truly something to behold. I guess that may be better than all the others who dishonestly ignore it and move on to the next piece of news.

For weeks, as the market has been pulling back, people were blaming much of it on the Fed's intention to taper. I mean, how can the market continue to rally without the Fed at its back? For weeks, all I have been hearing is that a more hawkish Fed will cause the market to significantly drop, or even crash.

Well, this past Wednesday, the Fed told us they were going to more aggressively taper and even projected three rate hikes in 2022. So, when I took a look at the headlines when the market began a rally after the Fed announcement, this is what I saw:

'Dow surges 380 points and S&P 500 (SPX) logs second-highest close of 2021 as Fed signals aggressive tapering and projects three rate hikes in 2022'.

By the time all was said and done, the market rallied over 100 points in the S&P 500 off that intraday low. So, good luck trying to trade that news.

And, for those that are now thinking to themselves that the market dropped the next day due to the Fed, well, I will simply tell you that I told our subscribers that I expected the market to pull back from the 4745 level in the futures. And, in fact, the market topped out this past week at 4743.25 in the futures early on Thursday morning, after rallying over 100 points off the Wednesday low. Maybe we should instead view that drop as market participants reconsidering the Fed news, and deciding they got it wrong the day before? Yea, maybe that is the better perspective. (Sigh.)

But, as one of my members noted this past week, "When you read the updates, the market becomes Avi-ous."

What makes me chuckle even more is what happened with gold. You see, back in 2013, when I dared to suggest gold is going a lot lower, the Fed announced its QE3 program. And, all the gold bugs began salivating, completely confident in their expectations that gold was about to go parabolic on the back of QE3. Yet, I held to my guns, and said we are still likely going down.

Well, what we all now know is that gold fell all the way down to $1,050 before we found a bottom, despite all the QE thrown into the market.

And now, when the Fed begins to become more hawkish, and reduces its involvement in the market and even calls for rate hikes, gold begins to rally. It was exactly the opposite of what everyone seems to have expected.

Folks, I want to try to make this abundantly clear. Simply because you may see times where the market acts as expected to a news event does not mean that the news event was the cause of that move. If that was true, then you would not find times when the market reacts exactly opposite to expectations on news announcements. And we all know we have seen that happen quite frequently. Yet, a news event can act as a catalyst to a move, wherein the substance of the news is not dispositive to the direction of the move made by the market. This is what happened this past Wednesday wherein the Fed news, which should have been bearish, catalyzed a move higher by the market, as most would agree that the negative news certainly did not "cause" a rally.

Understanding the truth to the market, as opposed to false reasoning proposed by most, leads us to recognize market sentiment as the primary driver of the market. During a positive sentiment trend, negative news is discounted, and positive news is seemingly important. We saw this over the past week as the market rallied over 100 points despite the negative news regarding the Fed's further hawkish stand.

And, during a negative sentiment trend, positive news is discounted, and negative news is seemingly important. We saw this during the March 2020 decline, despite the news of the Fed's action throughout that decline.

A Chart

And, when seemingly negative news is disregarded and the market rallies in the exact opposite manner in which one would expect, as we saw this past Wednesday, it tells you quite clearly that positive sentiment is in charge.

Isn't market sentiment a much more reasonable and honest lens through which one can view the market rather than the mental gymnastics one must perform in order to explain a strong move higher on negative news? In fact, it is a much more intellectually honest manner in which we can view markets.

In my last update, I noted that I expected a market rally imminently. And the market immediately began that rally when my article was published. The nature of this rally still suggests that we can continue higher in the coming weeks, as long as certain parameters are maintained.

As far as my overall market expectations, I will provide you a simple outline. Support in the market is in the 4550-85SPX region. And, as long as that support is held, I am looking for a continuation rally to 4900+ in the coming weeks. Alternatively, should that support fail, then the bigger fourth wave pullback I have been expecting in the first quarter of 2022 is likely in progress earlier than I had initially expected.

I want to conclude this week's publication with a re-statement of the words of Andrea Bocelli, as words of such power and truth must be internalized by all who seek truth in life:

"Never forget there is no such thing as happenstance. That's an illusion that lawless and arrogant men invented, so that they could sacrifice the truth of our world to their laws of reason."

Avi Gilburt is a widely followed Elliott Wave analyst and founder of ElliottWaveTrader.net, 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.