Bullish Set Up Still In Place, But Caution Still Warranted

Last weekend (Mar 11), I noted that we needed to stay over 21.60 on Monday and complete 5 waves up to give us a bullish set up going into the Fed announcement. On Monday, the market gave us our 5 waves up off the prior week’s low, and on Tuesday, we saw a deep retracement of that initial upside structure, which certainly scared many people in the complex. 

The morning of the Fed day on Wednesday Mar 15, I sent out a “Pre-Fed Warning:”

“. . . please focus on the simplicity of where we are.  Micro support is 21.20, with support below that at last week's pre-market low of just below 21.  As long as we hold those supports, we have a set up in place to break out.”  

As we know, the market broke out rather strongly after the Fed’s announcement. But, please do not make the mistake of viewing the announcement as the “cause” of the rally. Remember, sentiment was set up to take us up no matter what the Fed said. And, the fact that we went up even though most believed that a rate hike was certainly going to cause the dollar to rally and the metals to drop provided us with another example of how sentiment trumps all supposed market forces.

But, just because we broke out, and confirmed our prior bottoming structure, does not mean that we are completely out of the woods just yet. It is still possible that the market may rally higher in a corrective manner, which can still suggest that a test of the 19.90 region is possible in the GDX before we finally see the heart of a 3rd wave higher take hold.

As you can see from the attached 8 minute GDX chart, the market struck the upper end of the target box we set on Wednesday for a 3rd wave off the recent lows, and then came back into the support box on our chart. The lower end of this support box resides in the 22.40 region, which really SHOULD hold if this is going to maintain as an impulsive structure, as presented in the green count on this chart. Should support continue to hold early in the coming week, we need to then rally towards the wave 5 of (i) noted on the chart to create an even larger 5 wave structure off the recent lows to add to the bullish evidence.

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Avi Gilburt is a widely followed Elliott Wave technical analyst and author of ElliottWaveTrader.net ( more

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