Tom Scollon

And I am sure most investors are feeling the same way. And what is one of the reason we will see a continuing slide.

Let’s look at the US S&P:


SP-Spotv


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This suggests that we are only half way to the first level wave four pullback – the first horizontal line. That is not to say that the pullback will stop there. That is about the 10% drop which is the crude benchmark for what we generally describe as a "pullback"

This is distinct from a "retreat" which is more like an "easing" by anything from 1-5%. An accumulation of a number of easings gives us a "pullback"

If a market falls by more than 10% we are faced with a high likelihood of a reversal of the upward trend. That is the upward five wave Elliott move, stops. The market could then trade sideways or could go into a reversal pattern – a sustained bear market.

Now at the moment, if you read the press you will see that there is opinion covering both extremes and everything else under the sun. Some are saying "now" is the best time in years to "buy in". Others make the call we are about to see the mother of all bear markets.

I only see the headlines only. I just quietly look at Elliott over my coffee.

One thing I can say, which is the obvious – markets are dynamic. A truism.

Elliott is thus dynamic and rarely stays the same every day. It can be a little like watching paint dry or a snail crawl and that is not for everyone.

If you were to use the back testing tool in ProfitSource you will understand what I mean.

So, Elliott predictions will change. Elliott does not claim to predict the final outcome

At the moment Elliott is suggesting a 10% retreat as being highly likely but also cautions that it could be more.

When you look at the now almost decade run up, you don’t need the headlines to tell you any thing nor do we need Elliott for that matter:

 

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Many technical analysts would partially agree with the seemingly doom merchants about a bear market. Many would argue about a third or fifty percent of even a two third pullback:

SP-Spotv


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Take your pick – but study the sage advice of Gann if you wish to know more.

A decent pullback is healthy as then we can feel more relaxed about the next move higher. The risk in the 2007/08 pullback was there was no real consolidation which is often seen as essential foundation for the next run higher.


So, there are three reasons why it is not over yet. Firstly, you believe there is more to come – a self-fulfilling if you like. Secondly the market wishes for a pullback – a breather after such a marathon run.

And thirdly, the eco-political factors point to it.

Enjoy the ride

Tom Scollon