Bitcoin has certainly gone much higher than most investors have expected, but so have Amazon (NASDAQ:AMZN), Tesla (NASDAQ:TSLA) and the S&P500. In fact, in 2015, we targeted the 2537-2611 region as our ideal target from the 1800 region. And, the market is now approximately 3% beyond even our upper target region set two years ago for just this wave degree. But, we still expect the SPX to be well over 3000 before this bull market off the 2009 lows completes.
But, I think the title to my article may be a bit misleading. Rather than look at the differences, I think the more informative exercise would be to find out what is similar.
You see, people are quite certain of the fundamentals which drive the S&P500, yet, those fundamental perspectives did not foresee the rally from 1800-2600+. People are less certain about the fundamentals of Amazon and Tesla, as they hit levels which cannot really be supported by any standard valuations. And, that brings us to Bitcoin, which really has no valuation fundamentals of which to speak.
Yet, when I propose that the fundamentals are not what drive all of these “products,” many scoff. But, rather than view them all as being driven by different factors, I view them all as being driven by one and the same factor – investor sentiment. Alternatively, trying to view them as being driven by fundamentals would cause you to perform analysis contortions or to do what is akin to scratching your right ear by using your left hand and going over the top of your head.
At some point, people may have to take their blinders off and recognize how much easier and accurate it would be for them to analyze market sentiment to determine the direction for all markets rather than claim that fundamentals are driving the market some of the time and not others. So, while fundamentals is clearly not the common driver of all markets, market sentiment certainly is.
You see, attempting to apply a form of fundamental analysis for the S&P500 when we were down in the 1800 region did not provide insight into the impending rally to 2600+. However, an appropriate understanding of market sentiment certainly did.
Attempting to apply a form of fundamental analysis to Tesla or Amazon did not provide insight into the heights either of those stocks have attained. However, an appropriate understanding of market sentiment certainly did.
And, lastly, there really are no fundamentals upon which do provide a valuation on Bitcoin. However, having an appropriate understanding of market sentiment has allowed us to safely garner thousands of percentage points in profits trading cryptocurrencies.
Price pattern sentiment indications and upcoming expectations
Many have been calling Bitcoin a bubble for quite some time, yet, Bitcoin does not seem to be listening. While the gyrations of the market are seen in very high percentage moves on both sides of this market, it is not likely that Bitcoin has seen its major top yet. In fact, early 2018 may provide some surprises to the bubble heads, as Bitcoin seems to have a date with 34,000 once its completes this current pullback.
Moreover, those that have been saying the stock market is about to crash for the last who knows how many years will also be surprised when it eclipses 3000SPX in the coming years.
However, in the shorter term, I am still looking for a potential pullback in the stock market. But, the market may still attempt one more extension before that happens. While I noted a potential topping in the XLF last week, the structure developed over this past week that may suggest it can see the 29 region before it begins that wave 4 pullback for which I have been looking. In fact, if the XLF is unable to break below 27.63, and sees a strong break out over this past week’s high, it does open the door to the 29 region before it comes back down to the 27 region.
So, while the SPX has now extended approximately 3% beyond the target I set 2 years ago, and can still see further extensions, I think 2018 will present us with a nice pullback back towards the 2400 region, which will point us up towards 3000 region thereafter.
Avi Gilburt is a widely followed Elliott Wave technical analyst and author of ElliottWaveTrader.net (www.elliottwavetrader.net), a live Trading Room featuring his intraday market analysis (including emini S&P 500, metals, oil, USD & VXX), interactive member-analyst forum, and detailed library of Elliott Wave education.
By Avi Gilburt, ElliottWaveTrader.net
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