Avi Gilburt of Elliott Wave Trader predicted a major correction for 2020 when we spoke with him in 2019, even calling for the exact area the market would bottom months ahead of time.
FS Insider caught up with Gilburt recently on our podcast to get an update on his outlook for 2021 and beyond.
Here's what he had to say (see Avi Gilburt on Roaring 20s Redux and Multi-Decade Bear Market for audio).
Fifth Wave in Force
We completed the last large correction in 2009, which was part of a five-wave structure Gilburt anticipated. This wave started in 2000, ushering in what was then a correction that left us with sideways movement until we finally hit a low in 2009.
From that point, Gilbert anticipated a fourth wave setup that could potentially take more than a decade to complete, he noted. When we hit the March 2020 low, we completed that movement, leaving us primed for the next wave higher.
This fifth-wave structure may potentially take us to 6,000 on the S&P by 2023. Gilburt anticipates that markets will do well in 2021 and 2022.
Sentiment is bullish right now, and Gilburt would like to see a pullback before we head higher. If we see such a pullback, which may be underway right now, there should be little in the way of the market doing very well in the years ahead.
“We are about to really embark upon the heart of this rally as we look into 2021,” Gilburt said. “Off the March low, I'm viewing it similarly to the low we struck back in early 2016, which set up that very large rally. But this is actually one degree higher. … Ideally I want it to see us getting back down to maybe the 3,400 or 3,500 region before we begin the next phase of this rally. But should we see the market rally over the 3,775 level, then it’s really going to be pretty easy. The 3,730 to 3,740 region is going to be major support. And as long as we hold that, I think we're going to 4,200 to 4,300 in 2021.”
Roaring Twenties Redux?
Elliott Wave theory focuses on mass sentiment, which is lining up around the idea that we’re seeing a setup for expansion similar to what we experienced in the 1920s. As we begin to see this bull market form, Gilburt noted, he doesn’t expect another consolidation period until the 2022 timeframe.
After a 6-month pullback sometime in 2022, we should head to the final highs for the cycle, he noted, somewhere around 6,000 on the S&P by 2023. There is still plenty of time before any major consolidation takes hold, Gilburt noted.
There is an immediate potential for a correction down to the 3,400 to 3,500 level, he added, which presents a major buying opportunity for investors. However, taking a long-term perspective following the move higher through 2022 to 2023, things may take a turn.
Students of history know that, immediately after the Roaring Twenties, the United States experienced the Great Depression. Conditions suggest something similar may play out this time around, Gilburt said.
“Once we complete this fifth wave off the March 2009 low, I'm seeing us completing a very long term third-wave structure,” he said. “Meaning the bottom of that second wave was struck by the Great Depression. We are now topping in the third wave … and it's going to usher in a fourth wave correction of the same degree as the Great Depression, meaning there is potential we could be seeing a multi-decade bear market once we complete this rally to 6,000. So it's more akin to the Roaring Twenties than anybody is probably even considering at this point in time.”
To listen to our full-length interview with Avi Gilburt on where he's investing currently, click here. If you're not already a subscriber to our FS Insider podcast where we interview book authors, strategists and industry experts from across the globe 3 days/week on all things economics, finance and markets...
Written by Ethan D. Mizer