Avi Gilburt Warns Of Potential Banking Crisis; Charts Indicate Major Disruptions

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Elliott Wave expert Avi Gilburt returns to discuss raising cash long-term and the possibility of a major bear market (1:35), relying on market sentiment not exogenous events (4:40), metals' 3rd wave setup and possible melt-up (10:15), oil potential for multi-year rally (21:30) bond market's surprising length of consolidation (23:00) and concerns about the banking industry (28:10).

Relevant Links:

• Check Out The Market Pinball Wizard

Transcript

Rena Sherbill: Avi Gilburt, it's always great to have you here on Seeking Alpha. Great to have you back on Investing Experts Podcast. Thanks for joining us today.

Avi Gilburt: Thank you for having me back.

RS: It's great to have you. You were on back in May talking to Daniel Snyder. You run the Investing Group, Market Pinball Wizard. I don't think anyone following Seeking Alpha or the markets really at all don't know who you are, and for those wanting a deeper dive into Elliott Wave analysis and your strategies there, I would definitely seek out that first episode, but I'd love it if you would catch listeners up.

Last time you were on, you were telling us that you thought that investors should be raising cash long-term. Is that more or less what you're talking to subscribers about now, or how are you looking at things?

AG: Well, again, it all depends on timeframe that we're talking about. I think when I was speaking with Daniel in May, we were still looking for another push higher north of 4,300. And I said, once that rally completes over 4,300 and we get a pullback, the nature of that pullback is going to tell us a lot as to whether or not we can go back up to the new market all-time highs, or if the all-time high is already in place, and we can set up another market crash later this year or into early 2024.

So, I'm still of the same opinion, but if you take one step back by one more degree, even if we go to new all-time highs, my expectation is, once we have an all-time high set in place, whether it's in place now and we get confirmation in the coming months, or if we can push up towards the 5,000-plus region and then get that all-time high set in place, I'm expecting what could be anywhere from an 11-year to a 21-year bear market.

So, to answer your question in the bigger degree, yes, I think people should start considering raising cash if they haven't and start looking out over the next decade or so because there is strong potential for a major bear market to begin if it has not already begun.

RS: I was going to say, do you think it's already begun?

AG: Like I said, I'm not sure. I've been very, very torn. When we broke down below 4,000 on the S&P in 2022, that did surprise me. I was expecting a top at the end of 2021 and I was expecting a larger degree pullback into 2022. At the time, I did not expect we were going to break down below 4,000, but we got our subscribers raising cash at 4,800 and 4,600, and then we got back in around 3,500 on the S&P, but because we dropped as deep as 3,500 and left me torn.

The high that we struck at the end of 2021 really did not count well as a completed long-term top. Yet, if we really were going to see higher highs from a higher probability standpoint, we really should not have broken down below 4,000. So, I'm kind of torn still. I don't have a completed top in place so I'm more open for one more push higher and a lot of it's going to depend on how the market reacts over the next, I’d say over the next two months or so.

And once I see how the market pulls back in the next month or two, that's going to tell me, well, are we going to continue with positive sentiment pushing us up to new highs? Or is the all-time high in place for quite some time? I can't tell you what the news is going to be or how people are necessarily going to react one way or another to the news, I can just tell you what I see in the market.

I basically base my entire perspective on market sentiment. Exogenous events, exogenous actions really do not have as much effect on market movements as most people believe. And I've provided, I mean, I've written countless articles showing time and time again. People maintain a certain expectation about what the market is going to do based upon some exogenous event and they're oftentimes proven wrong.

The best example I can come up with off late was back in October of 2022, everybody and their mother was saying that if the CPI report comes in much higher than expected, then the market is just going to keep tanking lower and lower. And people were saying, we're going to go to 3,300, 3,200 if we get a higher-than-expected CPI. Well, the market got a higher-than-expected than CPI and then rallied 6% off the low that day. And that surprised almost everybody except our subscribers.

We were actually calling for a low literally that morning right after the CPI report was published, I sent out an alert to all our subscribers saying, guys, this is the final spike that's going to set the low. Prepare that we're going to get that big rally to 4,300-plus starting likely from right here. And that's exactly what happened. So, trying to follow these exogenous events, and I always say these exogenous events can act as a catalyst.

For example, a news event or a Fed announcement can act as a catalyst, but what history has taught us, if you look at market history very carefully, the substance of that news event or catalyst does not always determine the direction of the market.

RS: Yeah. We just had Courage & Conviction Investing on and for different reasons, but he was talking about why he doesn't put a lot of stock in following the macro picture because even the people that are super well trained for that don't typically predict it with a high degree of certainty. And to bring value to investing, you have to find where you get the edge. And obviously with you it's the type of analysis you're bringing to the marketplace.

Are there certain stocks that you look at in terms of not to do with sentiment, not to do with strategy, but you just find them interesting? Does that ever happen?

AG: Not really. We're very, very pure to our methodology. And what I've learned through the years is, when I divert from my methodology or if I look at a chart based upon the analysis and the analysis is saying one thing and I look at the chart and I say, there's no way that's going to happen.

I've learned through the years not to do that because if I try to impose my beliefs or my bias onto a chart, that's where I will often get in trouble. Rather, I like to look at charts from an as objective perspective as possible, so that I don't get caught by any surprises.

So, ultimately, we're very, very true to our methodology and through the decades it really has paid dividends, no pun intended, but it has paid dividends for our ability to be able to stay profitable.

Our main stock analysis is really done by our Stock Waves team. Our Stock Waves team is Garrett Patten, Zac Mannes, Lyn Alden, and we have a couple of other analysts that also help them as well, that support them. So, we have a team of about five, six people who do our Stock Waves analysis and they are the ones that handle all the individual stocks.

In Market Pinball Wizard, we mainly focus on the overall broad market, the overall metals market, oil through the (USO). We review the dollar bond market through (TLT) and so on and so forth.

I mean, I'll throw out ideas to our members. Every now and then when I see something that really, really catches my eye. For example, back in, when was it? Let me take a quick peek at my chart and I'll tell you. Back in the end of 2022, I was saying to our subscribers, as an example, I'm looking for Tesla to come down to about 100. I'm looking for it to double from there, pull back, and then rally back up to, ideally, I was looking for about the 265, 270 region, and thus far it really has played out almost exactly.

We did the same thing with Meta (META), for example. Meta, I was looking pretty much the same thing. Meta, we were looking for a drop down to also – Meta, we were looking for a drop down to 90 actually, and we were looking for an initial move to 200 on Meta pullback and then a move back up towards about 270 as well.

So, really pretty similar on Meta as well. So, every now and then, we'll come up with some of these really amazing opportunities that pop-up, but most of the analysis is really done in our Stock Waves team.

RS: Got it. So, talk to us about the - let's start with the metals market, if you would, and what you're seeing on the charts right now?

AG: Well, we are now tracking that could provide for a major melt up across the market, and we're on the cusp of seeing if we can develop that over the next couple of weeks, but the setup has definitely not perfected yet. Ultimately, I think the metals are going to see a very, very sizable rally over the next year or two, but I'm waiting for the particular setup I'm looking for that'll trigger the melt-up I want to see.

Melt-up is basically where the market just goes straight up. And from an Elliott Wave standpoint, we look for five-wave structures, and ideally, we look for a third wave to trade. Why a third wave? Because a third wave is usually the strongest segment of any market rally that you will find.

So, what we're always looking for is trading the third waves. It usually has the strongest movement, the fastest movement. You make the most money in the shortest amount of time during a third wave. And right now, we're trying to track a third wave set up in the metals market.

RS: And how are you looking at miners as opposed to the metals themselves?

AG: Miners are setting up pretty much the same, but when I say the miners, I'm most specifically speaking of (GDX). The individual miners really vary. And I'll give you one example. Let me pull up my chart on Newmont (NEM). That's probably the best example I can give you.

Back in 2015, for those that followed me over the last decade or so, you may probably know that, we called the top in the metals market for gold to hit the top, 1915 or 1916, I forgot exactly the number we called for back in 2011. And at the time, I remember everybody was freaking out, saying 2000 is not – we're not even talking about 2000. How much farther past 2000 are we going to go was the big question. And we were saying, we think it's going to top at 1915. Gold topped at 1921 and entered a multi-year correction.

When we started seeing that correction ending, we rolled out a mining service over at Elliott Wave Trader, our first platform, and we rolled that out in actually of September of 2015. And one of the stocks that we suggested to buy for a longer-term hold was Newmont. And I think we picked it up at maybe about $15 at the time. I think that was the price at the time. Back in April of 2022, Newmont rallied, and I had a minimum target for Newmont at about 82, 83 from a long-term perspective.

So, when we hit 83, 84 on Newmont, I told our subscribers that I'm basically selling almost all my holdings in Newmont, which was my largest holdings in the complex, individual holdings. And a number of them thought I was crazy at the time also, but as we know, I think Newmont hit a high of about 86 and then dropped down below 40. I think it spiked just a little bit below 40, which was our initial target.

The problem I have with Newmont is that I'm not sure if Newmont is even going to make a higher high above that which was struck in April of 2022. So, Newmont could double from here. It could, but I think that there are much better opportunities than Newmont, and I think Newmont may hold GDX back a bit. So, when I'm looking at the mining complex as a whole, I really am saying, I think you have to be careful about which stocks you're looking at in the mining world.

Now look, at the same time, if you buy Newman at 43 and we do get up towards – we approach even the prior highs, you're close to doubling your money. I mean, that's not so bad. Do that in a couple of years is not so bad. But I think there are better opportunities out there relative to Newmont.

RS: And do you look at the (GDXJ) as well, the juniors?

AG: I don't track the GDXJ as much. It's a little more wild. My analysts, like I said, I have analysts that cover the entire mining stock world for metals in a service we do as well, but that's not something I really focus upon. I really focus more so on the GDX itself.

RS: Gotcha. And anything to say about silver?

AG: Yeah, I love silver. Silver, I think, has potential. If we get the setup I want to see over the coming weeks, if not, it may take a little longer. But overall, I think silver could be setting up for a similar type of rally that we saw in 2010. And if you go back and you look at 2010 into 2011, you saw an almost parabolic silver rally. I think silver is setting up for something similar.

Again, if we don't get the set up I want to see, we may get another pullback in silver, but it'll just be a matter of time, I believe, before that set up actually develops and perfects. And then I think we have potential. Not guaranteeing it, but I see strong potential to get a similar type of rally that we saw in 2010. So, I think silver can outperform most everything else in the complex.

RS: Interesting. And do you pay attention to the silver miners?

AG: Yeah, like I said, in our mining service, we cover the silver miners. But overall, I think the silver side of the market has strong potential to outperform the gold side of the market.

RS: Any other precious metals that you feel like are worth commenting on at this point?

AG: Effectively, I have people that are looking at platinum and copper and so on and so forth, but I don't personally track it myself. So I'm not going to speak to anything that I don't myself have personally strong knowledge of.

RS: Fair enough, I appreciate that. Let me just ask you this as an aside. I want to get into oil and some commodities afterwards, but no joke, how do you feel that you're influencing, affecting, changing, how investors are looking at the market and analyzing it? I mean, you're really building like a whole nation of analysts subscribing and perpetuating this methodology. How have you seen it grow over the years, and what do you feel like the influence is?

AG: Well, I'll tell you, Ralph Nelson Elliott came up with the methodology back in the 1930s.

RS: Right.

AG: What we've done for the methodology in the last decade, a little more than decade is, we've added a new layer to the methodology that provides more objective perspective. One of the problems that people had with Elliott Wave analysis to date is that they believe it was too subjective. So, you could get 10 different analysts that are doing Elliott Wave analysis, come up with 10 different perspectives. We've come up with something called Fibonacci Pinball that frames the Elliott Wave analysis in a much more objective fashion.

So, not only do you get a lot more consistency, but you also get a lot more clarity. It gives us early warning when a pattern may break and it also keeps us very honest and being able to track the pattern as we move through its progression and keeps us well within a lane to make sure everything is going well. And we get early warning if it's not.

So, that's what we've added in the last, I don't know, 15 years or so. But what I've noticed most when I first came onto Seeking Alpha, maybe about 13 years ago, people would just, I mean, if I say they made fun of me, I probably would not be far from the truth.

RS: Who's laughing now?

AG: Well, I was not very well accepted when I first started writing my articles on Seeking Alpha. And the funny thing was, the first major article I wrote on Seeking Alpha, calling for a major market turn, was actually the gold article, calling for a major topic in gold back in 2011. It's taken a long time, taken a number of years for people to really accept that what we're doing is something much more than Voodoo, which is what a lot of people believe the Elliott Wave analysis is. Unfortunately, there are a lot of ignorant people out there.

There are a lot of people that will try to use Elliott Wave analysis, but I call them wave slappers. They look at a chart and they place numbers and letters onto a chart because of how they have a bias. They believe that the chart is going to react, or that's how they think it looks best.

There's a lot of work that comes into doing an accurate and appropriate Elliott Wave analysis and there are very few people who purport to do Elliott Wave analysis that are actually going to do that type of detailed work to come up with an accurate analysis. And that's what I think has given Elliott Wave a bad name throughout the generations. That and people utilizing it to just confirm their own bias.

They'll maintain a bias based upon a fundamental perspective and they'll just throw out a chart based upon that bias. It's not how you do Elliott Wave properly. So, over the years, I think, more and more people have been more open to what we've been trying to teach most specifically because of our accurate market calls through the years. We've called probably most of the major turns in all the markets we track throughout the 12 years we've been open in doing business publicly.

So, people recognize that we've had a really good track record. And right now, we have approximately 8,000 subscribers between our two platforms. And what I'm even prouder to say is almost 1,000 money manager clients. So, at the end of the day, I think what we've been trying to teach has been getting out there more and more, and more and more people are starting to open their eyes to the sentiment side of the market and recognizing that you can track the markets from a probabilistic perspective, utilizing a mathematical perspective.

RS: Yeah, I think you're absolutely right. I think past performance and calling those tops does a lot to assuage investor’s fears over the veracity of what kind of analysis you're using. So, it's like in sports, if people question a coach or a certain kind of strategy, if they start winning, the questions all stop and it just turns to praise. So, it's not surprising that it's turned, but it is definitely an interesting journey to watch. We've been at Seeking Alpha almost the same amount of time. So, switching a bit to commodities, what are you seeing in the commodities realm?

AG: Well, specifically on oil, I'm looking for a major multi-year rally to develop in the oil market. I'm not wholly convinced that the absolute bottom has been struck just yet, but there are a number of oil equity stocks that have bottomed, and a number of them that really suggest a lower low.

But even if we do get a lower low and a number of them, I think the other ones that potentially already have bottom will just get a higher low. We call it a wave two retracement. You get a wave one off below, and then you get a wave two retracement, and then that sets up your third wave higher.

What's interesting about the commodities, whereas third waves are very strong, even in the commodities, commodities are known for their fifth waves. As strong as third waves are, their fifth waves are just sights to behold massive moves. So and what we're setting up is a fifth wave in a lot of these commodities. So, I'm expecting a sizable rally over the coming years in the various commodities, especially in oil, but as it stands right now, I'm not wholly convinced that all the charts have bottomed.

RS: Let me ask you this, is there anything coming at you on the charts that you're surprised is happening?

AG: The one thing that surprised me right now is how long the bond market has been consolidated. I was not expecting this long of the consolidation, but I am expecting a bond rally, but I'm not sure if your question really had to do just in commodities, but that right now is probably…

RS: No. Yeah. In general, in the market.

AG: Yeah, the bond market. The length of this consolidation that we've seen in the bond market, I did not expect it to last this long, but I am still expecting another rally to be taking hold pretty soon in the bond market. We're actually tracking a setup right now that could confirm a nice size rally to be seen over the coming year in the bond market.

RS: How do you look at or what's the correlation in your eyes between the bond market and the stock market?

AG: This is something I actually wrote an article about that came out this morning. The issue I have with the term correlation is that it almost takes a more superficial view of the market. You look at one chart, it's moving this way. You look at another chart, it's moving in the same way.

So, people assume there's some type of correlation there. When you take the charts apart and you look at them individually, what you do is, you look at where they are within their own structure and within their own trend. And yes, there are times that charts are going to be seemingly correlated, but all they're doing is trading within their own specific patterns for a period of time.

I remember, and I wrote about this in the article back, this was probably the most glaring point, back in 2016, I wrote a very, very detailed update to our members about all the different seeming correlations that people have been following in the market at that point.

And I said, based upon a number of these charts, a lot of these correlations are about to break down. In early 2017 – and then we saw it happening as we went through 2016. In early 2017, one of my money manager clients sent me an article from Morgan Stanley that, it was like January of 2017 that said, we haven't seen a breakdown of these type of correlations in decades.

So, when you're able to take apart the chart and understand each chart on its own, not only do you not have a need for correlations, but you can even determine when those seeming correlations are going to break down. So, I do not look at one chart to identify a move for another chart. I rather be analyzing each specific chart on its own and asking, what is this specific chart telling me on its own?

I don't take into account any other charts as well. I look at each and individual chart on their own and I analyze it as such. I don't try to take cross analysis. I've seen too many people get hurt doing that.

RS: I'm curious. You said that you don't pay attention to the macro. The macro picture doesn't affect your investing strategy. Do you dip into at all, even if it's for your own, kind of personal edification? Do you ever dip into fundamental analysis either on the stocks or the markets?

AG: Absolutely. When we deal with sentiment, it really has to be what we look at as mass sentiment. So, when you're dealing with the mega caps, when you're dealing with the overall market, the SPX, the Nasdaq, what have you? When you're dealing with the larger markets, sentiment is what is most important in being able to determine where that market is going and where the turns can potentially occur.

If you look at the opposite end of that spectrum and I always use the example of a microcap biotech company with one product that has no mass sentiment attached to it, you need to know the fundamentals of that product and of that company in order to invest in that stock. And then everything else lies in between that continuum.

So, of course, the closer you get on that continuum towards that microcap stock, the more fundamentals are going to matter. The closer you get to the mega caps and the larger markets and how the markets move, the less fundamentals are going to matter. So, I look at it as a very large continuum.

RS: Very good. Avi, if you have anything to leave our audience with, happy for you to share, but I really appreciate you coming back on the show. Look forward to the next time. And thanks for sharing so much insight with our investing expert audience, with our Seeking Alpha audience. Thanks for sharing so much knowledge always.

AG: My pleasure. But there is one more thing that I do want to warn people about.

RS: Please.

AG: The banking industry is something that people are now probably very, very comfortable about, and I think that is a very big mistake. And I'm not just talking about it from an investing standpoint. I will not invest in banks at this point in my career. I'm talking about it as a place to house your money. And even then, I view that as a very, very, very risky potential as we look towards the next decade.

What we've seen to date, in fact, right before – two years ago, actually three years ago, I started preparing our subscribers for what I thought was going to be, I said, look, in a couple of years from now, we're probably going to hit a very major top in the market and start a large bear market.

So, they asked me, well, how do we prepare? And I said to them, one of the things you need to do is find yourself a safe bank to house your money, even several safe banks, so you can diversify where your money is being held, just in case. And we started looking at that years ago.

Two-and-a-half years ago, I hired a banking analyst to roll-out a service to identify what we viewed as the top 15 banks in the country. And we're starting to look at Canada and Europe, and we're rolling out what we view as some of the strongest banks there.

We started doing this two years ago because we foresaw this coming, when right before SVB (OTCPK:SIVBQ) went under. Two weeks before SVB went under, we wrote an article warning people who were willing to listen that one of the reasons that SVB went under was exactly what we were calling for and it is only one of the issues that we foresee as major issues to the bank. It's only one of the issues.

So, if people are getting very, very calm and feeling good about the banking system, I want them to be very, very careful about how comfortable they're going to get and to be very careful about where they house their hard-earned money. Because what we saw recently, really was only the tip of the iceberg.

There are a number of reasons, and the reasons will differ based upon the geographics and especially Canada. When we went through the 2007 to 2009 banking crisis, the financial crisis in the U.S., the Canadian banks came through that really strong. They were great. Problem is, people assume that the Canadian banks are just as strong today, and there's nothing further from the truth. We've only found one of the top five or six banks in Canada that are even worth putting your money in.

So, there are various reasons, and we've written public articles about this on Seeking Alpha that people can go read and we've outlined the reasons. We looked at some of the biggest banks in the United States, and we've highlighted the major issues we see, so people can go read that.

But I would not become complacent about where you have your money. I think people should be looking to where they should be housing their money in a more stable bank today, rather than wait to when the next phase of the crisis actually hits.

RS: So many disruptions coming our way, huh?

AG: It seems that's what the charts are telling me. And I'll even go so bold as to say that I think Citibank (C) and Capital One (COF) may be the first banks that get knocked out.

RS: Wow. And that's all based on the charts?

AG: Yeah. I mean, the charts told me that those banks look sick. And then we looked at the fundamentals and did a deep dive on their fundamentals and that confirmed it.

RS: And what's your timeline there in terms of sick and getting sicker?

AG: Like I said, I am an analyst, I'm not a prophet.

RS: Yeah.

AG: I could tell you that over the next five years, we should start seeing some really big issues in the big banks. And whether Capital One or Citibank may go under during that five years, I'm not sure. But I would say over the next decade, you're probably going to see a very different banking industry than you see today.

RS: Let me ask you this, would there be something that could save them at this point?

AG: For example, Citibank, Capital One, to me look too sick. I don't believe so. I can always be wrong about that, but I don't believe so. To me, they just look way too sick.

RS: Okay, something to keep our eyes on. Avi, more food for thought. I appreciate it, as always.

AG: Thank you so much for having me, Rena.

RS: Thank you. Talk to you soon.