UPDATE ON THE BROAD STOCK MARKET (4:00 pm EST)
It appears that anxiety over the potential impact of China's coronavirus epidemic on the global economy is triggering a major broad stock market dive. Yesterday's DOW lost over 1000 points, and the Wall Street carnage continued today with an 878 point DOW loss.
All three market indices (DOW, S&P 500, and NASDAQ) are now closing well bellow their late January lows. This strongly suggests that the DOW and S&P 500 did not start new medium-term cycles on Jan. 31 - as I have suggested in recent blogs - and are instead (like the NASDAQ) coming to the end of their older cycles with a final corrective drop to their final cycle bottoms. Those bottoms could very easily happen in our current strong reversal zone (Feb. 24 - March 6). Technical studies give us a wide range for a bottom here. For the DOW, the correction could level off around 27,000 (it is there now) or it could get below 27,000, and even as low as 26,000. Because it is still early in the reversal zone, there is plenty of time for this cycle to find a bottom in this range. We will watch for it as a possible spot to buy. Even though we had been anticipating a sharp correction, we were unfortunately "whipsawed" out of our short position two weeks ago (sigh!) so our best strategy now is to wait for the bottom. As long as this correction doesn't get too low, we are still anticipating another rally into the summer and most likely to new highs. We are on the sidelines of this market.
It appears that anxiety over the potential impact of China's coronavirus epidemic on the global economy is triggering a major broad stock market dive. Yesterday's DOW lost over 1000 points, and the Wall Street carnage continued today with an 878 point DOW loss.
All three market indices (DOW, S&P 500, and NASDAQ) are now closing well bellow their late January lows. This strongly suggests that the DOW and S&P 500 did not start new medium-term cycles on Jan. 31 - as I have suggested in recent blogs - and are instead (like the NASDAQ) coming to the end of their older cycles with a final corrective drop to their final cycle bottoms. Those bottoms could very easily happen in our current strong reversal zone (Feb. 24 - March 6). Technical studies give us a wide range for a bottom here. For the DOW, the correction could level off around 27,000 (it is there now) or it could get below 27,000, and even as low as 26,000. Because it is still early in the reversal zone, there is plenty of time for this cycle to find a bottom in this range. We will watch for it as a possible spot to buy. Even though we had been anticipating a sharp correction, we were unfortunately "whipsawed" out of our short position two weeks ago (sigh!) so our best strategy now is to wait for the bottom. As long as this correction doesn't get too low, we are still anticipating another rally into the summer and most likely to new highs. We are on the sidelines of this market.
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