The Fed's dovish "gift" to Wall Street last Wednesday (the likelihood of no interest rate hikes for the rest of the year) was not enough to push the DOW above its Feb. 25 high of 26,241 by the end of the week. In fact, after an optimistic surge on Thursday, the DOW dropped a whopping 460 points on Friday. If Tuesday's high at 26,109 was a significant top (it was in a reversal zone), we could now see the broad stock market fall steeply to the end of the current medium-term cycle, with the final low possibly in our next reversal zone (April 9 - 17). Because the DOW did not exceed that Feb. 25 high, we still have an intermarket bearish divergence signal against the S&P 500 and NASDAQ, and that is supporting the idea of more falling from here. But as I mentioned last week, all financial markets may be highly volatile through the end of this month. The DOW could suddenly reverse back up and give us a new high in that next reversal zone instead of a low. A break above 26,109 would suggest that is happening, but a move below 25,208 would suggest the bearish scenario playing out. If bearish, we will buy at the final cycle bottom. If bullish, we will look to sell short at a new high most likely above the Feb. 25 high (26,241). Either one of these trades would most likely happen in the next reversal zone (April 9 - 17).
The S&P 500 and NASDAQ both made new highs last Thursday before turning down. If this market is turning bearish now, the tops to the medium-term cycles are in, and, as with the DOW, we will wait for their final cycle bottoms to buy. If they push higher into the next reversal zone, we will look to sell short.
On the sidelines of the broad stock market.