All three broad stock market indices (DOW, S&P 500, NASDAQ) are making new all-time highs today, and so, as I suggested in last night's blog, ALL short positions should be closed now as we have lost our bearish divergence signal for this week. Does the lack of bearish divergence between these indices mean it is impossible we will see a top this week? Well, no. But it does make it less likely, and even if we do get a top, the reversal down may be modest. The big question here is whether or not the DOW and/or S&P 500 have already started new medium-term cycles from their Jan. 29 lows. If they have, they would be bullish and a significant reversal would not be imminent for at least several more weeks. It still looks like the NASDAQ is an older cycle which means that a top and significant downturn IS imminent (or should be). For this reason, we may be focusing on the NASDAQ for another possible shorting opportunity soon.
I should state here that the reason we are chasing a short sell in this market so vigorously is because the broad stock market is now very ripe for a MAJOR correction, not just in its medium-term cycles, but in its longer-term cycles as well. Wall Street's current rally is being driven by positive news concerning the distribution of COVID vaccines and the recent approval of another COVID stimulus package. But Wall Street and the DOW are very near-sighted beasts, and once this news becomes old, economic reality (as well as technical and cycle patterns) may kick in and pull the rug out from under this rally, a rally that some might characterize as "irrational exuberance".
We are now out of all our short positions in the broad stock market and will remain on the sidelines for now.