UPDATE ON THE BROAD STOCK MARKET (2:30 pm EST)
It looks like our prediction of a MAJOR correction in the broad stock market is happening now. This week's FOMC meeting and apprehension concerning the Fed's plans to start raising interest rates and terminate bond-purchasing is causing a panic sell-off on Wall Street today. (More saber-rattling between the U.S. and Russia may also be contributing to trader panic - equity markets do not like geopolitical instability.) This, of course, is following last week's steep equity plunge. This does not bode well for 2022 as the stock market's performance in January is often a predictor of how well it will do for the rest of the year.
The DOW has now broken below what was probably the start of its current medium-term cycle - the low of 33,613 on Sept. 20, 2021. This means the cycle's trend has turned bearish and can fall lower before hitting its final cycle bottom. We are now just stepping out of our reversal zone for equities (and other markets). If this market can find some support today or tomorrow and can close back above 34,265, there's a chance this cycle could bottom now and a new medium-term cycle could start (which would be at least temporarily bullish). Otherwise, it looks like this market is going lower - possibly to the 30,000 area.
The S&P 500 is also testing the start of its current medium-term cycle (4,278 on Oct. 4, 2021) today. As with the DOW, there's a chance this index could have a short rebound from this level now, but it is a little early for the S&P 500 to be forming its final cycle bottom, and I don't think any rally will get far before turning back down again. Today this index "gapped" down at 4,400. It would take a close back above 4,400 to question the current bearish trend.
The NASDAQ's medium-term cycle trend turned bearish last Friday when it closed definitively below the start of the cycle (14,181 on Oct. 4, 2021). The final bottom of this cycle is due 3-7 weeks from now, so it has time to go lower. This index got close to 13,000 today, but at the time of this writing, it is rebounding from that low. As with the other two indices, we could see a temporary bounce now in the NASDAQ before it turns south again. We were anticipating a 10% - 20% correction. So far the correction has been about 16% (our short position is happy), so we are probably getting close to a bottom. Let's continue to hold our short position in the NASDAQ for now.
It looks like our prediction of a MAJOR correction in the broad stock market is happening now. This week's FOMC meeting and apprehension concerning the Fed's plans to start raising interest rates and terminate bond-purchasing is causing a panic sell-off on Wall Street today. (More saber-rattling between the U.S. and Russia may also be contributing to trader panic - equity markets do not like geopolitical instability.) This, of course, is following last week's steep equity plunge. This does not bode well for 2022 as the stock market's performance in January is often a predictor of how well it will do for the rest of the year.
The DOW has now broken below what was probably the start of its current medium-term cycle - the low of 33,613 on Sept. 20, 2021. This means the cycle's trend has turned bearish and can fall lower before hitting its final cycle bottom. We are now just stepping out of our reversal zone for equities (and other markets). If this market can find some support today or tomorrow and can close back above 34,265, there's a chance this cycle could bottom now and a new medium-term cycle could start (which would be at least temporarily bullish). Otherwise, it looks like this market is going lower - possibly to the 30,000 area.
The S&P 500 is also testing the start of its current medium-term cycle (4,278 on Oct. 4, 2021) today. As with the DOW, there's a chance this index could have a short rebound from this level now, but it is a little early for the S&P 500 to be forming its final cycle bottom, and I don't think any rally will get far before turning back down again. Today this index "gapped" down at 4,400. It would take a close back above 4,400 to question the current bearish trend.
The NASDAQ's medium-term cycle trend turned bearish last Friday when it closed definitively below the start of the cycle (14,181 on Oct. 4, 2021). The final bottom of this cycle is due 3-7 weeks from now, so it has time to go lower. This index got close to 13,000 today, but at the time of this writing, it is rebounding from that low. As with the other two indices, we could see a temporary bounce now in the NASDAQ before it turns south again. We were anticipating a 10% - 20% correction. So far the correction has been about 16% (our short position is happy), so we are probably getting close to a bottom. Let's continue to hold our short position in the NASDAQ for now.
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