BROAD STOCK MARKET TRADE ALERT (2:30 pm EST)
We are in the final days of what is a very strong reversal zone for several markets (it ends this Thursday), and today the NASDAQ is making a new weekly high while the DOW and S&P 500 are not. Thus we have intermarket bearish divergence in a reversal zone, which is a sell signal. The cycle structure of these indices also suggests an imminent correction in this market. Cycle analysis indicates that this correction could be substantial. For these reasons I am going to enter a short position now in the broad stock market. The only thing that bothers me here is that the presidential inauguration is coming up Jan. 20th. Many analysts view the current "Trumphoria" rally as a classic case of "buy on the rumor and sell on the news". In other words, the market may be rallying in anticipation of Trump's election, but the rally could top out and sell off after Trump takes office. These analysts may be right, and if so we may be selling short too early. What we can do here is sell short with a stop loss based on the DOW and S&P 500 both making new highs this week, and especially if they do this after Thursday.
As I mentioned in my last blog, our longer-term strategy for the broad stock market is still to buy the bottom of any significant correction. Even if the inauguration puts a temporary damper on the current rally, cycle analysis shows that 'Trumphoria" could carry these markets higher over the next several months. Nevertheless, a short-term short sell seems appropriate now. (There is also a smaller possibility of markets starting to panic in which case we could see the start of a serious longer-term correction that would negate any Trump-driven rally).
Entering a short position in the broad stock market today.
We are in the final days of what is a very strong reversal zone for several markets (it ends this Thursday), and today the NASDAQ is making a new weekly high while the DOW and S&P 500 are not. Thus we have intermarket bearish divergence in a reversal zone, which is a sell signal. The cycle structure of these indices also suggests an imminent correction in this market. Cycle analysis indicates that this correction could be substantial. For these reasons I am going to enter a short position now in the broad stock market. The only thing that bothers me here is that the presidential inauguration is coming up Jan. 20th. Many analysts view the current "Trumphoria" rally as a classic case of "buy on the rumor and sell on the news". In other words, the market may be rallying in anticipation of Trump's election, but the rally could top out and sell off after Trump takes office. These analysts may be right, and if so we may be selling short too early. What we can do here is sell short with a stop loss based on the DOW and S&P 500 both making new highs this week, and especially if they do this after Thursday.
As I mentioned in my last blog, our longer-term strategy for the broad stock market is still to buy the bottom of any significant correction. Even if the inauguration puts a temporary damper on the current rally, cycle analysis shows that 'Trumphoria" could carry these markets higher over the next several months. Nevertheless, a short-term short sell seems appropriate now. (There is also a smaller possibility of markets starting to panic in which case we could see the start of a serious longer-term correction that would negate any Trump-driven rally).
Entering a short position in the broad stock market today.
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