Let me again refer back to my blog on the broad stock market from July 13 as it is still valid:
"We are now more than halfway through the medium-term cycles of the DOW, S&P 500, and NASDAQ which means that we should be watching for a top (high) from which a significant correction (to the end of the cycle) will follow. Technical studies are showing that this correction could be in the 8-10% range or possibly more. This top will most likely happen sometime between July 18 and August 23. Timing and reversal studies are pointing to July 21, July 26, Aug.3, and Aug. 21 as possible pivot points for a significant reversal. This means that the likelihood of a top and reversal down will be highest on or near any one of these dates. Our main trading strategy will therefore be to watch those dates for signs of a top and an opportunity to sell short."
OK. We are now entering another reversal zone centered around Aug. 3. Today the DOW rallied and made a new weekly and all-time high while the S&P 500 and NASDAQ did not exceed their highs from last week for yet another case of intermarket bearish divergence in a reversal zone. All three indices closed the day in the lower part of their day's range which is also bearish. This is giving us signs of a possible top and another opportunity to sell short. I am going to enter a short position in the broad stock market tonight for tomorrow's market open. We can set a tight stop loss for this trade based on both the S&P 500 and NASDAQ making new weekly highs. For those who are trading index funds, I would suggest trading the DOW or S&P 500 here as the NASDAQ's correction may already be significantly down from last Thursday's high.