IMPORTANT UPDATE ON THE BROAD STOCK MARKET (4:00 pm EDT)
In last Wednesday's blog following the end of the FOMC meeting and Jerome Powell's press conference, I noted that equity markets did not appreciate the hawkish news of a planned decrease in interest rate cuts for next year:
"Equity markets did not seem to like this slightly hawkish news. The broad stock market rallied into the afternoon but fell sharply after 2:00 pm and closed with significant losses. Will this market recover from today's news of fewer upcoming rate cuts? Probably, but markets are nervous right now, and even small things could trigger a major sell-off."
Well, markets WERE nervous, and they didn't recover. They continued to fall on Thursday and Friday and they fell some more today. Not only are equities falling, but all three of our broad stock market indices (DOW, S&P 500, NASDAQ) have now fallen below the start of their current (new) medium-term cycles - a potentially very bearish development.
Most likely the DOW started a new medium-term cycle on Aug. 25 at 34,029. Today it got down to 33,780. The S&P 500 and NASDAQ both started new medium-term cycles a little earlier - on Aug.18 - at 4,366 and 13,162, respectively. Today the S&P 500 got to 4,302 and the NASDAQ went down to 13,132. We are technically out of any reversal zones, and the next one is not coming up until Oct. 5 - 16. This means this market has time to fall some more before it takes on any upward momentum from a reversal (unless it turns up sharply NOW).
If the labeling of these cycles is correct, then the DOW and S&P 500 have turned bearish (they are significantly below the start of their cycles). The NASDAQ has likely turned bearish as well, although today's low could be a "double-bottom" to the Aug. 18 low. This means all three indices could be headed down for many more weeks, if not months.
Let's see if these indices continue to fall over the next few days. If they do, we will be looking to that next reversal zone (Oct. 5 - 16) as a likely spot for a corrective low to form. Then we will want to sell short the top of any modest rally from there as this market should continue to fall, possibly steeply, into the end of the year. Unless this market can turn back up this week, it looks like we will have to give up the idea of another rally to challenge the all-time highs and will have to accept that equities are resuming a longer-term correction to very deep lows with the possibility of a major "crash" to a 90 year cycle low over the next year or two. I will be commenting on this situation in more detail as it unfolds.
We remain on the sidelines of the broad stock market for now.
In last Wednesday's blog following the end of the FOMC meeting and Jerome Powell's press conference, I noted that equity markets did not appreciate the hawkish news of a planned decrease in interest rate cuts for next year:
"Equity markets did not seem to like this slightly hawkish news. The broad stock market rallied into the afternoon but fell sharply after 2:00 pm and closed with significant losses. Will this market recover from today's news of fewer upcoming rate cuts? Probably, but markets are nervous right now, and even small things could trigger a major sell-off."
Well, markets WERE nervous, and they didn't recover. They continued to fall on Thursday and Friday and they fell some more today. Not only are equities falling, but all three of our broad stock market indices (DOW, S&P 500, NASDAQ) have now fallen below the start of their current (new) medium-term cycles - a potentially very bearish development.
Most likely the DOW started a new medium-term cycle on Aug. 25 at 34,029. Today it got down to 33,780. The S&P 500 and NASDAQ both started new medium-term cycles a little earlier - on Aug.18 - at 4,366 and 13,162, respectively. Today the S&P 500 got to 4,302 and the NASDAQ went down to 13,132. We are technically out of any reversal zones, and the next one is not coming up until Oct. 5 - 16. This means this market has time to fall some more before it takes on any upward momentum from a reversal (unless it turns up sharply NOW).
If the labeling of these cycles is correct, then the DOW and S&P 500 have turned bearish (they are significantly below the start of their cycles). The NASDAQ has likely turned bearish as well, although today's low could be a "double-bottom" to the Aug. 18 low. This means all three indices could be headed down for many more weeks, if not months.
Let's see if these indices continue to fall over the next few days. If they do, we will be looking to that next reversal zone (Oct. 5 - 16) as a likely spot for a corrective low to form. Then we will want to sell short the top of any modest rally from there as this market should continue to fall, possibly steeply, into the end of the year. Unless this market can turn back up this week, it looks like we will have to give up the idea of another rally to challenge the all-time highs and will have to accept that equities are resuming a longer-term correction to very deep lows with the possibility of a major "crash" to a 90 year cycle low over the next year or two. I will be commenting on this situation in more detail as it unfolds.
We remain on the sidelines of the broad stock market for now.
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