UPDATE ON THE BROAD STOCK MARKET (7:00 pm EST)
Following last Wednesday's FOMC meeting, the broad stock market fell dramatically after Fed Chairman Jerome Powell dampened trader's and investor's hopes of an early interest rate cut. In my blog that day I wrote:
"Today the DOW dropped 317 points, the S&P 500 dropped 79 points, and the NASDAQ fell a whopping 346 points. This looks like the beginning of a fall to the final medium-term cycle bottoms (unless the market snaps back up tomorrow)...we wait to see if today's sell-off can gain more momentum over the next several days."
Well, the market DID snap back up, and by Friday all three market indices (DOW, S&P 500, NASDAQ) were making new highs for the week. This market is very bullish, but the rally and the current medium-term cycles are getting 'long in the tooth", and a final top is now due (overdue). We just left a strong reversal zone, but we are entering another one next week (February 2 - 13). Although this reversal zone is weaker than the previous one, we do have a strong potential "pivot point" for equities Tuesday through Thursday that could give it more strength. We will also watch for more bearish divergence in these indices (i.e. one or two, but not all three making new weekly highs). We note that there is still a strong bearish divergence signal between these three indices as the NASDAQ still has not exceeded its all-time high from Nov. 2021 (16,212) while both the DOW and S&P 500 have exceeded their all-time highs from Jan. 2022. The NASDAQ, however, is now very close to that high. If it does break through, that would be a very bullish signal for this market. We remain on the sidelines of the broad stock market as we wait for a corrective low and the final bottom of the current medium-term cycle.
Following last Wednesday's FOMC meeting, the broad stock market fell dramatically after Fed Chairman Jerome Powell dampened trader's and investor's hopes of an early interest rate cut. In my blog that day I wrote:
"Today the DOW dropped 317 points, the S&P 500 dropped 79 points, and the NASDAQ fell a whopping 346 points. This looks like the beginning of a fall to the final medium-term cycle bottoms (unless the market snaps back up tomorrow)...we wait to see if today's sell-off can gain more momentum over the next several days."
Well, the market DID snap back up, and by Friday all three market indices (DOW, S&P 500, NASDAQ) were making new highs for the week. This market is very bullish, but the rally and the current medium-term cycles are getting 'long in the tooth", and a final top is now due (overdue). We just left a strong reversal zone, but we are entering another one next week (February 2 - 13). Although this reversal zone is weaker than the previous one, we do have a strong potential "pivot point" for equities Tuesday through Thursday that could give it more strength. We will also watch for more bearish divergence in these indices (i.e. one or two, but not all three making new weekly highs). We note that there is still a strong bearish divergence signal between these three indices as the NASDAQ still has not exceeded its all-time high from Nov. 2021 (16,212) while both the DOW and S&P 500 have exceeded their all-time highs from Jan. 2022. The NASDAQ, however, is now very close to that high. If it does break through, that would be a very bullish signal for this market. We remain on the sidelines of the broad stock market as we wait for a corrective low and the final bottom of the current medium-term cycle.
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