The Trump Administration's decision to escalate "trade wars" with China (and now Mexico) is having a serious negative impact on the broad stock market. After a deep plunge early in the week, equities had a brief respite on Thursday before plummeting again on Friday. New monthly lows were made in all three major indices (DOW, S&P 500, NASDAQ) so we had no bullish divergence signal last week; rather, the market closed with a strong bearish momentum. As I stated last week, we are now at the center of a weak reversal zone for equities (May 29 - June 5), but I am doubtful that it can contain the bearish force of this current correction. We will watch for bullish divergence early this week (i.e. one or two, but not all three indices making a new low), but if we get all three indices making new lows (especially after Wednesday) then we will look to our next reversal zone (June 7 - 24) for a possible final cycle bottom.
I had been favoring the idea of another strong rally into the summer, possibly to new all time highs, but if these trade wars are not resolved soon, it's possible we could see a major panic in equities and a very serious plunge that could extend even beyond that mid-June reversal zone. This is a serious possibility now. If we get a weak bounce in this market early next week, we may even consider going short to ride what might be a serious correction into mid-June or even many more weeks beyond.