BROAD STOCK MARKET UPDATE (11:30 pm EDST)
Last week the broad stock market closed with a strong dive in all three major indices (DOW, S&P 500, NASDAQ), but especially significant was the drop in the DOW. This index broke and closed below our "line in the sand" (the Aug. 19 low of 34,691). That means the current medium-term cycle in this index has turned bearish and will be headed lower until its final bottom is reached. That final low could happen anytime now over the next five to eight weeks. If a low happens quickly and stays above the start of the cycle (the June low of 33,217), then the DOW may still be bullish and attempt to make another new all-time high before the year is over. But if this index plunges below 33,217, a bearish trend will be in place, and the DOW could fall considerably lower.
The S&P 500 and especially the NASDAQ do not look quite so bearish. The S&P 500 is still well above its Aug. 19 low of 4,368. As long as it doesn't break below there, its trend is still bullish. The NASDAQ is also well above its Aug. 19 low - 14,424 (which was probably the start of a new medium-term cycle) - so it is also bullish.
There is the possibility of a "Black Monday" type sell-off tomorrow. This sometimes happens when the markets fall all week with their biggest dive on the last day of the week. This is what happened on Friday. If this happens, the DOW could lead the other two indices into a bearish trend. The strongest signal for an overall bearish trend would be the NASDAQ moving well below 14,424. A big gap down after a bad week of trading doesn't always happen, but it is a possibility. If we get through Monday without a serious plunge, we'll watch for a bottom in the DOW over the next several weeks with the idea that the S&P 500 and NASDAQ will stay above those Aug. 19 lows. If they don't, a serious correction in the broad stock market could be underway. Staying on the sidelines for now.
Last week the broad stock market closed with a strong dive in all three major indices (DOW, S&P 500, NASDAQ), but especially significant was the drop in the DOW. This index broke and closed below our "line in the sand" (the Aug. 19 low of 34,691). That means the current medium-term cycle in this index has turned bearish and will be headed lower until its final bottom is reached. That final low could happen anytime now over the next five to eight weeks. If a low happens quickly and stays above the start of the cycle (the June low of 33,217), then the DOW may still be bullish and attempt to make another new all-time high before the year is over. But if this index plunges below 33,217, a bearish trend will be in place, and the DOW could fall considerably lower.
The S&P 500 and especially the NASDAQ do not look quite so bearish. The S&P 500 is still well above its Aug. 19 low of 4,368. As long as it doesn't break below there, its trend is still bullish. The NASDAQ is also well above its Aug. 19 low - 14,424 (which was probably the start of a new medium-term cycle) - so it is also bullish.
There is the possibility of a "Black Monday" type sell-off tomorrow. This sometimes happens when the markets fall all week with their biggest dive on the last day of the week. This is what happened on Friday. If this happens, the DOW could lead the other two indices into a bearish trend. The strongest signal for an overall bearish trend would be the NASDAQ moving well below 14,424. A big gap down after a bad week of trading doesn't always happen, but it is a possibility. If we get through Monday without a serious plunge, we'll watch for a bottom in the DOW over the next several weeks with the idea that the S&P 500 and NASDAQ will stay above those Aug. 19 lows. If they don't, a serious correction in the broad stock market could be underway. Staying on the sidelines for now.
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