Shortly after posting my blog on Friday at 2:30 pm EST, the broad stock market, which had appeared to be stabilizing earlier in the day after Thursday's steep fall, took another dive into the final closing bell. This final plunge took the DOW down to 23,533 and the S&P 500 to 2,588. Such a steep drop at the end of the week is a very bearish signal. Both the DOW and S&P 500 are still above their Feb. 9 lows (23,360 and 2,532, respectively), but they are very close and could easily break those lows next week. I am going to assume that this market is now turning bearish, which means it will most likely continue lower for at least another month and will make a final low probably sometime in May. The DOW could fall as low as 21,000, but it doesn't have to go that far. We can anticipate a bottom anywhere between 21,000 and 23,000. (No, this is most likely not "the big one" - i.e. major crash).
Even though this market is likely turning bearish, it is now falling into the center of a reversal zone this week so there is a good chance it will stabilize here, and we could see a short-term "relief rally" from a low next week. An especially good setup for a rally would be to see only one or two (but not all three) of the major stock indices (DOW, S&P 500, NASDAQ) break below their Feb. 9 low(s) as that would give us an intermarket bullish divergence signal. If this happens, we may go long for a short-term rally, but we would especially want to sell short at the top of that rally to ride this longer-term cycle correction down into May. Stay tuned for possible trading calls next week. Still on the sidelines of the broad stock market.