UPDATE ON THE BROAD STOCK MARKET AND CRUDE OIL (4:00 pm EDST)
Tomorrow (Good Friday) is a holiday, and the markets will be closed. Today the DOW surged up early in the morning, but it lost that gain as trading came to a close. The S&P 500 and NASDAQ are also closing the day with significant losses. Both the NASDAQ and S&P 500 had "gap downs" on Monday, and they haven't been able to rise and close those gaps this week. All of this is bearish and suggests that the market may push lower next week. If we get new lows early next week with bullish divergence (i.e. one or two, but not all three indices making a new low) near our target areas (34,000 in the DOW, 4,300 - 4,400 in the S&P 500, and 13,500 in the NASDAQ), then we could see a sub-cycle bottom and another rally to follow into the first week of May. Of course, in these volatile times, a sell-off is also possible. If the broad stock market continues to fall after Wednesday of next week (the end of the current reversal zone), then these indices could be headed south to take out their Feb.24 lows. That would be VERY bearish and would suggest that a major long-term correction in equities is still in progress. We will stay on the sidelines of the broad stock market for now, but we may look for a sub-cycle bottom and a spot to go long early next week for a possible rally into May.
Crude oil is closing today around $106 which is just above a downward sloping trend line at $105. This is confirming the idea that crude started a new medium-term cycle with its low of $92.93 (May contract chart) on Monday. I don't like to chase steep rallies, especially in highly volatile markets like this one (crude has risen over $10 over the last four days), so we will stay out of this market for now. A corrective dip that finds support near that trend line might entice me to buy. Let's see if that happens next week.
Tomorrow (Good Friday) is a holiday, and the markets will be closed. Today the DOW surged up early in the morning, but it lost that gain as trading came to a close. The S&P 500 and NASDAQ are also closing the day with significant losses. Both the NASDAQ and S&P 500 had "gap downs" on Monday, and they haven't been able to rise and close those gaps this week. All of this is bearish and suggests that the market may push lower next week. If we get new lows early next week with bullish divergence (i.e. one or two, but not all three indices making a new low) near our target areas (34,000 in the DOW, 4,300 - 4,400 in the S&P 500, and 13,500 in the NASDAQ), then we could see a sub-cycle bottom and another rally to follow into the first week of May. Of course, in these volatile times, a sell-off is also possible. If the broad stock market continues to fall after Wednesday of next week (the end of the current reversal zone), then these indices could be headed south to take out their Feb.24 lows. That would be VERY bearish and would suggest that a major long-term correction in equities is still in progress. We will stay on the sidelines of the broad stock market for now, but we may look for a sub-cycle bottom and a spot to go long early next week for a possible rally into May.
Crude oil is closing today around $106 which is just above a downward sloping trend line at $105. This is confirming the idea that crude started a new medium-term cycle with its low of $92.93 (May contract chart) on Monday. I don't like to chase steep rallies, especially in highly volatile markets like this one (crude has risen over $10 over the last four days), so we will stay out of this market for now. A corrective dip that finds support near that trend line might entice me to buy. Let's see if that happens next week.
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