We are now at the center of our strong reversal zone for the broad stock market (July 18-26), and all three of our market indices (DOW, S&P 500, NASDAQ) have been rising strongly into it. Today the DOW surged to a new weekly high at 35,373 before pulling back and closing at 35,225 with a diminished 163 point gain. The S&P 500 and NASDAQ did not exceed their highs from yesterday and closed the day with losses (especially the NASDAQ). This is all bearish behavior. Furthermore, this week all three indices have hit ideal targets for a final medium-term cycle top, and these cycles are old and due for their final corrective drop to their final cycle bottoms. This looks like a good time to sell the market short again. (We prematurely called the top two weeks ago and were stopped out).
The tops may be in already (today in the DOW and yesterday in the S&P 500 and NASDAQ), but these indices could still push higher into early next week (the reversal zone ends on Wednesday). We might also get a bearish divergence signal early next week if one or two, but not all three indices make new highs which would reinforce the idea of an imminent reversal and correction down. The final corrective drop to the end of our current medium-term cycles could be a sharp 2 - 5 week decline to around 33,500 in the DOW and maybe more. This is a substantial correction and worth trading short. I am going to enter a short position in the DOW (with an index fund) for tomorrow's market open. (The S&P 500 and NASDAQ may have already started their decline). We can place a stop loss on this trade based on the DOW closing above 36,000 and/or ALL THREE indices making new weekly highs next week.