BRIEF UPDATE ON THE BROAD STOCK MARKET (2:00 pm EDT)
The broad stock market is plunging today as we anticipated with yesterday's analysis. We shorted the broad stock market at today's opening bell; however, because the market "gapped" down, we were not able to capture gains on this initial plunge. But I am not that concerned because there should be plenty of downside to come as all three of our indices (DOW, S&P 500, NASDAQ) are likely taking the final correction to their current medium-term cycle bottoms. A good time frame for those bottoms is the upcoming strong reversal zone at the end of this month (July 18 - 26), so there is plenty of time for this market to fall lower. Today the DOW broke below its 15-day moving average and is approaching its 45-day moving average, but at the time of this writing (2:00 pm EDT), both the S&P 500 and NASDAQ are finding some support near their 15-day moving averages. A final medium-term cycle bottom should at least test the 45-day moving average. A good bottom target for the DOW would be around 32,500 and for the S&P 500 around 4,100. Those targets are a long way from here, but the market has the next three weeks to get there.
We also not that today's gap down produced a "bearish island reversal" chart pattern in all three indices. That bearish signal will be negated only if these indices rise up and close the gap that was created with today's opening plunge. Until that happens, we will hold our short position in this market.
The broad stock market is plunging today as we anticipated with yesterday's analysis. We shorted the broad stock market at today's opening bell; however, because the market "gapped" down, we were not able to capture gains on this initial plunge. But I am not that concerned because there should be plenty of downside to come as all three of our indices (DOW, S&P 500, NASDAQ) are likely taking the final correction to their current medium-term cycle bottoms. A good time frame for those bottoms is the upcoming strong reversal zone at the end of this month (July 18 - 26), so there is plenty of time for this market to fall lower. Today the DOW broke below its 15-day moving average and is approaching its 45-day moving average, but at the time of this writing (2:00 pm EDT), both the S&P 500 and NASDAQ are finding some support near their 15-day moving averages. A final medium-term cycle bottom should at least test the 45-day moving average. A good bottom target for the DOW would be around 32,500 and for the S&P 500 around 4,100. Those targets are a long way from here, but the market has the next three weeks to get there.
We also not that today's gap down produced a "bearish island reversal" chart pattern in all three indices. That bearish signal will be negated only if these indices rise up and close the gap that was created with today's opening plunge. Until that happens, we will hold our short position in this market.
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