Today's plunge in the broad stock market is significant, and not just because the DOW dropped 343 points. More importantly, the S&P 500 and NASDAQ both broke and closed below the start of their new cycles. The DOW did this earlier in the month which is why I entered a short position in the broad stock market last week. The other two indices have now confirmed this pattern. July 7th seems to have been the start of new cycles in all three indices: the DOW at 17,465, the S&P 500 at 2044, and the NASDAQ at 4902. If this analysis is correct, all three indices have broken below those starting points and their cycles are now pointed down for at least six more weeks. The correction could be 15% or more from their all-time highs. (The all-time highs are 18,351 for the DOW, 2134 for the S&P 500, and 5231 for the NASDAQ.)
Needless to say, everyone should at least be out of the broad stock market right now if not selling it short for what looks to be a major correction. It is possible we could see a short-term sub-cycle bounce in these markets next week. If we do, traders still in the market should use that as an opportunity to get out at a better price, and all traders can use it as an opportunity to add more short positions.
I will, of course, continue to monitor these markets on a daily basis and post any changes to this analysis if necessary.