BROAD STOCK MARKET TRADE ALERT and CRUDE OIL UPDATE (2:15 pm EDST)
We have a very interesting situation in the broad stock market right now. As we enter the early part of another reversal zone for equities (Aug. 5 - 17), the S&P 500 and especially the NASDAQ are clearly falling strongly. This means we should be expecting some sort of bottom for these two indices in this time period. The NASDAQ is already down to the level of a normal sub-cycle correction (but it could go lower) while the S&P 500 needs to fall a bit more (say to at least 2800) to get to the level of a normal correction. What's unusual here is that the DOW has been edging a bit higher over the last few days and doesn't seem to want to fall with its two counterparts. The DOW is not far from last week's high so there is still time for it to push higher and make a new high in this reversal zone. (That would actually be an excellent sell signal as the S&P 500 and NASDAQ are pulling strongly away from last week's highs - i.e. bearish divergence). I think it is more likely, however, that the DOW is about to reverse now and join the other two indices in a corrective drop. In either scenario, we should be looking to sell short. I am going bet on the DOW turning down sooner rather than later so I am entering a short position in this market today. In this trade we want to focus on the DOW (such as a DOW index fund or ETF) because the other two indices are already well into their corrections. If the DOW does make a new high (it is about 1% away from doing so), we will not worry too much unless we see the other two indices also rallying strongly, and especially if they all continue higher after next week.
It looks like we missed a good shorting opportunity in crude oil earlier this week when crude made a new cycle high on Tuesday at $71.40 (Oct. contract chart). The price has fallen sharply from there. I refrained from selling short on Tuesday as it was technically not within a reversal zone for crude (although it was only one day outside of a reversal zone for equities). Prices are now falling strongly into crude's next reversal zone (Aug. 7 - 13) which starts tomorrow. As with the DOW, if crude bounces back up to make a new high (or double top) next week, it will be an excellent opportunity to sell short. Otherwise, we will have to watch for a significant bottom in this new reversal zone and a possible spot to buy. If Tuesday's high holds, this market may be ready to turn bearish for a longer-term cycle correction. On the sidelines of crude oil.
We have a very interesting situation in the broad stock market right now. As we enter the early part of another reversal zone for equities (Aug. 5 - 17), the S&P 500 and especially the NASDAQ are clearly falling strongly. This means we should be expecting some sort of bottom for these two indices in this time period. The NASDAQ is already down to the level of a normal sub-cycle correction (but it could go lower) while the S&P 500 needs to fall a bit more (say to at least 2800) to get to the level of a normal correction. What's unusual here is that the DOW has been edging a bit higher over the last few days and doesn't seem to want to fall with its two counterparts. The DOW is not far from last week's high so there is still time for it to push higher and make a new high in this reversal zone. (That would actually be an excellent sell signal as the S&P 500 and NASDAQ are pulling strongly away from last week's highs - i.e. bearish divergence). I think it is more likely, however, that the DOW is about to reverse now and join the other two indices in a corrective drop. In either scenario, we should be looking to sell short. I am going bet on the DOW turning down sooner rather than later so I am entering a short position in this market today. In this trade we want to focus on the DOW (such as a DOW index fund or ETF) because the other two indices are already well into their corrections. If the DOW does make a new high (it is about 1% away from doing so), we will not worry too much unless we see the other two indices also rallying strongly, and especially if they all continue higher after next week.
It looks like we missed a good shorting opportunity in crude oil earlier this week when crude made a new cycle high on Tuesday at $71.40 (Oct. contract chart). The price has fallen sharply from there. I refrained from selling short on Tuesday as it was technically not within a reversal zone for crude (although it was only one day outside of a reversal zone for equities). Prices are now falling strongly into crude's next reversal zone (Aug. 7 - 13) which starts tomorrow. As with the DOW, if crude bounces back up to make a new high (or double top) next week, it will be an excellent opportunity to sell short. Otherwise, we will have to watch for a significant bottom in this new reversal zone and a possible spot to buy. If Tuesday's high holds, this market may be ready to turn bearish for a longer-term cycle correction. On the sidelines of crude oil.
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