BROAD STOCK MARKET TRADE ALERT (3:30 pm EDT)
The DOW, S&P 500 and NASDAQ are all down a bit today (at the time of this post - 3:30 pm EDT) so our intermarket bearish divergence signal from yesterday (when the NASDAQ made a new weekly high but the DOW and S&P 500 did not) is still valid. We are also nearing the end of the current reversal zone for the broad stock market (it technically ends Wednesday). If this reversal zone is going to be valid, these markets should turn down now. The cycle structure in all three indices is also suggesting that a significant correction should start now. If equities are going to bypass this reversal and instead stage a "breakout", we could see these indices rise into early July before any significant correction. That bullish scenario has a low probability, but markets have recently been very nervous, volatile and unpredictable so anything is possible. What we can do here is sell the broad stock market short today with a stop loss based on the DOW and S&P 500 both breaking above last week's highs (21,225 in the DOW and 2440.23 in the S&P 500). Those highs are very close to today's positions and would result in a very minimal loss if triggered. New highs would be especially significant after Wednesday as we would be out of the current reversal zone, and we wouldn't expect any significant corrections until the next one (around July 1). Entering a short position in the broad stock market today with the stop loss conditions stated above.
The DOW, S&P 500 and NASDAQ are all down a bit today (at the time of this post - 3:30 pm EDT) so our intermarket bearish divergence signal from yesterday (when the NASDAQ made a new weekly high but the DOW and S&P 500 did not) is still valid. We are also nearing the end of the current reversal zone for the broad stock market (it technically ends Wednesday). If this reversal zone is going to be valid, these markets should turn down now. The cycle structure in all three indices is also suggesting that a significant correction should start now. If equities are going to bypass this reversal and instead stage a "breakout", we could see these indices rise into early July before any significant correction. That bullish scenario has a low probability, but markets have recently been very nervous, volatile and unpredictable so anything is possible. What we can do here is sell the broad stock market short today with a stop loss based on the DOW and S&P 500 both breaking above last week's highs (21,225 in the DOW and 2440.23 in the S&P 500). Those highs are very close to today's positions and would result in a very minimal loss if triggered. New highs would be especially significant after Wednesday as we would be out of the current reversal zone, and we wouldn't expect any significant corrections until the next one (around July 1). Entering a short position in the broad stock market today with the stop loss conditions stated above.
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