UPDATE ON THE BROAD STOCK MARKET (11:45 pm EDST)
Yesterday the DOW and S&P 500 made new all-time highs, but the NASDAQ did not for another case of intermarket bearish divergence. Today we enter another strong reversal zone (August 17 - 26) and all three indices are taking a dive. It's possible the DOW and S&P 500 topped out yesterday (a day before the actual reversal zone) and are starting their sub-cycle corrections (unless they pop higher this week or next). If so, they are still young medium-term cycles which means we can't be sure they have made their final tops yet. That will depend on how low the sub-cycle corrections will go. (To stay bullish with possible new highs ahead, the DOW should not break below 33,741 and the S&P 500 not break below 4,233).
As I've pointed out in earlier blogs, the NASDAQ could still be an old medium-term cycle about to take its final correction to the final cycle bottom. It that's the case, its final cycle high and top could have been on Aug. 5 (at 14,896) - in the center of our last reversal zone. The minimal correction we would expect would be to test the 45-day moving average. It is doing that today, but it could also go quite a bit lower (and there is plenty of time left in this new reversal zone to do that). An alternative scenario would be that the NASDAQ is a new medium-term cycle that started with its July 19 low at 14,178. In that case, a modest correction now would just be the first sub-cycle dip, and as long as it doesn't break below 14,178, the cycle would stay bullish and likely make new highs over the next several weeks. If that 14,178 low breaks, however, it would mean the older cycle is bottoming OR the newer cycle is turning very bearish.
I realize this is all a bit complicated, but the bottom line here is that we are waiting to sell short at the top of a LONG-TERM cycle and ride a very substantial, long-term correction (crash?) down. Analyzing the medium-term cycles will give us clues as to when a long-term top is in and when we should go short. The strength and depth of any corrective drops now (or from highs later this week or next) should help us determine if that long-term correction has started already (NASDAQ), is starting now, or if it is going to start from higher highs into September. We will stay on the sidelines of the broad stock market for now and wait to see if today's correction can gain any legs over the next few days. There is plenty of time left in this new reversal zone (which ends Thursday next week) for these indices to make new highs.
Yesterday the DOW and S&P 500 made new all-time highs, but the NASDAQ did not for another case of intermarket bearish divergence. Today we enter another strong reversal zone (August 17 - 26) and all three indices are taking a dive. It's possible the DOW and S&P 500 topped out yesterday (a day before the actual reversal zone) and are starting their sub-cycle corrections (unless they pop higher this week or next). If so, they are still young medium-term cycles which means we can't be sure they have made their final tops yet. That will depend on how low the sub-cycle corrections will go. (To stay bullish with possible new highs ahead, the DOW should not break below 33,741 and the S&P 500 not break below 4,233).
As I've pointed out in earlier blogs, the NASDAQ could still be an old medium-term cycle about to take its final correction to the final cycle bottom. It that's the case, its final cycle high and top could have been on Aug. 5 (at 14,896) - in the center of our last reversal zone. The minimal correction we would expect would be to test the 45-day moving average. It is doing that today, but it could also go quite a bit lower (and there is plenty of time left in this new reversal zone to do that). An alternative scenario would be that the NASDAQ is a new medium-term cycle that started with its July 19 low at 14,178. In that case, a modest correction now would just be the first sub-cycle dip, and as long as it doesn't break below 14,178, the cycle would stay bullish and likely make new highs over the next several weeks. If that 14,178 low breaks, however, it would mean the older cycle is bottoming OR the newer cycle is turning very bearish.
I realize this is all a bit complicated, but the bottom line here is that we are waiting to sell short at the top of a LONG-TERM cycle and ride a very substantial, long-term correction (crash?) down. Analyzing the medium-term cycles will give us clues as to when a long-term top is in and when we should go short. The strength and depth of any corrective drops now (or from highs later this week or next) should help us determine if that long-term correction has started already (NASDAQ), is starting now, or if it is going to start from higher highs into September. We will stay on the sidelines of the broad stock market for now and wait to see if today's correction can gain any legs over the next few days. There is plenty of time left in this new reversal zone (which ends Thursday next week) for these indices to make new highs.
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