UPDATE ON THE BROAD STOCK MARKET (11:30 pm EDT)
We still appear to be on target for a steep correction down to the final cycle lows of our current medium-term cycles in all three of our broad stock market indices (DOW, S&P 500, NASDAQ). However, that scenario is being challenged now by a hopefully temporary bullish surge in equities today. As I mentioned last week, the "gap-down" in prices last Thursday in all three indices created a "bearish island reversal" chart formation that usually portends lower prices - unless prices edge back up and close that gap. All three indices did that today.
Also significant is that the S&P 500 and NASDAQ seem to be finding support at their 15-day moving averages. So far only the DOW had broken below its 15-day moving average, and today it is breaking back above it. We need to watch this carefully. If the market continues to rally tomorrow, there's a chance last week's highs will be exceeded, and we could then see a new high in the upcoming strong reversal zone (July 18 - 27) instead of a low. If that happens, it would mean that we sold this market short too soon as that new high would almost surely be the final top in our current medium-term cycle. Currently our short trade is at a break even point. Let's wait to see if all three indices can close above last week's highs before we abandon this position. We will continue to hold our short position in the broad stock market for now.
We still appear to be on target for a steep correction down to the final cycle lows of our current medium-term cycles in all three of our broad stock market indices (DOW, S&P 500, NASDAQ). However, that scenario is being challenged now by a hopefully temporary bullish surge in equities today. As I mentioned last week, the "gap-down" in prices last Thursday in all three indices created a "bearish island reversal" chart formation that usually portends lower prices - unless prices edge back up and close that gap. All three indices did that today.
Also significant is that the S&P 500 and NASDAQ seem to be finding support at their 15-day moving averages. So far only the DOW had broken below its 15-day moving average, and today it is breaking back above it. We need to watch this carefully. If the market continues to rally tomorrow, there's a chance last week's highs will be exceeded, and we could then see a new high in the upcoming strong reversal zone (July 18 - 27) instead of a low. If that happens, it would mean that we sold this market short too soon as that new high would almost surely be the final top in our current medium-term cycle. Currently our short trade is at a break even point. Let's wait to see if all three indices can close above last week's highs before we abandon this position. We will continue to hold our short position in the broad stock market for now.
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