The DOW and S&P 500 have now dropped into our target ranges. We can now comfortably cover (unload) our short positions in these indices with very little or no loss as they are now close to (DOW) or below (S&P 500) our April 26 entry points. Our NASDAQ short position has gained even more profit with today's broad stock market plunge and is also in a good position to cover.
Although the DOW and S&P 500 may be taking a short-term dip today, the NASDAQ's drop looks more severe (although it is recovering as I write this), and there is a possibility we may be seeing the start of a major correction in all three indices. If the DOW breaks clearly below 34,000 and the S&P 500 breaks below 4,000, we will have to consider that possibility. The NASDAQ breaking below 12,397 (the start of its medium-term cycle on March 5) would also be a very strong signal that the market is turning bearish.
For now, we will go with the idea that today's drop represents a short-term dip and that all three indices could be pushing higher into the end of this month, with the final tops still ahead of us. With this in mind, we will cover (unload) all short positions in our three indices (DOW, S&P 500, NASDAQ) today, with a profit in two (NASDAQ and S&P 500) and slight loss in one (DOW).
*** Please note that bailing out of these short positions does not mean the broad stock market is out of the woods or is not in danger of a SEVERE correction now. But severe corrections are often preceded by "blow-off" tops, and we do not want to be short if that happens. It is very tricky to call the top of a major correction, and we have to be flexible and nimble in our trading. We are expecting a severe correction to start soon. If it doesn't start now, the next best time for a final top will be coming up at the end of this month or possibly into the end of June. ***