Today equity markets took another big dive. All three broad stock market indices are approaching and testing support near their 45-day moving averages, and this is happening at the center of a very strong reversal zone
(Sept. 2 - 11). The big question now is whether this steep plunge will continue or will these indices find support near their 45-day moving averages (or even a bit lower) over the next several days.
If the DOW and S&P 500 are newer cycles (as we suspect), then we should get a sub-cycle bottom this week or next. That might be near the 45-day m.a. (now 27,300 in the DOW and 3,326 in the S&P 500, with both rising) or it could be in a wider target range between 26,500 - 27,500 in the DOW and 3,000 -3,300 in the S&P 500. Another rally would follow from such a bottom and likely take these indices to the highs mentioned in yesterday's blog (around 28,500 and 3,500 in the S&P 500, respectively) which could possibly give us a good opportunity to sell short. If the DOW and S&P 500 are NOT newer cycles but instead older cycles completing their final corrective plunges, then we probable won't see any bounce this week, and these indices will fall much lower than the targets mentioned above.
We are more certain that the NASDAQ is an older cycle and is in the process of falling to its final medium-term cycle bottom from last week's top at 12,074. Does that mean we missed the chance to short sell? Maybe, but this index is testing its 45-day m.a. today. If the DOW and S&P 500 rebound as I described above, the NASDAQ may bounce too and possibly give us another entry point for a short sell.
We are still on the sidelines of the broad stock market.