We are now in the dead center of this week's reversal zone and the broad stock market is rallying into it. Yesterday's rally was strong, but today equities seem to be losing some of their steam and could be ready to roll over. All three market indices (DOW, S&P 500, NASDAQ) are making new weekly highs (i.e. no weekly bearish divergence signal), but today the S&P 500 and NASDAQ made new highs while the DOW (at the time of this writing) appears to want to stay below yesterday's high, which is a bearish sign. The S&P 500 is at our target level for a top (2,700), and the DOW is very close to our target of 25,000.
I am going to enter a short position in this market now. We can set a stop loss for this trade at 25,400 in the DOW and at 2,770 for the S&P 500. The main risk here is if the current cycle turns bullish. For that to happen, the DOW and S&P 500 would have to break above their current cycle highs. That would be 25,800 in the DOW and 2,807 in the S&P 500. These highs can also be used as stop loss points for those willing to take more risk with this trade.