I have to apologize for Tuesday's late posting of a short selling trade alert for the broad stock market without any analysis or explanation. My website application sometimes reboots unexpectedly and causes the loss of active text. Unfortunately, this happened on Tuesday just before posting an update on the broad stock market and precious metals, and the update was lost in cyberspace. I scrambled to post a simple trade alert for the broad stock market which did get posted before the close of the trading day.
We entered a short position in the broad stock market (NASDAQ) for several good reasons. First, even though it's still not clear if the DOW and/or S&P 500 are old or new cycles, it's very likely that the NASDAQ is completing an older cycle and is therefore ready to take a sharp correction down to its final medium-term cycle bottom. When that happens, the DOW and S&P 500 will also fall (to a moderate sub-cycle correction if they are new cycles or a sharp and deeper final correction - like the NASDAQ - if they are older cycles). We decided to buy an inverse NASDAQ 100 - based fund or ETF because the NASDAQ is most likely ready to take its final sharp correction.
The second reason for our trade on Tuesday was timing. It is very late in the NASDAQ's cycle, and a final top is due (even overdue). Furthermore, Tuesday was near the end of a reversal zone (Aug. 12-19) so it was ripe for that top and reversal down. Finally, both the S&P 500 and NASDAQ were making new all-time highs while the DOW remained stubbornly below its all-time high (from February). This was (is) a strong intermarket bearish divergence signal.
It appears our timing was good (so far) as today the broad stock market took a nose dive after rallying briefly in the first hour of trading (very bearish behavior). This could be the start of a significant correction. If not, and these indices push higher Thursday and Friday, we could see another high in yet another reversal zone coming up next week (Aug. 25 - Sept. 3). We have a very tight stop loss for our trade based on a close above 11.500 in the NASDAQ 100 (Sept. contract chart - not the regular NASDAQ composite index we usually follow) which should give us a very minimal loss should the markets rally and "whipsaw" us out of our trade again. Holding my short position in the NASDAQ.
Last week gold and silver finally took the sharp correction we had been anticipating for some time. Both metals dropped into our target zones on Wednesday and then snapped back up. I thought that maybe we had missed a good buy spot, but today gold and silver prices are down sharply again so maybe the bottom isn't in yet. this market is very volatile right now so we need to be careful in our trading - especially with silver. If prices are going lower, we could see a bottom in our next reversal zone next week (Aug. 12-19). Let's stay on the sidelines for now.