In last Tuesday's blog on the broad stock market I wrote:
" Because. this is a holiday week (Thanksgiving in the U.S. on Thursday), I think there's a good chance the S&P 500 and NASDAQ will make new highs (equities are usually bullish into holidays), and we may have to look for another bearish divergence signal early next week."
All three indices did make new highs by Friday, but so far this week only the S&P 500 and NASDAQ are making new highs. We are therefore getting that intermarket bearish divergence signal this week. Last week's high in the DOW and Tuesday's highs in the S&P 500 and NASDAQ all fall within our last reversal zone (Nov. 24 - Dec. 1) so it looks like we are getting a reversal now from those tops. This could (should) be our first sub-cycle reversal in the young medium-term cycles of the DOW and S&P 500 that began with their lows on Oct. 30. If these cycles are bullish (they appear to be), a good target for a corrective low would be around 29,000 in the DOW and 3,545 in the S&P 500. If we see those targets this week or next (our next reversal zone is Dec. 3 - 14), we may consider going long for a possible rally to new all-time highs.
The NASDAQ 100's (E-mini, Dec. contract chart) current medium-term cycle began with its lows on Sept. 21 and Sept. 24 (double bottom) so its cycle is a little older than those of the DOW and S&P 500. Nevertheless, a significant sub-cycle correction could be happening here as well. A good target would be around 11,500, but this index could even get as low as 11,200. As with the other two indices, we will watch this range for a possible buy spot.
I should mention that any long position we might establish now would probably be a short-term trade as the FINAL tops to these medium-term cycles will likely be followed by a very severe correction (which we will want to sell short).
On the sidelines of the broad stock market for now.