The major stock market indexes rebounded sharply today after setting new price lows for this current correction just yesterday. While the strong snap-back rally in response to Fed Chairman Powell’s dovish comments this morning was encouraging, officially today was only day 1 of a new rally attempt. Unfortunately, todays move came with lower total trading volume than the previous days rout. As such, our Current Market Outlook remains “Market in Correction” with a “red“ light.
On May 7th we wrote… “All in all, the trend is still up but it is tiring and is under growing selling pressure. A correction of 3-5%, even up to 10%, is not out of the question and would probably act as a refresher for the current rally. We have raised some cash over the past week in a few of our strategies and will let the market dictate if more is necessary.” (Note: since the close of that day the S&P500 has fallen -5.40% and the Nasdaq -8.40% through yesterdays low.) FYI: The previous 2 week old rally attempt officially failed last week (05/29) by undercutting the original low (05/13).
After yesterdays massive technology stock capitulation, the chart patterns of the main indexes are now set up for the possibility of the long expected “higher-low” sequence we began writing about in January. These major patterns take time to develop, but once they do they are hard to reverse. On a positive note, we received our first green signal from one of our “core 4” technical indicators with a climatic numerical reading on Friday (05/31). Additionally, yesterday (06/03) featured good technical action via positive divergences in the advance/decline readings on the S&P500 and Nasdaq even as the indexes tanked.
If yesterdays price lows on the S&P500 and the Nasdaq hold for more than a few days, the bulls should become more emboldened. If those lows give way quickly, then lower prices will likely follow. A typical pattern to watch for, if a “higher-low” bottom is in, is 3 straight up days (or 3 out of 4) followed by a pause (pullback) for a day or two, then followed by a significant blast higher on big volume somewhere in the next 3-4 trading days.
Please note our daily study of the “math of the market” is based on the technical internals of supply & demand and our system tracks the “footprints of money”. Our job is not to make predictions, but rather to interpret the markets numbers and be aligned with its current trend. The mathematical internal indicators of our proprietary 3-stage sell-signal discipline are objective and factor out the noise. Over the next two weeks the market will likely decide if the “higher low” sequence (now seen on the index charts) will win and prices soar higher, or if the old adage “sell in May & go away” will prevail and precede a significant sell-off into the fall. Either way we will be ready. Will you? Stay tuned.
Have a Triumphant day! ®
The information in this article is based on data obtained from recognized services and sources and is believed to be reliable. Any opinions, projections or recommendations in this report are subject to change without notice and are not intended as individual investment advice. Not to be used as legal or tax advice. ©2019 Triumphant Portfolio Management, LLC.