Stock Market Sell Signals II: May 3 Divergent Peak Projects Sharper Sell-off; Multi-Week Sell Signal in Force. What Would Confirm Multi-Month Top?
Stock Market Sell Signals II: May 3 Divergent Peak Projects Sharper Sell-off; Multi-Week Sell Signal in Force. What Would Confirm Multi-Month Top?
05/08/19 Weekly Re-Lay Alert: The China Syndrome – “Exactly 40 years after the movie of that name (dealing with a potential nuclear meltdown), the markets are confronted with a different kind of China Syndrome – one that involves the potential for a trade war meltdown.
[Not to be lost in that discussion, two weeks after the China Syndrome was released in 1979, the Three Mile Island nuclear disaster occurred. Is it ironic that a pair of nuclear challenges – Iran and North Korea – are now injecting uncertainty into the markets, one 40-Year Cycle later?]
If one were to rely on the latest rhetoric, it would appear the trade war is about to be ramped up… dramatically. However, the rhetoric rarely reflects reality in this administration… so there is still some uncertainty. That does NOT mean the tariffs will not rise to 25% on Friday or that the trade war will not be escalated… but the majority of the rhetoric is usually for negotiating.
So, where does that leave traders?
Stock Indices initially sold off after peaking in late-April/early-May 2019 – the time that has been deemed most likely for an intermediate peak, and potentially the high for all of 2019.
This is fulfilling several short-term indicators, including the April 26 weekly 2 Close Reversal sell signal in the Transports. Corroborated by its daily trend and daily 21 MAC, that projected a 1 – 3 week decline that is now in its second week.
The Transports quickly validated that April 26 signal, by rebounding for two days and generating two neutral signals against their new daily downtrends – as they surged to their daily LHR and held on May 3. That signaled a secondary top, which has been confirmed.
Other indexes have spiked down to short-term extremes – placing them at pivotal crossroads. The S+P 500 has had its latest four weekly HLS levels (extreme weekly downside targets) at 2856 – 2875/ESM, with its current one at 2860/ESM. It just spiked down to 2862/ESM while turning its daily trend down (and closing below its now-reversing daily 21 Low MAC). It also tested its previous peak from March ’19 (2866/ESM) – a key level of intermediate resistance turned into support.
The S+P would need to give a daily close below 2860/ESM to elevate this latest sell-off to a higher magnitude. Until then, a reactive 1 – 3 day bounce is unfolding. The DJIA & NQM have similarly spiked down to the convergence of their latest four weekly HLS levels, but have not quite reached this week’s specific HLS (25,665/DJIA & 7485/NQM). The DJIA is also spiking below its monthly HLS for May.
Most indexes have turned their daily trends and intra-month trends down, reinforcing the potential for some additional downside. The paradox is that they have just tested monthly support – the primary price objective for that trend signal. That reinforces that equities have suffered an initial quick sell-off but need to close below recent lows to escalate this to something greater…
On an intermediate basis, stock indexes need to give weekly closes below 26,285/DJIA, 2897/ESM & 7581/NQM to neutralize their weekly uptrends and generate the first intermediate sign of a developing top.”
Multiple indexes turn daily trends down while generating a monthly trend sell signal in early-May. Stocks have entered a dangerous period when a multi-month peak has been forecast after precisely fulfilling late-2018 forecast for a rally into April/May 2019 and back up toward their Sept./Oct. ’18 highs. Daily & weekly cycles peaked on April 22 – May 3 and are corroborating that May 2019 begins a precarious period for equity (and energy) markets! Watch for initial sell-off.
Refer to latest Weekly Re-Lay & INSIIDE Track publications for additional details and/or related trading strategies.