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Wednesday, May 24, 2017

Market update 5/24/2017 - Outlook for the Summer

My outlook for the summer is pretty drab, but don't become complacent...

We continue to see stocks drift sideways in a range, and that trend is likely to continue into the summer.

The smart money took profits in March, and we continue to see every rally sold. It's hard to say when we'll see the rug pulled out, as summer usually brings with it low volume, and low volatility. Maybe we see another August surprise, like we saw in 2015? Not even Nostradamus, gave timelines for his his dire predictions...

One thing is certain: The longer this correction takes the higher the 200 day ma rises, as seen on the Dow chart below, and even if the market were to correct 1000 points tomorrow, the buy target is only a slight shakeout, below the DOW 20,000 level, which would no doubt set up for another rally into the end of the year.

2 weeks back; when I started composing this update: I found certain stocks (quality names) being dumped - stocks which had recently made new all time highs - while certain other stocks continue to be pressed ever-higher. This balancing gives the appearance that everything is fine, when everything is obviously not fine.

The Dow chart - this is a simplified version that anyone can understand. If you follow me on Twitter you may have seen we tweet out a similar chart showing a extended wave 4 triangle, concluding with the same target, or maybe slightly lower, around the 19,500 level. That seems more likely, than a sudden crash, considering that the $VIX remains trapped in a range.

Even though I'm only calling for a 1000 point correction on the Dow, don't become complacent this summer. If the $VIX were to break out above our line in the sand, all hell will certainly break loose, and all bets will be off the table. If you watched my latest interview with Dale Pinkert @ForexStopHunter, you should know exactly where that red line is. If you don't know where the line in the sand is, you haven't been paying attention, and have some homework to do. Find that interview linked in the left side menu.

Short term: The $VIX is oversold, and may remain that way going into the Memorial day holiday, but the market may also consolidate lower.  

The $NYSE trading in a smaller range, and that trend is likely to continue for the time being. I don't see it breaking out, or crashing.  

Follow me on twitter @3Xtrades 

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