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Today we will be covering...

• Market Summary

• Chart of the Week

• Technical Analysis

• Liquidity

• Sentiment

• Cycle Analysis of Major Indexes

• EW Analysis of Major Indexes

• VIX/VXX Update

• Forex

• Bonds

Market Summary

The stock market indexes continued their strength post-FED, which is somewhat unusual but started to correct on Thursday-Friday. Indexes are completing the last wiggles up and some may have already topped. SPX, NDX, and DJI satisfied or exceeded the cycle targets I detected. They also have very short-term cycle projections down. So topping or topped is still a dilemma, but I am looking lower, one more high or not.

Perhaps NDX and cryptocurrencies may give risk-off clues on Sunday evening and Monday morning in the futures.

Repeat from last week:

The short-term analysis is becoming more in line with the intermediate—and long-term analyses, which suggests a reversal is due. The lightning could strike unexpectedly around the tops.

My longer-term expectations do not change. I will repeat from the weekend report: “Despite the market's resiliency and FOMO, I expect a correction in the next 2-4 months, initially.

Market data as of close on 22 Mar. 2024.

Chart of the Week

Decoupling of US & Chinese tech stocks. The gap will close. I think I know how.

Lesson – Price Projections Method #1

Before we delve into the actual lesson, let’s observe some technical characteristic of the NDX chart.

If my EW count is correct, NDX is potentially completing a 5-wave EW structure from the Oct’23 low with the blue ending diagonal (ED), a terminal pattern.

At the same NDX exhibits negative divergences in RSI and MACD. Very fitting for a top.

Now, let me explain how we could project the final price target for a financial instrument from about the middle of the move.

1. Plot multiple centered moving averages (CMAs). In this example, I used CMAs of length 8, 16, 32, 64, and 128. Most charting software packages have the CMA capability. Consider a shorter bar distance, e.g., 4-hour bars, to get an earlier peak estimate;

2. Determine the intersection of CMAs, the Focal Point (FP);

3. Determine the distance between the FP and the low of significance;

4. Add that distance to the level of the FP. That’s your price target;

5. Add X+/-%, typically 10% will do it, to the determined price target to get the target range, the light blue box.

Are you interested in seeing more Lesson Segments?

Technical Analysis

We looked at Google’s doji the other day. Below is a potential Cup & Handle (C&H) pattern in GOOGL, projecting about 30% higher. Can Google do it?

Liquidity

Consumer liquidity is not good. Personal Interest Payments in US as a % of Disposable Income has risen faster than at any time over the last 70 years.

Sentiment

The most bullish positioning of small speculators on the record cannot end up well.

The ratio of Techs to S&P 500 is extreme, even though S&P 500 includes a good deal of tech. I showed before similar charts for Techs vs IWM and DJI. If reversion to the mean happens like the last two times, and I am confident it will, Tech investors will suffer some pain.

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