Stock Market Outlook

Sell in May & Go Away?

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Market Summary

· We discussed the famous “Sell in May and Go Away” seasonality pattern a few weeks ago. I personally like the Sell in May pattern, but May is a 31-day month, and the devil is in the details, i.e., when exactly to sell.

· What is next?

· On Tuesday morning, I published that I expected a correction to start very soon based on various “tea leaves.” The reversal occurred on Tuesday exactly at the technical level I expected.

· We got that correction, but it was shallow and in 3 waves, which allows for continuation to up or down.

· Shorter cycles up to 40D have a down bias, while the intermediate-term cycles, such as 80D and 20W, have an up bias into June.

· Correspondingly, we may still see twists and turns until June before a bigger correction commences.

· It is still a good strategy to sell the rips (RIPs), i.e., raise cash. 🤑 

· My intermediate- and long-term views have not changed. They are bearish. 👇️ 

Market data as of close on 8 May 2024.

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I have not forgotten Magnificent 7. They are important for NDX and the overall market direction. Let’s check how some of them are doing.

META Technical Analysis

· It looks like META is aiming to close the earnings release gap fully.

· Incidentally, a full gap closure coincides with the common 61.8% Fibonacci retrace level.

· Also, 50 DMD MA is heading to that level, so the confluence level of these 3 resistances, about 483, would be a nice target for wave (b).

· After that, META should decline in wave (c) and find support at the 200D MA, which may start to bend down within a couple of weeks.

· Assuming that wave (b) completes at the 61.8 Fibonacci level, the ideal target for wave (c) will be at (c)=(a), about 377, which should also be close to the 200D MA.

META Cycles

· The cycles suggest a negative bias for META into October, at least. But we should allow for bounces along the way, like the one in progress.

SMH Follow Up

· I repeatedly pointed out that the semiconductors sector is important for the overall market. At least partly because it includes chip companies important for AI, such as NDVA, INTC, QCOM, TSM, etc.

· Semiconductor sector ETF, SMH, paused today at the 61.8% Fibonacci retrace level, which may be a stopping point for (b).

· However, another target for (b) would be where c=a, which coincides with the 78.6% Fibonacci level and near the top of the resistance region. Thus, allow for some additional up in SMH.

 To have maximum benefit from the newsletter, it is essential to follow me on X,  where I often post important and timely charts between newsletters.

 Yesterday morning, I posted the chart below on X just before the bounce in ES started, but failed to load it in the blog email properly. But at least subscribers who follow me on X could see it on time.

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