Stock Market Outlook

Is the “Chinese Dragon” Going to Fly?

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Market Summary

What has happened?

· After spending 5 days in a tight range during a 10-day cycle down phase, the stock market gave in the afternoon. The positive vibes from NVDA earning just gave morning pop.

· This pop and drop produced a bearish engulfing, engulfing the previous five trading days, on the daily SPX chart. Generally a bearish reversal pattern, but not always a start of a bearish trend.

· More worrisome is 5:1 decliners to advancers on the NYSE.

· I expected a drop for a fourth wave pullback, but not necessarily with such bearish vibes.

What is next?

·         It would be ideal that when indexes reach existing targets, about 2-3+/-% higher, CNN’s Fear & Greed gets into the extreme greed territory.

·         SPX, NDX, and DJI are not far from a top of significance, neither in time (give it a week or tow) nor price.

·         Then I expect a bigger correction to commence by mid-June or so.

It is still a good strategy to sell the rips (RIPs), i.e., raise cash, gradually, as we have been suggesting since December, especially since February-March.🤑 

·         Buying the dips (BTDs) becomes more risky as indexes approach targets.

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

Market data as of close on 23 May 2024.

Chinese Dragon Ready to Fly?

Emilia Clarke Hbo GIF by Game of Thrones

Gif by gameofthrones on Giphy

Is the “Chinese Dragon” ready to fly? I think not yet. But let’s examine the largest China ETF, KWEB.

· Since Jan-Feb lows, KWEB made three ways up, potentially corrective, unless five waves up develop.

· Since the daily cycle composite now suggests down, the recent peak was likely a B wave with a C wave target below Jan-Feb lows in mid-summer.

· The big question is whether KWEB bottomed in 2022. From the daily chart the answer is affirmative.

· However, on the weekly chart, the strongly dominant 3.5Y cycle is about to roll over and will not trough until late 2025.

· That can produce a new low for KWEB, but a new low or not, that time frame will be a good opportunity to jump on the KWEB train.

 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.

·  I posted yesterday another update, on X, when NDA reached the highest target.

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Cycle Analysis of Major Indexes

Let’s check time cycles for SPX. We have been talking about a complex top for a while due to intermediate-term cycles looking up and longer-term cycles looking down. . .

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