Stock Market Outlook

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· What did Janet Yellen say last week? Long story short, as Barron’s summarized it, something like this: No Rate Cuts? No Worries. Uncle Sam Has Dough to Disburse. 🤑 

· Stock market indexes are approaching and/or heading to the price targets I discussed in the premium content and updated today.

· Although CNN’s overall Fear & Greed indicator is in the fear territory, they have generally been selling volatility instruments, e.g. VXX, which hit the upper part of our target region. 😨 

· A pullback is possible next week. However, cycles can support additional upside probing after that.

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

· My intermediate- and long-term views have not changed.

Speaking of Janet Yellen. . .

This strikes me as

Market data as of close on 3 May 2024.

SOX/SMH Revisited

· We pointed several times how the semiconductor index (SOX ) is important for the overall market.

· The chart below shows the dynamic cycle composite for SMH, an ETF for the semiconductors.

· The cycle composite shows that SMH is bouncing from the 40D cycle trough. The bounce can continue for a few more weeks, but then down again.

· The SOX’s price has bounced lately between the 50D and 100D MAs.

· The very bearish EW count that I speculated about a couple of weeks ago is invalidated by this strong bounce. The wave structure down counts best as an (a)-(b)-(c).

· That does not change the overall bearish picture to bullish. I expect this bounce to be an a-b-c structure for (b), as shown in the chart.

· SOX broke above the gray channel, which supports still higher prices. This would imply that SOX would penetrate the 50D MA from below. It is not unusual for MA resistances to be broken for a few days and then reversed.

· An ideal target for (b) would be where c=a, at the 78.6% fib retrace level, and the top of the red resistance region.

Emerging Markets vs US Equities

· Emerging Markets (EMs) equity prices relative to US equity price levels are at a 50-year low.

· Could this ratio go lower? Certainly, but it reveals at least a relative potential in EM.

· Although we looked before at China and India, we should, at some point, take a closer look at the broader EM index.

·         On Wednesday, we suggested that the relatively strong 10D cycle should turn up. Indeed, the 10D cycle obliged and produced a strong bounce in SPX.

The 10D cycle can have 2-3 TDs before peaking. However, the 20D and 40D cycles are looking down and may cause. . .

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