Stock Market Outlook

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The News Buzz

• Apple announced its long-awaited new artificial intelligence features, “Apple Intelligence,” including tools supported by OpenAI’s ChatGPT. These features promise to deliver personalized, safe, and deeply integrated technology into the iPhone maker’s software.

• A ‘generational opportunity’ could see Nvidia become 15% of the S&P 500, says MarketWatch.

• Elon Musk says it is ‘not cool’ that big Tesla shareholder opposes $56 billion pay package. 

• ‘This could be a concern.’ French stocks and bonds slide after Macron calls an unexpected election. Belgium’s prime minister resigns. Sholtz’s party and “Greens” slid down in German elections. The euro fell vs. the British pound and USD Monday after European politics turmoil.

• Elliott Management, a hedge fund led by Paul Singer, has announced its intention to shake up Southwest's leadership.

• NYC Landlord to Sell Office Building at Roughly 67% Discount.

Swing Trading Approach

Swing trading is a “speculative” trading strategy that aims to profit from price movements in a security's price (stocks, commodities, forex, etc.) over a period ranging from a few days to several weeks or several months. Swing traders focus on capturing profits from these "swings" in price movements to maximize the “speed of money.”

• Timeframe: Swing trading occupies a middle ground compared to long-term investing or day trading. Positions are held longer than day trades but not as long as typical buy-and-hold investment strategies.

• Technical Analysis: Swing traders rely heavily on technical analysis tools to identify trends, potential entry and exit points, and assess risk.

• Volatility Focus: Swing traders look for assets with some degree of price volatility, as these offer the potential for larger swings that can generate profits. However, excessive volatility can also lead to greater risk.

Main Swing Trading Strategies:

• Trend Following: Identifying and capitalizing on established upward or downward trends in price movement.

• Support and Resistance Levels: Buying near support levels (where the price tends to bounce back up) and selling near resistance levels (where the price tends to get rejected).

• Price Patterns: Recognizing and trading on recurring technical chart patterns that might signal potential trend reversals or continuations.

Important Considerations:

• Active Management: Swing trading requires active monitoring of market conditions and the chosen asset.

• Risk Management: Stop-loss orders are crucial to limit potential losses if the price movement goes against your trade.

• Psychology: Managing emotions and sticking to your trading plan are essential for success in swing trading.

• Fundamental Analysis: While technical analysis is a primary focus, some swing traders might also consider fundamental factors to support their trading decisions.

Swing Trading can be rewarding for active traders who can dedicate time to market analysis and risk management. BraVoCycles methodology combines cycles, EWT, and technical analysis and shines in swing trading. We provide some swing opportunities in the free newsletter and, much more frequently, in the premium newsletter, where we also track the status of identified opportunities.

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VALE – Cycle & EWT Analysis

• VALE has an interesting value potential and a swing trade eventually.

• Let us examine it in more detail, how I usually do it in the premium newsletter.

• The dominant cycle is 40W, as shown in the chart below. This cycle indicates that the 40W cycle in VALE should be forming a trough any time now.

• The same message is obtained by adding three additional cycles from the weekly chart (the 2^nd chart below).

• Do we automatically buy VALE here based on cycles only? The answer is negative.

• By examining the EW chart below, one can notice that VALE is breaking down from a triangle (wave B) in wave C of (B).

• The breaks from the triangles are “terminal” moves, but the question is where the move will be completed.

• Cycle projections using FLDs do not help, as the target range for VALE is too broad and can encompass multiple targets that could be identified by EWT.

• There are multiple potential targets from the EWT point of view. The three most prominent are (approximately) 10, 6.6, and 4-4.55.

• 10 would correspond to 61.8% fib retrace of (A) and C=0.5*A;

• 6.6 would correspond to 78.6% fib retrace of (A) and C=0.786*A;

• 4-4.5 would correspond to 88.7% fib retrace of (A) and C=A;

• All compliant with standard Fibonacci relationships. So, which one is it?

• Too early to say. To get an answer to that, I noticed that wave A was a 5-wave structure, and according to EWT, C shall be a 5-way structure.

• Thus, one should look for signs of a completed 5-wave structure into one of the above targets with positively diverging technical indicators and signs of a reversal before entering a swing trade.

• Patience, grasshopper! 

• My multi-pronged approach significantly improves the probability of successful swing trades and minimizes the probability of drawdowns.

• In my over 30 years of studying markets, I have not seen a single analyst that employs all of these methods jointly. 

Market Summary

As of close on 11 June 2024.

What Has Been

• No surprises today. The major indexes/averages advanced per my preferred view, which was discussed on Sunday in the premium newsletter.

  DJI was up 0.2%, S&P 500 rose 0.3% to 5360.79, and Nasdaq Composite rose 0.4% to finish at 17192.53. The latter two are gradually approaching the targets I posted several times.

  Rates on U.S. government debt ended higher again as traders focused on this week's Federal Reserve update and May's consumer-price index (CPI).

  May’s CPI and Wednesday's FOMC meeting may cause increased volatility mid-week.

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• I still expect major indexes/averages to push . . .

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