Stock Market - Struck by Lighting

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Today we will be covering...

• Market Summary

• NVDA Case Study

• Technical Analysis

• Let Us Know Why You Like BraVoCycles

• Cycle Analysis of Major Indexes

• EW Analysis of Major Indexes

• VIX/VXX Update

• Commodities - Energy

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Market Summary

Ouch, what a finish. In the last two hours, there has been a news-driven relentless selloff. I have warned multiple times in the last couple of months that raising cash in the topping region is a good strategy, as “lightning” can strike out of the blue. In just a few days, most indexes erased about 1.5 months’ worth of gains.

There was a lot of technical damage today: broken channel lines, bearish candles, bearish engulfings, shooting stars, spinning tops, …, in abundance in major stocks and indexes.

Although we have generally been expecting a top, the short-term analysis has prevented us from declaring it explicitly. Yesterday, we left it with a mixed message: DJI may have topped, while NDX may not have. They behaved accordingly today until the late selloff. Unfortunately, the message is almost the same today, although the probability of a top for all indexes increased.

The monkey wrench for the bearish case, along with April’s positive seasonality, is that 10/20D cycles are about to trough, possibly tomorrow, so a bounce of several days is possible. The question is how strong it will be. I presented bullish and bearish alternatives in the EW section in the premium content. It is still possible, as I mentioned yesterday, that some indexes may get to a new high while others will not.

Repeat from before:

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 4 Apr. 2024.

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NVDA Case Study

As I posted yesterday on X, NVDA, the leading AI stock, is a key stock for the semiconductor index (SOX), tech stocks, and the overall market. Let’s take a closer look at it.

After a bearish engulfing at the top of (v) and initial drop, NVDA bounced in a corrective three waves and made a spinning top for wave (ii). Then, it continued down and broke the 10D EMA and stayed below it for several days. I consider 10D EMA trend-defining for shorter-term time scales. The trend is down.

 I have the 20D cycle target to 803.5-833. Getting there in several days from now may initiate a series of waterfall projections down.

NVDA Seasonality is shown below. Remember that this is an average; it does not always play out that way. But the longer-term cycle composite I posted a month ago suggested a down bias this year. Further below is the cycle composite composed of just two dominant cycles of 81 and 196 trading days, nominal 20-week and 40-week cycles.

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Technical Analysis

SOX index, of which NVDA is a significant component, is abundant in bearish signs. Several days ago, I posted the extreme SOX over SPX ratio, which was even higher than at the 2000 stock market peak.

First, in terms of Elliott Wave Theory (EWT), we had five overlapping waves down for a leading diagonal (LD) for micro-1. This is followed by a corrective (A)-(B)-(C) for micro-2. So, at least another five waves down shall follow.

Second, we had a bearish engulfing at the high 2-3 weeks ago and a bearish shooting star candlestick at the top of micro-2. And today, we have another bearish engulfing. Bearish signs.

Third, after a few days above the 10D EMA, today's SOX reverted back below the 10D EMA with a big red candle. I consider that bearish.

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