FOR MONDAY: (4/24) Stocks ended softer ahead of the weekend and will turn their attention to next week’s budget talks and government funding deadline on Friday. Cycles still point towards a mild recovery in stocks and continued rebound in the dollar. Gold should be backing off after Friday’s surprise recovery. Crude may be overdone on the downside and we may adjust our cover target for our short position.

TRADING RECOMMENDATION: Wait for morning comments.

S&P ANALYSIS FOR FRIDAY: (4/24) We needed to be more aggressive Friday with our day trade sell rec at 2353 and projections to 2343. Budget talks and the threat of Friday’s government funding deadline will dominate early and should keep the market on the defensive. Had a bias toward lower prices on Friday but were in no rush to take a position over the weekend. Cycles suggest higher prices Sunday and Monday. Key support remains in the balance near 2349, as it was last week

NEAR TERM: The most likely pattern to continue would be congestion between 2330-2360 and since the market is getting closer to the upper end of the range the next play may be the market is closer to the lower end of the range. A bullish breakout could happen like the Gulf War rally in that if we do something major in Korea and are successful, the market will feel resolution and rally. That is very possible. Anything more complicated and a break of 2300 would start negating chances for a divergent high. For now we can play the ranges but traders have to be alert for newsflow. A story last week had North Korea probably not capable of another nuclear test until early May.

OVERALL: It’s possible that if over the next week, 2318 does not come out then the divergent high to 2417 will manifest and NQ has clearly needed new highs and is stronger for a May high. We do think war cycles are tense through next Tuesday and the chance of someone pulling the trigger is very possible and whether the market will like it or not will depend on how many defense stocks you have.

SHORT TERM: We have seen enough of these sucker-punch situations to not hold out hope for 2302. If we’re going to get another push lower, we may see 2357.50 first. Without the close below 2318, the market still has some ways to make divergent highs to 2412-17 into May and that may not be off the table. The market thinks war is good for the economy usually. The surprise will come if China or Russia get more active in the fray.

LONGER TERM: (3/27) Still can’t officially say we have a weekly chart sell signal until 2300 comes out on a closing basis. It may be a while before we know if a weekly chart top is in. Expecting a May high and a new NQ high unless NQ takes out 5200–and if that’s the case, we’ll get a divergent S & P high to maybe 2420. Expecting that 2150 is the most likely first downward target into June if the market can close below 2300.

CYCLES OVERVIEW: Higher Sunday night; sideways to higher Monday; higher April 25.
(Note: cycles for the US and world are complicated and tense into April 26 and could override normal stock market cycles.)

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