Both the S&P 500 and the DOW are showing very clear patterns, according to Dow Theory, that a correction has begun. This may not be the “Big One” yet, but we have a very high probability of at least a minor pullback before another move up begins. In the video, I walk through the pattern on charts and explain in more detail.
Here are the key levels to watch:
S&P 500: Taking out the previous low of $2,322.25 will signal strong evidence of continued movement down into the Fibonacci retracement zone with a mid-point of ~$2,240.
DOW: Taking out the previous low of $20,412.80 will signal strong evidence of continued movement down into the Fibonacci retracement zone with a mid-point of ~$19,532.
We have a moderate number of planned economic reports coming out next week, notably; Housing starts Tuesday before the open, Jobless claims Thursday and then Existing Home Sales on Friday.
The bigger planned news is “Earnings Rush” as Q1 reporting heats up. Several big names such as; Netflix, Bank of America, IBM, Qualcomm, eBay, General Electric and United Airlines are scheduled to report. As we have previously noted, the run up in the first three months of this year are based on expectations, not economics. Expectations are high, and any hint of weakness in earnings could trigger the downward move that the technical indicators are signaling.
Gold is continuing its bullish run and we expect that to continue. There is no evidence of this impulsive move losing momentum or pulling back. We are still long Gold and are staying with it.
Oil is stuck in a very wide sideways channel and is volatile without clear direction. We are staying away from Oil trades until some order and direction returns to this market. If we do break through some key levels and further evidence emerges for a market pullback, I will send out a mid-week update.
Increasing volatility will likely present some great trading opportunities.
As always, be sure to use strict Risk Control and keep your winners big and losers small.
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