Finally, there was some volatility in stocks, last week. The moves on August 10th, 2017 triggered some panic selling as more short term selling continued. This will put in a “washout low” in prices as I have been discussing over the past couple of weeks. I am expecting further rises in the VIX which will trigger a cascade of selling. This is a gauge which both investors and traders should watch very closely in the coming days.
Correction Week!
The Dow Jones, SPX and NASDAQ are in a “consolidation mode”. This pattern will lead the indexes to further declines over the next couple of weeks. There is NO SELL SIGNAL OR REVERSAL SIGNAL! After this correction finishes, the markets will breakout into highs which have never before been seen. I expect to see the Dow Jones reach at least 24,000 sometime during the first half of 2018.
Global Central Banks will continue to not only provide support but will increase liquidity in the marketplace. They will continue indefinitely to support asset prices by increasing accommodating policies.
Central banks buying stocks helps to maintain the “illusion” that their economic plan is working. At the beginning of “The Great Financial Crisis of 2017”, they entered into the stock markets to rescue at risk corporations. Afterwards, their efforts shifted to propping up the entire stock market through major purchases of the largest companies.
A classic sign of a market in correction is when its’ breadth (on the SPX) continues to diverge from its’ price. The Advance – Decline indicator is declining very quickly. This is a very important warning sign!
The “Dog Days Of August” Have Arrived!
Momentum oscillators are very overbought and turning down. It is time to take your profits off the table if you have not done so already!
The U.S. dollar is currently trying to make a turn. If it fails to do so, and declines, I would buy GLD @ $124.00. Otherwise, please wait while it channels down to the $115.00 area.
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