My primary focus in the last few weeks has been to interpret the present correction in an attempt to determine the likely outcome for markets. This will continue to be the case until we have the clearest idea of what to expect.

We have the major setback in the China trade deal, rising tensions over Iran, and friction between Trump and the democrats… yet markets continue to act as though they’re jacked up on crack and itching to shoot up into the “Dark Window” finale I’ve been forecasting.

All of this is political, which makes it less predictable, so it’s best to let market patterns steer us towards a clearer picture.

Two weeks ago, I outlined two scenarios…

The first sees a shallow correction in the Nasdaq of 8% to 11% and then moves into the next of two sharp waves up towards 10,000 by late September or so this year. That correction should be over by early to mid-June.

The second sees a deeper correction and a retest of the December lows… maybe even slight new lows… and could retest the line in the sand of 2,350 for the S&P 500 and even 5,600 for the Nasdaq. Then it would launch towards more like 9,400 by January or so of next year. This even more opportune scenario should be over by late July or so and look more like the October to December correction in late 2018.

In this chart, you can see the correlation with that recent deeper correction…

In the first three weeks of correction, this down trend has been a bit less than the October to December one. It’s leaning a bit more towards scenario #1, the shallower correction. But it started to head down sharply again on Thursday and could still move towards scenario #2. That should happen in the next week or two, if it’s going to.

If the Nasdaq can hold above 7,320 by the end of the first week in June, then scenario #1 will be more favored. That could trigger a strong buy signal.

If it drops down more towards 7,000, then it’s favoring scenario #2, and we should wait to add to stock positions for the final blow-off rally.

Scenario #1 more favors investors already strongly in stocks with less downside pain to go through. Scenario #2 favors people that have more powder dry and can add at lower prices.

I’ll keep you updated as this continues to be the key short-term issue, as do key geopolitical tensions.