Stocks Re-Testing Highs: Break-out in Dark Window Imminent?
This correction and rebound since early May have been a doozy, as you would expect at such a critical time in this rare Dark Window scenario: Great final blow-off rally, then crash of a lifetime.
You rarely know the truth in the first wave down, like we saw in May, as it will be more normal. In this case, the correction was about 10%, like the one we got in the first month of the October to December deeper correction last year. It’s after the first rebound that you start to see if the correction is going to get more serious, which it did a bit as I was making my last update on June 10.
Here’s an update to the correction pattern. The potential sharper breakdown in the deeper correction scenario 2 did not materialize in June as it should have.
The continued rebound has gone back up and re-tested the highs. That means it’s much more likely this correction is over and the markets are positioning to break up into the 3rd wave of this final Dark Window thrust up since late December.
In my previous update, I warned that if we did keep rallying back to the highs, then buying on a pullback may be warranted as my target for the Nasdaq is still 10,000 by late this year or early next year.
However, there is one reason to still be a bit cautious here…
There is a potential megaphone pattern in the Dow and S&P 500, with higher highs and lower lows since the blow-off-like top in January 2018.
This pattern could see a near-term peak at slight new highs around 27,300 on the Dow and 3,020 on the S&P 500 very near term, while the Nasdaq merely re-tests its early May highs.
Then we could see the beginning of a new correction that would project down to around 20,000 on the Dow and as low as 5,700 – the line in the sand—for the Nasdaq. That’s a drop of more than 27%.
Even in that case, the Dark Window rally would still be in play. And following that next correction would be a much more opportune time for adding to stock positions.
So, if you’re not following one of our investment research services like Lee’s Instant Income Alert, Rodney’s Fortune Hunter, Charles’ “Flex-10” Peak Profits, or Adam’s Cycle 9 Alert, for now I suggest you wait to see if the markets pull back from these target levels and then re-evaluate.
Again, a new correction pattern could start from here. But if it doesn’t, add to positions if we get a clear break above this third e-wave megaphone top.
I wouldn’t call this a breakout yet, given this potential megaphone pattern, and it won’t take too long or too much of an advance to create a clearer break-out pattern or not. Either way, the Dark Window scenario looks still to be very much in play.