Market Direction Mid Week Update

Market Direction: BULLISH alert issued 6/2/2016

Concerted selling in the Nasdaq Composite reared its head for the first time in five weeks Tuesday, with most market participants little fazed by the proceedings. Crude oil, once again below $40, poses an obstacle for a further move forward.

If this is the beginning of a 3%-5% Nasdaq reaction, or something more, the question becomes how far down will a retracement go. A good rule of thumb says that a normal retracement of an advance is between one-third and two-thirds of the advance.

This roughly coincides with the 38.2% and 61.8% pullback levels related to Fibonacci price retracements.

A pullback in the general market would give some of the overheated growth glamours a chance to digest their recent run-ups. In so doing, the resulting pullbacks may provide intermediate-term speculators with fresh entrance points.

No one should be surprised if the averages embark on a 3%-5% reaction following a Nasdaq advance of 13.7%. This should be embraced. It would give extended growth titles a chance to consolidate recent gains and perhaps build new bases with fresh buy points.

 

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The all-time highs since our initial recommendation to go LONG this market. Here is how the markets have performed:

Stock Market Direction Recommendation (6/2/2016)
Dow	up 783.45 points a 4.39% gain	7/20/16
Nasdaq	up 227.77 points a 4.58% gain	8/1/16
S&P 500	up 73.03 points a 3.47% gain	8/1/16

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