Continued Consolidation in a Dominant Long Term Bull Market
by Antonis Benis, on May 14, 2019 3:29:08 PM
Dow Jones Futures
Yesterday’s (May 13, 2019), news related, selloff in the stock markets may have appeared shocking to most of the traders/investors. However, it may also have produced a temporary low in the markets; a, short term, hard oversold condition in a dominant uptrend. TD daily sequential buy setup @ 7 today. Expect a bounce that could last until late next week. Short term, “brave” traders could go long or cover their shorts; the better, less risky trade should be to wait and sell the expected rally. (see chart 1).
German DAX has a similar technical picture, tops and bottoms with the US indices, however underperforms them. DAX appears to have found support at a very obvious trendline from the late December major low. (see chart 2), which is -most of the times- a warning that lower prices are ahead once the bounce is complete.
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Cycles (see chart 3) suggest a significant bottom in the first part of June, followed by a rally into mid-July and renewed weakness until late August 2019. From there, at the latest, the consolidation that started in January 2018 should come to an end; expect a very strong rally until January 2020 before another correction takes place. On the chart (S&P 500), the green line is long term while the red line is shorter term cycles. Please, note that cycles are all about trend changes, not about the magnitude of the moves.
Crude oil is also at support, expect a bounce. Longer term, a good support level is @ 58,02/58,27 (see chart 4)
Bottomline: Stock markets are still going through a period of consolidation in a dominant long term bull market. While the bottom of this consolidation must be the December major low, a secondary low should be due this summer (June or August), that should be a major buying opportunity.