Summary: Continue to maintain a LONG position.
With the US Government shut down, threats of the first ever default and politicians pointing fingers at each other, it has been quite a boring week for the stock market with the Dow down about 250 points (so far) for the week and about 700 points over the last 3 trading weeks.
Let’s attribute that to normal market fluctuations. However, things are starting to get interesting. It is possible that the fundamental and the technical factors are indeed lining up for the confirmation I have been seeking for so long. Please allow me to explain.
The market has opened up a bunch of gap downs over the last 3 weeks. Some of them being as high as 15,600. That means the market will have to go back up in order to close them. As I have mentioned before, I believe the government shut down should be short lived. There are already signs that Republicans are starting to capitulate. If that happens I would expect a short term relief rally that should push stocks higher to close all the gaps.
That COULD be our point of inflection. If the market reverses itself at that point and continues lower by breaking recent lows, I would most likely welcome you to the beginning of the bear market I have been predicting. For now, we continue to wait for our confirmations.
As such and for the time being I continue to maintain my “HOLD” position for the DOW if you are long.
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