Tuesday, October 11, 2016

Stock Market's Next Big Move

Overall the market remains in bull market. Today's decline was a small part and would need to persist for few weeks before the underlying internals switch. As of now, the internals are in very good shape.

Bull Case:
Today's decline can be read as the last decline as part of the recent ~3 month long correction. We have also seen a lot of bearish articles being published in the financial media, which suggests that the trend is probably near exhaustion.

With earnings right around the corner, market might have completed a complex correction pattern over last few months. This correction was soon complicated and choppy that it pushed out many market participants.

The head and shoulders pattern in all the indices remains active (shown below)

Once the market breaks above 2170, it will signal the start of a new rally phase

Bear Case:
If the market is truly in for a bigger decline, it won't be able to rally above 2160. Instead, it will decline after a minor rally. This decline could last for couple of weeks and could be supported by the earnings reports.

Market Classification Model:
MCM remains bullish and our proprietary portfolio remains long Stocks along with other investments. So unlike financial media, we don't foresee major correction in the near future.

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