July 3, 2020
Broader Market Review
The Dow, S&P 500 and Nasdaq have all drifted down and reversed higher from the Entry Zones I shared with you two weeks ago. The Nasdaq bottomed exactly where and when I described and ripped higher by 7% while the Dow and S&P 500 gained about 4% from the projected reversal zones.
The Dow and S&P 500 have strong overhead resistance (selling pressure) at both the yellow Major Resistance line and the descending blue line resistance level. You can see the recent rejection at Major Resistance for both the Dow and S&P 500. Nasdaq, on the other hand, continues to make new highs, however, a reversal lower is likely around 10,700 towards the middle of July.
If we continue to grind up I would look to the Exit Zones for profit taking/risk reduction. If we trade lower I would look to the Entry Zones for initiating or adding positions. We could very well be at the beginning of a range trading market bracketed by the narrowing blue lines forming a compressing wedge into September/October and the election.
Considering we are entering seasonal summer weakness, on approach to the election and a high probability period of wide summer chop I am currently beginning to trim positions on the way up as I’m more concerned with raising cash and reducing risk than I am with what I consider limited near term upside. Raising cash will allow me to take advantage of lower prices should we get down into those lower Entry Zones.
Nasdaq futures..(/NQ)
Dow futures..(/YM)
S&P 500 (/ES)
I hope you had a wonderful weekend celebrating our freedom.
Don