IMO, the averages may be setting up for a peak on Monday, May 21. I see bearish MACD divergences on the COMPX and NDX daily charts and, potentially, the hourly charts as well. I also see some bearish divergences forming on certain stochastics counts.
From a wave perspective, it appears to me that the NDX and COMPX are completing wave C of the corrections off the bottom (currently in wave 3 of 5 of C of 4, to be specific). As for the DJIA, I believe it is in wave 3 of 5 of 1 off the March low.
I feel the COMPX may rally about 50 points or so Monday and then begin a move down to new lows (probably taking about 4-8 weeks) to complete 5 waves down. At the same time, I would look for the DJIA to retrace a portion of its rally, and I'd be looking at fib retracement levels as possible targets.
Note that a 50 point rally would take the COMPX to the 2250 resistance level, which is also near the upper Bollinger Band.
Also be aware that these divergences can be overcome by powerful rallies, so there is always a risk in playing them for a reversal. |
