Here's what the 'pros' I follow say --
We are potentially in the midst of a '5th wave' of an A wave. That means basically this current leg down is the final leg of the larger ABC total correction of the entire market cycle. That means the 'B' wave correction could be that large rally we get this year going into the late summer.
The potential projections on this decline is on the SPX around 650 to 700. That's just a fibonacci projection. 5th waves however are many times 'truncated', or just flat. In other words they don't conform to the overall trend and many times don't actually break the 3rd wave lows. The reason being that the smart money smells the end to the overall wave count down and know this time they are safe in their buys. So, they front run it in larger volume. That's why today's volume was actually very low.
BRCM normally trades for example around 14 mill shares a day. Today they did only 10. The Q's normally around 190 mil a day, today around 130 mill. So, the low volume is suggesting possible hedge fund redemptions with no bids by the big boys.
So, that's actually very positive because there's no panic selling. Valuations are very positive and because we're most likely in this 5th wave, the big boys this time will come in full force with 'all in' positions which will propell the short squeeze to an amazing level. A 'B' wave rally would project at least 50% of the decline of the 'A' wave, or 50% of the decline from (rounded) 1500 to 750, or around 1100ish.
60% of most bull market's gains, no matter cyclical or secular, happen in the first leg, so don't be short here because even if the market does fall to say SPX 700, you're better off being positioned long here averaging in on the downside.
A year ago, the financials made up around 30% of the SPX. Today, they are less than 10% with XOM making up almost that alone. So, what moves the SPX today is going to be tech and commodities. When oil starts heading back up, the SPX will go with it in a big way. Keep an eye on RIG, HAL, XOM, and CVX for your clues as to the direction of the market. Actually also BNI because they report this week and Buffet just bought 4 mill more shares this week. When the railroads start heading back up, you know the market is also going for the ride.
No longer is the 'banks lead' thing true. Just like after 2000, the SPX rotated the semi stocks out of the majority of the weighting and moved in the banks to lead. Those that make those decisions as to what sector gets the most weighting in the SPX at any given time are way ahead of the game. Take this latest re-allocation and adjustment as a sign of things to come. Oil much higher soon along with commodities.
Those only go up if the economy also gets stronger.
