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WALL STREET CRAPS MARKET OBSERVATIONS FOR JUNE 3, 2012

June 3rd, 2012

MARKET OBSERVATIONS FOR JUNE 3, 2012: The stock market has broken through its basing pattern and can be expected to start a new leg down in price. That should lead to another chance to bottom out during the second or third week of June.

The McClellan Summation Index continues to confirm the market correcting heading towards lower prices. We may even see some climatic panic in the near term which will lead to a big bounce and then a retest of the bottom. And while breadth and sentiment have been negative all through the month of May, the price of the Dow Jone Industrials has not dropped enough to create the kind of negative emotions that usually mark a tradable bottom.

The following market indicators show that Monday is probably not an ideal day for taking action:

For now, the best advice is to keep your powder dry on the sidelines and let the market set itself up for its next move up. The next move down could be nasty so patience is the name of game. The next bottom over the near term may only be a bounce to relieve downside pressure. If we buy this next bottom, be ready to ride it up quickly and get out. The target date for the next low is June 12 plus or minus 1 day.

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In regards to Apple (AAPL), this current bounce off of the 1/3 retracement of its prior rally appears to have finished. The next low in Apple should come during the middle of June (previous bounces have been in mid-April and mid-May) and below the previous lows around $522. I’d guess that this next mid-June low could come between $503 (a 50% retracement of the previous rally) and its 200 day moving average around $488. Keep in mind that this low could be a spike down intraday and that a sharp trader should be ready to pull the trigger beforehand – anytime the price of Apple goes below the previous low of $522.

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