Written by Lance Roberts, Clarity Financial
As I stated last week:
“In reviewing our three primary pathways above, pathway #3a and #3b remain the most viable currently.
- Pathway #1 is the most bullish of potential outcomes. With earnings continuing next week, and short-term conditions mildly oversold, the market is able to push through resistance and rally back towards old highs. (Probability = 20%)
Please share this article – Go to very top of page, right hand side, for social media buttons.
- Pathway #2 is the most bearish with the market failing at the cluster of overhead resistance once again but this time violating the 200-dma. This decline begins a process of a deeper correction as we head into the summer months. (Probability = 30%)
- Pathway #3a and #3b suggest a further rally to the 100-dma, a pullback to the previous downtrend and then either an advance that breaks above the 100-dma and begins a more bullish rise, OR a failure and another test of the 200-dma. (Probability =50%)“
While we have been giving the most weight to a version of pathway #3, it was pathway #1 that came to fruition, at least for now. Over the next week, I will begin to map out the next three most probable paths as #2 and #3b have likely been invalidated unless we get a sharp breakdown in the next week.
On an intermediate-term basis, both of our weekly “sell signals” remain, and as shown below, despite the sharp rally last week, the market remains confined within an intermediate-term consolidation process.
While the break above the previous resistance and moving averages is indeed “bullish” in the short-term, the intermediate-term setup is not as favorable just yet. When, and if, the current “sell signals” reverse, then becoming much more aggressively allocated will make sense.
For now, be careful where you step.
