9 Monster Stock Market Predictions – The Week Of May 10

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Stocks moved higher on Friday, despite the jobs report coming in much lighter than expected. The move higher allowed the S&P 500 at least to break free of its recent trading range, while the other indexes continue to show signs of weakness.

The options market is only implying a move of 1.15% this week, based on the long straddle strategy from the $422.50 strike price.

The Ghost of 1999

The divergence of the indexes is very reminiscent of that of the late 1990s. After all the NASDAQ Composite peak and started to decline well ahead of that, the S&P 500

The 1998 bottom serves as the perfect starting point for the S&P 500 of today.  Again, perhaps it is a coincidence, and I’m not trying to suggest they are the same or that the same fate lies ahead. I’m merely trying to point the similarities.

NASDAQ Comp

For now, the Nasdaq Composite has been able to find support around the 50-day moving average. Clearly, a break of that moving average would be a big blow and likely result in the Composite moving back to the March 2021 lows. The index has lost plenty of momentum, so this week could be of great importance in determining what happens next.

S&P 500 

One could argue there were plenty of points where we could have seen the end of this recent rally in the S&P 500 (SPY), and through the miracles of market rotation, the index has managed to grind sideways or higher in astonishing fashion. However, one could also point to this recent high as the end of a 5 wave count off Vaccine Monday. That was when a broadening wedge pattern started. Additionally, Wave 3 is equal to 1.618% of Wave 1, and Wave 5 is equal to 1.618% of Wave 3. It does nicely. Wave 5 would complete somewhere around this 4250 region.

There also remains a substantial divergence in terms of the trend in the S&P 500 and the percentage of total stocks above their 50-day moving average. Of course, none of this tells when a correction will occur in the market. It tells us that we must remain on a high alert because not all is healthy in the market.

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Disclosure: Mott Capital Management, LLC is a registered investment adviser. Information ...

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