In my last stock market update on March 11, I wrote that I was expecting continued sideways movement throughout the spring leading up to a 10-20% drop by the late summer. That continues to be my stance on the markets for the reasons described in the March 11 post. I think that anytime between now and August, the market could begin trending down decisively. Recently, several indices have started looking bad.
Here’s the Dow Transports:
The ominous sign on the Transports chart is that, after the fourth low of this trading range, the subsequent rally fell far short of the previous peaks, and the index has now fallen back to the lower end of the range. This suggests that the trend may be turning lower.
Here’s a chart of the NASDAQ-100 (NDX):
Prior to the April peak, the NASDAQ indices were trending higher this year. But following that peak has been a sharp zigzag lower, which is the first time such a pattern has appeared on the NDX this year.
There is also some evidence that economic growth may be slowing as Q1 GDP was near zero and the ADP jobs report for April came in below expectations again. The macroeconomic situation could be the catalyst for a correction that has been cyclically due to happen for long time now.