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April 7, 2012

April Outlook

April is shaping up to be a shaky month for both stock and commodity markets if cycle interpretations have anything to say about the outlook. Beginning with equities, the S&P's recent bounce out of a daily cycle low has been quite tepid. Only a little more weakness is required to form a failed daily cycle, the primary indicator of a weekly cycle in decline.

SPX Daily

Daily cycle interpretations have recently been challenging for stocks, so we should also keep a close eye on secondary confirmations of decline.

SPX Weekly

Since a decline into a yearly cycle low... when stocks tend to witness their more violent declines... is not due until autumn, odds favor seeing a somewhat orderly decline during spring, followed by a rally that perhaps sets a marginal, new high before taking a nastier spill. However, a nastier spill cannot be completely ruled out. Likewise, we have no assurance that an equity correction will, indeed, presently commence.

Nevertheless, cycle interpretation from other markets support the notion of a stock market correction.

Oil Weekly

Stocks and oil frequently seek ICLs together, so seeing oil in decline lends credence to theidea of an impending equity correction.

DX Weekly

Seeing a higher high suggests the DX will make a move above DX 82 in coming weeks. Such a rally would almost certainly induce a larger stock market correction.

So, cycle analysis for stocks, oil, and the dollar seem to corroborate on an impending equity correction. I will, however, warn that equity corrections are nototriouly difficult to call, especially with the Fed fighting that outcome tooth & nail. However, if a correction were to transpire, we traders should see some rather juicy opportunities to trade the long side, especially in oil and other commodities.

 

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