Stock Market Update:

In 2015, I wrote on my blog about the importance of DOW 17,500. In 2015 this number was very important to keep the 2009-2015 bull market moving higher. When this level was breached in August of 2015, the DOW dropped all the way down to 15,370. In November of 2015, DOW 17,500 was reclaimed; however, it did not hold, and the DOW went back down to 15,430 in January/February of this year. I continue to see DOW, 17,500 of high importance to the stock market.

In February, I indicated that the correction that started in December was coming to an end. At that time, I wrote that the DOW should get back to 17,000 by sometime in March.  I came up with this number in analyzing the 2001 and 2008 bear markets. This rally has not been surprising. Last week, the DOW got back above 17,500. Five weeks ago the DOW was under 15,500. Historically, volatility of this level is not a sign of health. From internal research, it appears this rally is coming to an end. So where are we now, and what does this all mean?

The months of April, May, and June hold the answers. Are we in a bear market, or was August of 2015 and Jan/Feb of 2016 corrections normal within an ongoing bull market? Now that it appears that this technical rally is coming to an end, the next two months are of high importance. Here is what I am seeing:

Bear Market:

1. Stocks continue to have high volatility.
2. The DOW will have multiple days of up 200 and down 200.
3. The Dow drops back to 15,400 by the end of June.

Bull Market:

1. Stocks become less volatile. Dow up 50, down 50 in a day.
2. We have some selling, but no days of the DOW down 200.
3. Generally the DOW should not go back below 16,000 at any time in April/May/June, and then we could resume the 2009 bull market.

I continue to believe that the rally the stock market just experienced is “Phase 2” of a bear market, and “Phase 3” of the bear market is ahead (see my last blog update). Either way, stocks should have a multi-week correction over the next month or two. We will either have more evidence of a bear market, or we will find that the last two corrections are just normal within an ongoing bull market. Based on historical data, the next three months investors should be very cautious.