First Five Days Of The Month

The above chart shows the Qs with a box around the first five trading days of the last 5 months. The first five trading days of the month is a good guidepost for the trading action for the rest of the month.

The upward breakout on 3/11 established the new uptrend for this rally which continued in April with another breakout. In May there was a failed downward breakout which held above the high of first five days of April and established a trading range for May. In June the breakout above the first five days of May stalled, reversed and broke out to the downside below the low of the first five days of June and the high of the first five days of May. The first five days of July formed a lower high indicating that the rally has stalled out.

A downward breakout of the first five days of July below 34.30 would be the first indication that the correction is extending as expected. On the other hand, a sustained move back above 35.50, the May high and the low of the first five days of June would increase the likelihood that the correction is over.

A common target for breakouts of the first five days of the month is the 61.8% extension of the range. For July, the downside target would be 32.73. The 100% ext, less likely, would be 31.76. Both of these levels fall into the projected downside target zone for this correction as demonstrated in prior posts by other methods. I think this increases the likelihood that if these levels are hit in July that it will mark the end of the correction, and I will look to be a buyer at those levels. Failure to hit those levels followed by upside follow-through could also mark the end of the correction.

The projected levels for the Dow and the SP500 are:

SP500: 830.63, 806.72
Dow: 7782.34, 7593.91

Note that the lower of these levels holds above the prior 3 month low, which maintains the uptrend using Marketclub's triangle technology.