So far the stock market has declined on rising BTI (sentiment indicator is bullish), this is called a bullish divergence. The BTI is our proprietary sentiment indicator. When prices are advancing and sentiment is bullish, pullbacks will end on rising BTI, therefore there is no reason to assume that the current decline is the start of a multi-week decline.
As I explained yesterday the 34-day BTI is above 400, this means there will be a multi-week decline but because sentiment is bullish, once the current pullback ends the FTSE 100 is likely to rally to 6930 before this multi week decline starts. If however, sentiment turns bearish we will assume that the multi-week decline is underway.
What is clear is that the bull market is tired, five years of rising prices without a prolonged decline is unusual. The period from May to September is generally not a good period for stocks, as we enter the fourth week of May there is an increased risk that stock markets are in a resistance area. This should lead to a sideways trend or downtrend in the coming months.
We must keep an eye on the bond market in particular US treasury yields, if money is moving into bonds (falling yields) the stock market could come under pressure and the US Dollar could weaken further.