Below are the views we shared in our most recent issue of Key Market Strategies about the major markets.

Comments: Near-term looking for stocks to stage a correction lower, commodities to follow; bonds to edge higher; and the dollar to work higher again in the wedge pattern.

Stocks–SPY Daily [last 204.67]: Key juncture. Stocks rallied to bang on the 78.6% resistance level at 205.23 we have been watching and have back off slightly.This would be a natural place for a correction lower in Wave 4 targeting down to 200; with the next target being the swing low at 197.38.If stocks turn down here, we would be watching for a three wave decline because that would strongly suggest the rally phase is not over and we have only seen Wave 3 of 5.In the chart below we have drawn a stylized three-wave corrective decline, i.e. Wave 4.Intermediate-term players may want to sit through a corrective move lower; however the risk to that strategy is the possibility the impulse move from the low is complete, i.e. alternatively we have seen Wave 5 high as labeled in red. But our primary view is the next move is likely corrective.For some more perspective, drilling down to the 4-hour chart, see page 2.

Stocks–SPY 4-hour View:  Note the divergence in momentum relative to the price high (Stochastic indicator at the bottom pane of the chart).This adds some credence to the view at least a near-term top is in place. 

Emerging Markets–EEM Daily [last 34.10]:  We have seen a standard 38.2% retracement in EEM, reaching our initial target of 33.90; ultimately we expect to see at least 35.86—minor Wave 5 where it hits swing high resistance at 50% retracement before the rally is complete.Given the tight ongoing 21-day correlation between EEM and SPY at a whopping 96.5%, we would expect a correction here in line with analysis as described in SPY above.We suspect any Wave 4 correction lower should hold the above the down-trend line (in red); if not we will have to reassess this outlook.