NEW YORK ( TheStreet) -- On Wednesday, Federal Reserve chief Bernanke testified that it was premature to remove the stimulus on the quantitative easing measures, and stocks surged to new highs. Then in afternoon trading, the Fed minutes suggested otherwise, indicating that the FOMC discussed slowing down the QE purchases. Stocks soured, with the major equity averages closing below their lows of Tuesday. Wednesday was thus a key reversal for U.S. equities and lower closes today and Friday will confirm the key reversals. A key reversal day occurs when a market sets a new high for a move then closes below the prior day's low. A key reversal is confirmed by lower closes the next two days. The Dow Industrial Average set a new all-time high, at 15,542.40, on Wednesday, then closed at 15,307.17, below Tuesday's low at 15,325.68. The S&P 500 set a new all-time high, at 1687.18, then closed at 1655.35, below Tuesday's low at 1662.67. The Nasdaq set a new multi-year high, at 3532.04, then closed at 3463.30, below Tuesday's low at 3486.88. The Russell 2000 set a new all-time high, at 1008.23, then closed at 982.26, below Tuesday's low at 995.20.
Setting a negative tone this morning is the 7.3% overnight plunge in Japan's Nikkei, down 1,143.28 points, to 14,483.98. In the U.S. markets, I say, Nasdaq 3583, or bust! Or, Nasdaq 3583, then bust! Including today, there are six trading days left in May to proclaim "sell in May and walk away." When bubbles inflate, stocks move in an orderly manner to the upside. Once the S&P 500 cleared my semiannual pivot at 1566.9, the upside was to my semiannual pivot at 965.51 on the Russell 2000. Having cleared the small-cap hurdle, my next target has been my semiannual risky level, at 3583, on the Nasdaq, which is only 1.4% above Wednesday's intraday high, at 3532.04. When equity bubbles pop, the major averages cascade back down to these pivots, like magnets! While the major equity averages traded higher, the yield on the U.S. 30-Year bond has also moved higher. This yield was as low as 2.808% on May 1, and traded as high as 3.244% on Wednesday. Higher stock prices and a higher bond yield resulted in a U.S. equities market with 72.0% of all stocks overvalued. This continues the ValuEngine valuation warning.