Back on 6/2, with the SP500 at 945, I mentioned in a post that I
thought the market was due for a correction. After failing to break
out top side last week, the market has headed down so far this
week, and some technical damage is evident. The SP500 has
fallen through its 10 and 25 day m/a's, and both of the m/a's in
question have turned down. Moreover, the ADX tool shows
that +D1 has just fallen below a rising -D1 on declining momentum.
Note though that the 10 day m/a has yet to confirm a downtrend
by falling through the 25 day m/a CHART.
I know full well how short term technicals can whipsaw you, but
I think enough of this type of analysis to say the amber light is on.
IF a correction is finally underway, my best guess now is that if the
SP500, now 911, is contained in a range of 865 - 880, then it would
remain plausible to argue that the powerful bull leg in evidence
since Mar. '09 could well run further before it confronts more
substantive headwinds. IF there is a break below 865, then the
argument for a cyclical bull from a technical perspective becomes
more problematic, although not necessarily fatally flawed.
With the downdraft this week, the market has turned ever so
slightly oversold, and I plan to keep an eagle eye on it, which I
have not done for a few weeks. It might also be wise to look at
some of the longer term issues in an upcoming post to come
shortly.
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