Stock Market -- Technical

The market has entered a short term correction, but it has not
weakened enough to change it from a consolidation phase into a
more vulnerable one. The correction is indicated by breaks of
the market and its 10 day m/a below the 25 day m/a and the fact
that the 25 day m/a is starting to roll over (See chart link below).
The SP 500, now 1045, would fall out of consolidation below short
term support of 1025.

The market, on my measures, is only modestly oversold at current
levels, and would need to fall to the 1010 - 1020 range to give a
stronger, more respectable oversold reading. That range would
also be equal to a 7 - 8% correction off the 10 /15 rally high of
1097 (closing). An 8% pullback represents a goodly shorter term
correction in a cyclical advance.

Since the market has broken its uptrend line from 3/09 and since it
failed to take out trend resistance dating back to the '2007 highs,
we have a situation that commands attention.

I would also note that I have a sell signal from my smoothed 40
wk. oscillator, which went definitively positive in mid - March ' 09
and stayed that way until this past Fri. This indicator can whipsaw
like any other, but long experience says a change in direction is
well worth attention. This is a momentum oscillator which puts
weekly closes against the 40 wk m/a and which is smoothed out to
13 weeks.

I will happily concede that the market can confound the short term
situation by swinging back into rally mode, but my work is now
flashing amber or caution.

Looking long term, this upleg since 3/09 represents one of the
more powerful 6 - 7 month advances in history and the market
today is trading well above levels indicated by a more typical
cyclical advance. From a historical perspective, it is wise to
figure that this powerful upleg will transform into a more normal
one at least for a while, but just how that situation may eventuate is
something that one can probably only guess at. I have been thinking
that there could be another leg up to the current advance before a
more rugged correction takes hold, but that awaits resolution of
this current cautionary period which I have been looking for since
mid - Sept. '09 (See 9/20 post).

Sp 500 chart.