The SPX went out at a new closing low for the year, leaving the market in correction mode.
A more dangerous signal was averted today, as the SPX did not break away to the downside from
the prior closing low set in mid March. But, tomorrow is another day.
The market is around 5% below its 25 day m/a and that level of oversold has held up in every
sell off in this cyclical bull market save for May, 2010 when the 25 day price oscillator went to
-7.5%. So we are at the point where fear has mostly given way and a rally has developed, and we
now have a decent test set up regarding the seriousness of the correction so far. All well and good,
but remember that in a price correction period, the market firmly reserves the right to get itself
more oversold.
This cyclical bull has rewarded traders who go long on down spike closing lows. Because RSI
is also getting oversold, there could well be an upside pop nearly immediately ahead, but that
kind of play is not my style, as I prefer more signs of a sold out market before jumping in.
$SPX Daily
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