Correction Arrives

In last night's post, I pointed out that the level to watch on the S&P would be 1141 today. That was indeed the level that sellers stepped in and marked the high of the day. It was a relief to see some price action that actually makes some technical sense... at least to me! If the choppy action is to continue, I think there's a good chance to see a retest of 1130. In fact, I think this is the most likely scenario and prices could meet the declining 5 dma at that level. That scenario would create a great low risk opportunity to add to short positions. However, if the selling pressure continues and 1114 breaks, there's little meaningful support until roughly 1087...

Of note, the S&P found support at the 50 dma, but the distribution days are rising rapidly. Typically, 4 or 5 distribution days in short order will lead to a more serious market correction (thinking 7-10% or more)...

The Nasdaq has plenty more room for downside. I included the shorter term moving averages on this chart and you can see that prices closed below all of them and the trend is aligned for more downside. I'd expect any rally to be capped by the 5 dma...

Next support for the DOW is closer to 10,250, but a pop back up to resistance at 10,500 is not unrealistic to expect here...


The dollar was mostly unchanged today and remains at resistance. Much of the short term action will likely be dictated by the next move here...

Of interest, the dollar is not only up against horiz./fib resistance, but battling a declining 200 dma, too. I've mentioned that this market decline could be brief and this resistance for the greenback is one of the many reasons for my stance. The rejection today is typical of the first attempt and we'll be watching closely to see how this unfolds. A brief pop above would not surprise me, but with the average declining, the odds favor a roll back over sooner rather than later...

I don't think now is the safest time to take on long positions, but if one wants to take a shot on a day trade or two into strength, here are a few charts of interest that I'll be watching tomorrow...

BCSI - Trendline Support

CERN - Breakout Retest

RHT - Horizontal and Diagonal Support

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