There has been such focus on trying to understand how shallow or deep the upcoming correction might be, I thought I’d jump into the fray of prognostications.
The whipsaws that are occurring on a daily basis in the indexes is more reminiscent of a top formation rather than a normal, mild correction. Time will tell of course, but we can look to the charts to see how far of a fall we can expect if there is a draw down ahead.
The daily SPY chart shows the 50-day moving average hovering just above 160 (~1603 in the S&P), while the first big volume pole is just above 155 (~1550). In the near-term then, those are my two markers. In this chart, the 50-dma has acted as a trampoline over the last six months. If there is no bounce off of the 50-dma, I expect the market to continue down to 1550 before another bounce opportunity presents itself.
It is interesting to note that there is a big volume hole from 1625-1605. My expectation is that once the market enters that volume hole it will have no problem penetrating through it – until it starts slamming into some volume poles again. Those poles don’t begin to appear until 1605, continue to grow as the S&P declines and reach their first climax in the 1560-1530 range. Those are my lines in the sand. http://protectedreturns.blogspot.com/
