As the little blip continues this morning, let’s review the short-term parameters that would indicate the potential for further correction on a few indexes. In an update a couple of weeks ago, when the market made a little twitch we noted that a daily close below the previous week’s low would increase concern. That is what we will stick with this week.
The Dow’s low is highlighted. A close below 23,300 would be an indication that this market is finally going to make a test of the SMA 50 (blue). Until then, it’s a minor blip.
The level on SPX is 2566.33.
For NDX it is 6248.29.
As for Europe, the black arrow indicates the current price on the STOXX 50. The lower low to October has it testing the SMA 50 and if it does not spring back from that, a test of the upward sloped SMA 200, and its greater uptrend could be in play.
Stocks are down moderately across the world. I am watching the Japanese Nikkei, but a buying opportunity could be shaping up in several areas. But the question has been ‘blip or real pullback?’ and so patience is in play here.
Taking a look at the SPX weekly chart a pullback to the daily SMA 50 above would only look like a test of the EMA 10 or EMA 20, which would relieve the weekly overbought condition.
Now of course, I am the guy with the ‘by Q4’ top projection hanging out there and so I will not discount that potential. But we need to use markers all along the way.
By the same token, gold is moderately green this morning, along with Treasury bonds and USD. These are risk ‘off’ areas that would receive liquidity coming out of risk ‘on’ stocks. Just as nothing is broken in the charts above, things are not bullish/actionable in gold and T bonds. Could it get bullish? Well, as with a stock correction only the markers along the way will tell.
For now, the stock market remains on a blip. The first marker to changing that is to make a daily close below last week’s low.