The preferred plan having been a mid-summer correction of routine or impulsive (emotional) degree. The market has selected ‘B’, impulsive. This morning in ‘pre’, the indexes are trying to muster a rally.
The backdrop has played out as expected so far and judging by Laura Ingram (before flipping on the Red Sox) basically blaming this end-of-the-world, oh so terrible market correction on the vice president (did not watch CNN to see what their take is, if any), I’d say that the public is well-informed now about how the economy is going to hell (well, it is IMO, but it’s a question of timing), the stock market is tanking and we all gonna die!!!
Tuning all of that out, let’s retreat to some simple daily charts with a few status observations. SPX tanked initial support seeking out the “deeper correction” option. A nice down day yesterday did not quite hit the gap. Despite this morning’s positive pre-market, I’d remain open to the idea of SPX filling that gap, which would also test the firmly uptrending SMA 200. A reminder that SPX does not break into a bear market signal unless it loses the April 19 low of 4953. SPX is oversold, but could get more so.
NDX got dope hammered and is already testing the SMA 200. It too is oversold (to the degree of the spring correction). On the plus side, NDX has filled the gap associated with the SMA 200. It needs to maintain a higher low to April 19 low of 16974 or it’s breakdown city. Also, if markets are going to recover and rally anew, expect NDX to bottom before SPX and lead.
The Semiconductor index was the leader (of both of the above) on the way up, and so it leads the correction as well. Indeed, SOX cannot move lower (on a daily or especially weekly close) than the key low (4288) without registering a bearish signal for Semis and the broad market as well. As we watched SOX on the way up, we should watch it now for broad market up/down indications.
This is a picture of an extreme and the tip of the spear of the bull/bear question. Thus far, it is intact… by a hair. It is conceivable in the very short-term that the SOX > NDX > SPX leadership chain could guide SOX and NDX to bottom and firm while SPX continues to flounder in search of a bottom. But so far, all the leading indexes have done has been to settle into the testing zones. Nothing is confirmed yet.
