Monday, July 18th, 2016

Market correction finally or is it?


After a three week non stop binge to the upside the market has finally corrected -for the relief of those who were getting tired every morning waking up and finding a new high never set before. It sounded like a broken record. The media was on fire. SPX, RUT, NDX  and everthing else kept moving higher and higher.

There was no rest , relief or a minor dip or a correction till Wednesday when Uncle Ben started speaking before the Congress. The QE program that started 60 days before November election may get a  little less gas if the economy improves. The news didn’t sit well with the market.

Lately like an addictive drug The Feds have been bent upon injecting liquidity into the syatem. This is a tool they successfully deployed and made a difference. No matter what the Stock market is addicted to this and in it’s euphoric blast, right after the job report, it took off for three week climb.

Is this a correction? It is hard to tell. We are still above the 21 day moving averages on all the indexes. The long term direction of the market has not altered one bit. If this a correction, which was badly needed, to give room to those investors who didn’t get in earlier, it may be a shallow one.

We have already dropped 3.5% percent this week from the highs of 1687 set on Wednesday to the lows of 1635 yesterday. Is that good enough for bears? I don’t know. May be we need more. These indexes were so far out and stretched last three weeks that they needed to catch up with their moving averages below and to continue moving higher.

Make no mistake the direction of the market is still intact to the upside.You may ask the question, how do you tell that ? Just look at the simple 50 day and 200 day moving averages. They are still pointing to the right hand corner of the chart and they have not changed. The trend is still up.

This may be a good time to prepare a shopping list and on “down days” pick up some names that you couldn’t shop earlier.  The market is getting oversold as seen in the video.The Stochastics are getting oversold too and you can see the readings, it may bounce…

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