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The Correction Continues . . For How Long? April 11, 2014

Posted by Tom in Thoughts.
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This rather volatile correction should not have taken my readers by surprise, but now the question is “when will it end?”.  The short answer is “not yet”.  The reason I say that is we have not seen any signs of a Selling Climax, that wash out day where (nearly) everyone gives up; that panic downward thrust.  Now Friday was a fairly down day, big spread on the bar but volume was only ’bout average.  No panic yet, and also no signs of buyers either.


The chart above shows we closed at the 3995 level, a level we haven’t seen since mid December of last year (red circle).  This could be a nice place for a wash out Monday (in the morning) with buyers stepping in toward the afternoon . . all on high volume.  IF that does not happen then the next stop is 3905, then 3820.  Ouch!  That’s going back into time.  I really don’t see that happening though.  Not unless Russia does a dumb thing like invading the Ukraine, but stranger things have happened.

Our trend lines are clearly broken so the character of this market has changed and there is nothing to say that “it has to go up” from here.  Personally, I wouldn’t be surprised to see it trade near sideways for awhile during the Summer months.  That would frustrate a bunch of folks now wouldn’t it?

The key here is now to watch volume confirm price.  Is the Ease of the price move (up or down) confirmed by the Effort of the volume?   (that Wyckoff stuff again)  This will tell us if any move up is “legit”.  Until then the market has spoken, let’s not fight it.  As the 1st quarter earnings come out and/or Russia makes a move we’ll watch how the market reacts. Until then, have a good week.  Take Care.         …………..  Tom  …………..


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