In our weekend review post we made reference to the deterioration in the internals using the advance – decline line. The bottom chart above shows that deterioration continues and now that we have sustained a selloff bigger in size than any of the previous since this November melt up. I think it is safe to say we have a short term correction on our hands. But just how much of a correction will this turn out to be?
It’s tough to say at this point, the one thing I do know is that the next stop below now rests around the area of 1556.02 – 1530.94 on the S+P 500. One of the reasons that I use to formulate this support range is studying the supply and demand characteristics of this current uptrend. In the top chart above the S+P 500 weekly is showing trading all the may back to the 2011 low. I’ve highlighted the 3 corrections of note. A similar sized drop coupled with a 2000 bull market high support level and previous swing high has is a few of the reasons for my drawn conclusion.
This is the next stop and once support is established (whether here or lower) the bull market will resume to make new all time highs once again and lead us into the long term upside target on the DOW that was mentioned in this post. LINK
One last area to watch comes in around the 1600 level, roughly 1605- 1595. There is a couple confluence areas coming together to make this a possible short term area to watch. I do not believe this is strong enough support to take us to new bull market highs. Basically we have the 50 day moving average, trend line support and previous swing high all coming together in a tight radius. Most likely good for a day trade at least.