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Seeing Red

By Matthew Kerkhoff

 

In one fell swoop the stock market has taken out a series of technical levels and moved very close to correction territory.

 

Corrections are arbitrarily defined as a drop of 10% from previous highs. For the Industrials this would imply a drop below 16480, which represents a 10% decline from the high of 18312 set back in May. For the S&P, a 10% correction would put the index at 1918.

 

We have not yet hit either of these levels, but are approaching them quickly. The sharply negative momentum is a signal that the pain is not over.

 

Over the course of three days, the S&P took out its 50-day moving average, 200-day moving average, and dropped through the bottom of its six-month trading range (chart below).

 

 

If there is anything positive to grab on to, it’s that over the last twelve months the S&P 500 daily RSI has touched oversold territory twice (October ... Log in or subscribe to continue reading.


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