FINALLY. We can all take a breather as the long awaited correction/pulback is (or has) taken place. We truly do not know how far this will go, or how far will be go down. However, the signs are pointing towards a further decline in the coming DAYS. I cannot speak for the next few months, as the overall trend is still VERY much intact and I do not think this is going to be a MAJOR MAJOR MAJOR pullback.
The banks were a concern today as I tweeted this morning (see below) they were in a very tight wedge pattern and which ever way they broke would be a BIG tell for the market. Well, needless to say – they broke down. Not only did they “breakdown” but they had a potent engulfing (scary) down move. This kind of move should be noticed, and definitely NOT a buy sign. As Scott Redler wisely said on his recap today (click here to view it), “I do not buy on the first potent down day”. I completely agree with him. Trying to be the hero too soon is a bad idea. While we could see a bounce tomorrow, I do not think you will have missed much, in other words – it is NOT worth the risk of more downside to buy into the 50 SMA after such a move. If we able to hold below 18.10 in the coming days (2-3), then I think we will see lower prices.
Homebuilders are also a concern as they come into a deep trendline. There is some heavy sell volume out there right now in the homebuilders and I think they will bounce (and soon), but unless they give me a tactile buy signal I will not touch them. They do look a little rough right now. Not relatively strong.
I posted (ironically) this morning on “Why Pullbacks are GOOD“. I recommend reading that to understand how to approach the market going forward. Essentially though, if we are able to pullback — it would reset alot of the charts, and give new entries – like “REFRESHING” the page.
With all this said, be careful out there. Do not get caught up in the wrong thing. Be PATIENT.