Stock Market Analysis

Monday, October 22, 2012

Intermediate Correction Begins...

The Dow moved sideways today, gaining by 2 points as the intermediate correction goes underway.

The Dow took a huge hit last Friday after my comments about the market going to form a triple top last Thursday. This completed a declining triple top formation, which puts the odds strongly in favor of it being the start of that intermediate correction that I have been talking about for so long. However, last Friday's drop is so strong that it isn't unusual to see a bit of bargain hunting aka buying into weakness leading to a few sideways or slightly upwards day like today. However, such "strength" should be taken advantage of to exit any profitable longs for now.

Bond yields rose across the board as investors bought into the weakness while options traders continue to reflect a more uncertain sentiment as they keep total equities put call ratio above 0.9 but below 1.1 (read how I use Put Call Ratio for analysis).

Immediate support for this intermediate correction will be around the 13,000 points level. I continue to maintain that this is going to be a hard and fast correction that will not lead into an all out bear trend and that the 13,000 points level would be a perfect place for accumulation.


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