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Thursday, October 31, 2013

Correction Imminent

Here we are at the end of the month, and , well, I was sort of right. The R2 pivot point did mark the high point for he month, but not the close. I should stay out of the prediction business, I probably won't have a better record than someone using voodoo. However, the most important thing is not where we topped, or closed, but what is happening here, and it is clear the market has come under distribution. We are now in for some down side, but for how long, I can;t say, and how bad it will be, again, I don't know.  We did get a volume increase today, bu we don;t have enough of a pattern yet to say we are in for a major correction, bu i don;t believe we are in a minor pullback. We might be headed for the 50dma again (which I forgot to put on the charts today, and hat would fit the pattern we have seen for the last 6 months. So, for now, look for a trip down to the 50, which should take up most of the month of November.

The pivot points didn't help much on the Nasdaq 100, and, barring today, there isn; nearly as much distribution here. However, we did get a huge increase in volume today, anad a hefty drop. This does not have the same pattern as the SPX: in fact, the down drafts have been extremely mild, and this one looks like it will be, as well.

The Russell 2000 needed to hold up during this market weakness to give the bulls some confidence: it didn't, and it looks like this is headed for a pretty decent correction. I don't have a target here since we have a new set of pivot points staring tomorrow, but this is well above the trend line traced by the prior 3 lows, so we can still drop quite a bit before threatening the long term up trend.

Here is the percentage of stocks above the 50dma on the NYSE. This is a classic top, looking nearly identical to every other top this has made in the past 10 years. Breaking 75 will be the signal that that the market is entering a correction. It has not been a month yet since the peak, and the market is already dropping, and if it continues, it is time to get out.

The Nasdaq did no quite peak where it normally does, but this is also a classic top, and the drop from the last two days would signal that this is already in a correction. Since price on the Nasdaq is holding up relatively better, we could be in a mid correction there, but it still is probably time to get out. Unless the market gets a strong reversal tomorrow, it sure looks like we are going down.

It appears hat a correction of unknown depth or duration is in the process of starting, and I plan to take appropriate action: tighten stops and take profits, and start looking for possible shoring opportunities. The market has been firing warning shots all week, and today I think it was firing for effect.

I will have the new highs update shortly.

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