Could This Be A Technical Case for a Continuing Bull Run ?

Many key stocks are now testing their 200-day moving averages bottoming out, or is their behavior the sign of the bear?

Is this a pause to refresh and just another correction or the start of something more pernicious?

Market history reflects that deep corrections in bull trends such as what occurred from the April top into July 1 are seldom followed up by similar deep corrections over the next 12 months or so.

Consequently, if another deep correction plays out, it will signal a bigger picutre bear market, not a continued new bull market.

And this correction is deeper so far than the November correction. The percentage of NYSE stocks below their 50-day moving averages shows that the percentage of stocks ABOVE their 50 dma’s is just 40%. Put another way, more than half of NYSE stocks are below their 50 dma’s - below the November correction threshold.

Does this "overbalance" of the reading from November indicate a change in trend?

At the same time when 50% or more of stocks hit new 20-day lows, a snapback often times plays out. This occurred on last Wednesday. The snapback came in on cue.

With the S&P tagging the levels where the year opened on Wednesday, it was a likely place for a rally attempt to play out. However, with the average portfolio as reflected by the NYSE percentage above the 50 dma probably below water for the year now, will the animal spirits be able to generate traction?

Previously I thought that a snapback attempt would stick and not to be too eager to short into it and that trade over initial resistance near 1272 implied a run to second resistance near 1290.

The Daily Swing Chart above has not turned up and will eventually. If a higher open on Monday will trace out the first Minus One/Plus Two Sell pattern since the S&P stabbed below its 50 dma. Why? Because the 3 Day Chart is down and two consecutive higher lows assuming we get that Monday will carve out the Plus Two part of the setup.

This will coincide with a backtest of the 50 dma setting up a solid risk to reward short.

Even if the market is tracing out another bullish correction, I think there should be one more move down below Wednesday’s low, likely to 1235ish.

Last week, a friend sent me a chart of the S&P with the following Elliott Wave labeling. Note that another hit at the top of the channel comes in at 1400.

Recently, I mentioned that 1401 is opposite February 18. If the S&P should extend to 1401 following the current correction, it will be squaring out the February 18 high.

The above Square of 9 Chart shows that 1254 is 180 degrees down from the 1344 high. On Wednesdays surge lower, the S&P tagged 1249 intraday, closing at 1254. It is possible that this marks the low of the correction, but the level should be tested or undercut, possibly to 1235. If this is a correction in a bull market then as The Wheel shows 360 degrees up from Wednesday’s low equates with 1400 which ties to the upper end of a daily S&P channel.

Strategy: It looks like we’re in a big "B" wave up, with a big "C" wave decline to come, so I would not be long over the weekend. A decline below 1254 suggests an extension to at least 1235.