By: Scott Redler
And always measure the move. Traders judge the potency of a move by the size of the countertrend retracement. Well, the two day bounce, on low volume, displayed the strength of the uptrend break (the bearish action at work). The composure change of that 1,130 breaking of the uptrend was significant. The market did not even have enough juice for the “proper retest.”
In the S&P, from 1,150 down to 1.072 was an 80 handle move. Then a bounce back from 1,072-1,104 retraced 30 handles. That was a .38 retracement–a key Fibonnaci level–which is yet another indicator of the power of this latest down-move. It was an easy two-day bounce, but nothing more. You needed to be a surgeon to precisely maneuver through this.
1,072 is a small support sport from last Friday, but this action supports the thesis that we are due for a 10% correction, down to the 1,040 area.
