The equity markets corrected this week and now is testing the low from Thursday May 5. Should this area be taken out and not quickly recover then technically the indexes have put in a lower high and more downside could be in store. We have a list of names that are trading well and moving higher on good volume. However, many of the stocks that have led the upsurge since the market bottomed in spring of 2009 are beginning to correct also.
When market leaders correct it can be a sign of a short term top in the market or it can simply be a sector or stock rotation that is taking place. This can only be determined with time and price and volume analysis of both the market and the stock. We are however slightly more cautious than we have been and are monitoring market conditions for further deterioration. We still expect an upside bias through the end of the year but it appears is may get choppy and become a rotating market for the summer.
