Today, let's put our chartist hat on for a few moments. If you look at the chart below of the S&P 500, you will see that this correction has done very little to disturb the recent upward trend. It broke a trend-line last week, but the correction has been relatively minor. From a chartist standpoint, most corrections "correct" 1/3 to 1/2 of the previous advance. Since this last rally moved the S&P 500 from 1343 in November 2012 to 1687 on May 22nd of this year, a 1/3 move down would create a bottom around 1573 (we're already at 1588) and a 1/2 correction would mean a drop to 1513. We've put those two support lines on the chart below.
It is never fun to endure corrections and 2013 has produced a series of conditioned reflexes that make you want to buy any dip, but it does appear that our short-term caution since February will be given an opportunity to get back in gear with our very long-term bullish outlook. We'll be watching our Psychology Composite very closely to see when that door is opened a little wider.
As we've recently mentioned (you can read last Monday's post by clicking here), many indicators are flashing green lights; however, some very important green lights are still missing, so we don't want to jump the gun.
If you are a subscriber to HaysAdvisory.com, click here to read our recent reports. If you would like to learn more about the research and commentary offered by Hays Advisory, click here.
Please see important disclosures at the bottom of this page.