OT: IBD calls Correction

No surprise, IBD calls a market correction.

The Nasdaq plunged 2.4% and the S&P 500 1.8%. Both indexes are now below their long-term 200-day moving averages and have undercut their May lows. The composite is about 8% below its June 6 peak of 4,980, the best mark of 2016, and is 12% down from its all-time peak, set last July.

With the Nasdaq falling more than 6% in two sessions and the S&P 500 down more than 5%, the sheer scale of selling leaves little doubt that the stock market is now in a correction

Some type of dead-cat bounce is possible now, with the put/call volume ratio hitting levels of extreme fear. The VIX index is also elevated; however, it hasn’t reached the peaks that helped mark the January and February market lows.

Volume fell Monday. That was expected, following a Friday that saw panic selling and the annual rebalancing of Russell indexes. Those considerations aside, volume was above average and mostly on the sell side Monday.

Be glad you don’t own these…
http://stockcharts.com/freecharts/gallery.html?bcs
http://stockcharts.com/freecharts/gallery.html?rbs

Cramer says they may be good tells of when the worst is over.

It’s funny in a not so funny way - Brexit could take up to two years to finalize, so we all panic now. What that really says is no one really had much faith in the market. The economy is still weak, unemployment is only “low” because people quit looking. Weak oil is costing us the only good jobs that were growing. It was due. The market was “under pressure” long before the vote. My wife called me to say to go 100% cash in our 401k the day of the vote, but I would not do it, I was already at 50%. Maybe she was right :wink:

Probably not much to add to this thread until it turns around, but I might post every now and then.

As a last note look at this chart of the SPY and tell yourself that it is impossible to reach back to those Feburary lows of oh so long ago. Are we close to a bottom? That was a nice “double-bottom”, some say there is no such thing as a “triple bottom”. Should be an interesting ride. I have bought a lot of “great bargains” in my life only to see them get better. Don’t think you are great at picking a bottom, nibble very slowly if you have to, this could take quite a while to turn around.

In regards to Brexit, note that this was just a vote, the Gov has not officially submitted the request to invoke the exit clause. There are a lot of “leave” voters that were promised this would fix immigration and free up lots of money for domestic spending. Now they are finding out that is not true. Stranger things have happened and they might not actually leave, but that would take a while to evolve too :wink:

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6/29/16 - a second day of a big bounce…


The Nasdaq composite rallied 1.9%, adding to Tuesday’s 2.1% catapult. Combined, the rebound took back nearly two-thirds of its sharp losses seen on Friday and Monday. The S&P 500 was not far behind, up 1.7%; the Dow Jones industrials rose 1.6%. But none of these three indexes rallied heartily enough to take back their respective 50-day moving averages

It may be surprising to some, but the size of the market’s correction over the past few days hardly matches the size of declines that investors saw in late summer last year or at the start of 2016.

In August, the Nasdaq slipped 18% from an all-time high of 5231 to 4292; that decline included the Aug. 24 flash crash and was in reaction to a meltdown in mainland China equities. At the start of 2016, the tech-rich index tumbled from 5007 on Jan. 1 to 4209 on Feb. 11, a 16% roasting in less than six weeks’ time.

The damage caused by the U.K. referendum so far: an 8% drop from the highest point in June near 4980 to Friday’s low of 4574.

That’s certainly enough to justify the recent change in the Market Pulse to “market in correction,” because a correction can range from the mild (5% or more) to intermediate (10% plus) to the bear variety (20% minimum).

In regards to Brexit, there is not a 100% chance it will happen. Yes, the people voted, but only the Government can invoke the exit clause. Sure the French are saying get out already, but that does not matter. Cameron will not push the button. He steps down in September and there will be a new election. This could be in essence a second referendum, and maybe it turns out differently. I give it only a 65% chance that they actually leave.

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