Charting the Markets: S&P 500 Looks to Have a Bigger Correction
Failing to hold the recently drawn channel could mean a test to important support is next.
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So far it's been a very bad start to the month of September. The S&P 500 has started the new month in the hole by 4.1%, while the Nasdaq and Russell 2000 have fared much worse. And while those weekly figures are staggering, we should also note the indexes are not yet even oversold. Another 2-3% down would get the panic level up towards oversold conditions.
The entire week was all about selling. The bulls were hopeful that coming in after the long holiday weekend the buyers would be in a mood to add, but that did not come to pass.
The chart of the S&P 500, below, is starting to look shaky, as the past week took out gains over the previous couple of weeks. Though we still see the candles as blue, that will change with another down week.
We see important support for the S&P 500 at the 14 period McGinley Dynamic, sitting just near 5,100. Moving Average Convergence Divergence (MACD) has rolled over while the stochastics (momentum) have done the same. Notice the chop index (pane 3) is rising up, which means a trend is happening, and it is down.
We suspect a large rally will ensue within days but prefer to be patient and wait for more panic to set in.
