Market is yet to show sign of stabilization. Early gains turned to sharp losses and selling accelerated. Many groups like fertilizers and solar energy joined sectors breaking down. Technology sector has taken big hit. We are yet to see full blown panic and sentiments are still not at extreme level. But a reflex bounce is a increasing possibility at this stage.
We are now entering stage where the good, bad and ugly are all being sold. Prudent strategy is always to sell much before correction starts or at first hint of impending correction. A few days delay can wipe out lot of profit and if you liquidate in panic, your losses are even greater.
Now I would be looking at a series of 300 plus day on positive side, reversal in stocks up 25% or more in month, and extreme readings of around 200 on stocks up 25% in 65 days to signal possible reversal. Besides that the IBD follow through day is what I would be looking at.
The next phase will have new set of stocks leading the rally. New sectors will take on leadership.