Markets have corrected around 8% in the Rusell 2000 index. We have not seen many 10% plus corrections in this market since it bottomed in 2009. The Index is now just below its range low. There might be fakeout moves at this level. By end of this week we will know if the level breaks convincingly or the market again does one of its sharp bounce act.
The correction was not a surprise. The market was witnessing breadth divergence for months. Every rally was on lower number of stocks leading the action.
In last 16 trading sessions we have seen 11 distribution days. There is currently a negative breadth thrust going on.
Bear markets are exciting. They are very welcome as they invariably lead to big upside moves once they bottomed. This action is very good as it will hopefully, finally resolve the range. After few weeks/months of bear moves we will setup again for a bull move.
My personal guidelines for my longer term accounts :
10% correction: Time to start being bullish. Most market corrections end at this level in bull market.
20% correction: Bullish. Offers a outstanding risk reward situation as after such drop you historically get moves of 20% plus on upside.
30% correction: extremely bullish
30% plus correction: sell your house,wife, children, girlfriend, boyfriend and anything else and get ready to buy.
The Market Monitor will signal the start of new trend and till that time it is a bearish market.