As you would expect the S&P 500 gave us a STRONG SELL SIGNAL just like the Dow Jones on Friday with sharp move below the 50 day MA. The Dow Jones' and the S&P 500 charts are practically identical, and whether you look at one chart or another you will come to the same conclusion: the market appears to start a correction. Just like with the Dow Jones, the S&P 500's Wilder DMI ADX is indicating a shift in momentum from positive to negative. However, based on the Bolinger Bands it's fair to expect a little bounce back up, perhaps as soon as tomorrow which should be considered as an attempt to recover the past week's losses and resume the major up trend. Since for both the Dow Jones and the S&P 500 we have seen a cross below the lower Bolinger band (Standard Deviation), I think we could see the market move back up towards the 50 day MA, but most likely fail to jump back up over. Whether this happens or the markets simply continues downward, this should be considered a confirmation of the beginning of a major down trend. You may have already heard many analyst say that we could expect a 10.00% correction, and I agree with this observation based on where the 200 day MA currently stands for both the Dow Jones and the S&P 500. So far the S&P appears to have peaked at 1150, while its 200 day MA currently stands at 1007 which would represent a correction of just over 12%. The Dow Jones peaked at 10709, while its 200 day MA stands at 9372, which points at a potential correction of over 12% also. Right now, if this trend continues the markets are around another 7-8% away from their 200 day MA. This week will be a critical week for the stock market, and we should definitely know where we are heading next by the end of it.
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