Ask The Trader: Has The Correction Begun? 15 May 2014

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David from Toronto writes: “…there’s lots of noise being made about a new correction having started. With today’s US equity market performance it looks like maybe the Boo Bears are right this time?”

Yeah David, I too see the articles declaring the end of the rally popping up.  The truth of the matter is such articles (and their attention grabbing headlines) are always around.  Which article link are you more likely to click, “The Correction Has Started… Here’s How To Protect Your Assets,” or “A Correction May Have Started… If It Has, Here Is What You Can Do To Protect Yourself?”

Stop paying attention to the talking heads and focus on the price action.  The DJIA was down 1% today, but until price reaches one of several inflection (support) points, there’s little reason to fret.  Those levels to watch include:

  • the rising trendline which is currently around 16,300
  • right around 16,000
  • the exponential moving average between 15,500 and 16,000
  • the deep February low

Until we start to challenge some of these levels, the trend remains intact.

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