Over the weekend, we finished our report with these words:
“Simply put, if the large cap areas start breaking the 50 day average, that would be the next shot across the bow as it would tell us the big boys are following suit. We started to get some of that last week but Friday’s action had support being held…FOR NOW! The DOW,S&P,NASDAQ,NDX and TRANSPORTS are just a smidge above and are to be watched closely as we head into October. We are also watching the BIOTECHS, SEMIS and the FINANCIALS as they have acted best and held best on any pullbacks. If they go, we suspect market goes.”
Unfortunately, our worst fears are coming to fruition as all the major indices have broken below their first important line of support. This also includes the BIOTECHS,SEMIS and FINANCIALS!
We hold any further comment because we suspect we are going to get some random, all-over-the-place action…but leave no doubt, the market is in corrective mode, foreshadowed by the small caps and all the divergences we have discussed. At this juncture, we take it one day at a time but will leave you with one other thought. Except for the permabears, I have seen no one discussing the possibility of even a 10% correction in the popular indices, let alone…dare I say a bear market. Hmmm!