The Correction Checklist

Corrections within the recent rally have all looked strikingly similar. Thus far the current correction fits the bill.
  • The market reached maximum overbought before each correction.
  • Sentiment was tilted strongly to the bullish camp.
  • The first dip lower gets bought.
Currently, we are at stage two when the dip buyers start to get buyers remorse. The third stage is when we see buyers give up, negativity creep into the market and we get actual selling. This all assumes that we ae still in the midst of a rally and we have not seen an intermediate term top. Were this not the seasonally strong part of the year I would be convinced that a top is in. I am not ruling the possibility out.

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