Whereas I was pretty certain we would see a correction a few days ago, I am less certain where we go from here now that the market has gone down three days in a row. The bulls can argue that the market has done the minimum on the downside. There have been a flurry of cash M&A deals announced recently which should help digest the overbought reading as well. The bears will argue that the market is now intermediate term overbought and that sentiment is still on the bubbly side even though it has calmed a bit.
I still expect the overbought reading to contain the upside but would not be surprised if we have already seen the price low for this correction. Corrections are about time and the market can correct by going sideways or going lower. The bears still have time on their side so it's possible they can still do damage.
While there is the risk of a further correction I want to remind readers why I think it's a mistake to get too bearish. Corporations continue to repurchase shares at a near record pace and engage in cash M&A. Valuations are reasonable and we are still in the sweet spot (November to April) of the year in terms of seasonality.
I would likely turn more positive as this overbought reading is worked off, whether it is worked off by going sideways or lower. I started to reduce my hedges yesterday and will look to further reduce them as time passes or prices correct.