Was this a temporary correction, the start of a deep correction, or the end of the line for the bull market? That’s the question everybody is asking, and nobody knows (no matter what they tell you).
I’m not about to make a guess. Instead, I’m preparing myself for whatever comes our way. Tomorrow I will post stocks from my short and long watchlists. The short term short watchlist features stocks the most extended momentum stocks that posted big drops today on enormous volume. Most of these stocks feature bearish engulfing candle patterns.
The long watchtlist features stocks that handled the day well, either posting small losses or gains. A key element to this list is stocks that dropped had to have done so on declining volume. These stocks may still drop if there is a correction, but they stand a better chance of holding at support levels.
Here is a chart of the S&P 500. I’ve marked the major support levels that need watching over the next week. It is encouraging that the index bounced off it’s lows, which ripped through the old highs, and closed above that key level.
I closed all of my positions today, with the exception of BLUD. I will post specifics tomorrow.