Now the market has reached the 1350 level, which I think will support at least another bounce. Here is a daily chart of the SPX.
The market tends to bounce after it breaks important levels. It did so after settling below the 200 DMA and I think it will do it again after closing below SPX 1354. If the market bounced a bit without clearly committing below 1354, then it would just be ready to break lower.
Certainly, the market is oversold from a bull market perspective. Using the chart below the average momentum of different moves can be evaluated.
Any lower than this for this correction and the market is entering bear mood again! It has been quite a whipsaw during the last 2-3 years from this point of view, but this means something too. The unprecedented volatility from bull to bear suggests we are at a big inflection point.
So, the question is whether this will be just a bounce in a larger drop or a continuation of the long term uptrend. My gut goes with the first, my system with the second. The market has nothing positive to anticipate fundamentally but it is oversold in a larger uptrend. I guess if this is the start of a bear, we will first get a bigger bounce into the end of the year.
P.S. - As I have written this post the market started falling again. If it does not reverse until the close, tomorrow will be a good opportunity to go long on weakness below 1340
