Leaders Index 6-7

[Jerry Samet]

After a good opening the market looked like it was going to have a rebound. The gains held most of the day but a sell off into the close left the major averages in the red for the day. Volume was down slightly across the board. The leaders also lost early gains to finish flat on the day but near the lows of the day. Volume on the index was up and above average. We can't even manage a weak bounce, which bodes ill for the market. Watch the 8% down levels. Jerry

[Riskslayer]

Thanks for your work here Jerry! I have been following you for some time and appreciate you and Mike Scott's work on CANSLIM.

I subscribe to the Minervini service which is a substantial variation on CANSLIM, but similar; MM sees the current action as a correction within a long term bull phase, albeit a late stage bull market. All of the market metrics that I follow, based on MM's risk model, are quite negative (the worst in 6 months).

Its dangerous to my mental mindset to think too much about predictions, but the markets are slow these days ... so ..

I am looking at an undercut (1% or so) of Apr 18 lows (6-7% correction); or an undercut of Mar 16 lows (10-11%), or an undercut of Nov 16 of lows (15-16%) ...

How are you coming up with 8%? I assume historical data abot 75% of all corrections being contained to about 8%?

Thanks

Shawn

[Mike]

Thanks for your work here Jerry! I have been following you for some time and appreciate you and Mike Scott's work on CANSLIM.

I subscribe to the Minervini service which is a substantial variation on CANSLIM, but similar; MM sees the current action as a correction within a long term bull phase, albeit a late stage bull market. All of the market metrics that I follow, based on MM's risk model, are quite negative (the worst in 6 months).

Its dangerous to my mental mindset to think too much about predictions, but the markets are slow these days ... so ..

I am looking at an undercut (1% or so) of Apr 18 lows (6-7% correction); or an undercut of Mar 16 lows (10-11%), or an undercut of Nov 16 of lows (15-16%) ...

How are you coming up with 8%? I assume historical data abot 75% of all corrections being contained to about 8%?

Thanks

Shawn

The market seems dangerous to me also and just for the reasons you state Shawn, historically most corrections are contained by 8%, that is a key level to watch . A failure could mean slipping into bear market territory or your 15%-16% territory.

The major indices have been building a possible head and shoulders pattern. A right shoulder hasn't formed yet. Let's say we get a weak rally and form a right shoulder. This could be the optimum shorting opportunity. There are two possible H&S patterns to look at. A narrow one with left shoulder in February of this year and a much larger one with left shoulder in April 2010. The market based on Shiller ten-year average S&P500 PE is grossly overvalued and the large H&S pattern could gain traction over the next 6-12 months.
I remain in cash for now with a watch list built of shorting opportunities. A long watch list will probably be built over the coming weekend. At any particular time in a correction we could be 4-days away from a confirmed rally.