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NOT YOUR "GARDEN VARIETY" CORRECTION

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The past two-month trading period is one at the present time considered a "correction"; however, there are nascent signs it may be something quite a bit larger than just your "garden variety" correction. First, we note that trendline resistance is proving its merit by turning prices lower, which up to this point during March has allowed prices to form an "outside reversal month" lower. Now, whether this collective pattern remains in force and the monthly close near its low will be determined next...but it is negative nonetheless at this point.

Secondly, and a bit more of a "conundrum" if you will - is the current price level relative to the location of the both the 40-month and 50-month moving averages...it is in between.

What to do? Our strategy will be simple - we will respect the correction to 1060; but at that point make a determination as to the strength of the rally off that low. If strong - we become aggressive buyers until otherwise noted; if weak...then we aggressive sellers upon its completion. Outside of this - the ancillary technical evidence suggests the probability of the latter is greater...but we must remain objective.

Chip Anderson
About the author: is the founder and president of StockCharts.com. He founded the company after working as a Windows developer and corporate consultant at Microsoft from 1987 to 1997. Since 1999, Chip has guided the growth and development of StockCharts.com into a trusted financial enterprise and highly-valued resource in the industry. In this blog, Chip shares his tips and tricks on how to maximize the tools and resources available at StockCharts.com, and provides updates about new features or additions to the site. Learn More
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