The correction is finally here.
Over the last week, I’ve been warning that stocks were due for a pullback, if not a correction. Some of the red flags I noted were:
- The S&P 500 has formed a clear rising wedge formation. Stocks had to go parabolic to the upside or correct. With the market up 30% from the lows, and overbought on a daily and weekly basis, the odds favor the latter outcome.
- Stocks were extremely extended above key moving averages. Historically, this degree of overextension above the short-term and intermediate term trend has resulted in a period of consolidation if not a short-term top.
- Market leading metrics (high yield credit, breadth) had begun to roll over, suggesting stocks would do so soon.
- Historically, August has been a poor month for stocks during a President’s 2nd term. As Ryan Detrick notes, the average August performance under these conditions is DOWN 3.4%.
- Multiple companies Visa (V) and Alphabet (GOOGL) had seen their shares slide despite posting fantastic results. This signaled that the market rally was exhausted.
Finally, yesterday I warned investors to keep a close eye on Meta (META) and Microsoft (MSFT). Both companies announced double beats (beating revenues and EPS expectations) on Wednesday evening. As a result of this, META and MSFT shares exploded higher in the after hours.
I warned that if META and MSFT shares couldn’t hold on to their gains, that the correction was finally here. And sure enough, both companies saw their shares close near the lows of the day, giving up considerable gains in the process.
META:
MSFT:
This, along with overall market weakness, resulted in the S&P 500 breaking out of its rising wedge formation to the downside. From a purely technical analysis perspective, it would not be unusual for the S&P 500 to decline to 6,000 or even lower.
The big question is what happens there. Specifically, is this just a dip that should be bought… or are stocks about to roll over and REALLY collapse?
To answer that, we rely on a proprietary market timing trigger that has caught every market meltdown of the last 45 years. We detail it, how it works, and what it’s currently saying about the markets in a special investment report How to Predict a Crash. If you’re looking for a clear signal of when to get out of the markets, this is it!
Normally we’d sell this report for $499, but in light of what’s happening in markets today, we’re making just 99 copies available to the investing public.
To pick one up…
Graham Summers, MBA
Chief Market Strategist
Phoenix Capital Research
