14 Dec Market in Correction 12-11-15
After being unable to go into all time highs successfully the market is again into a correction. If you are newer to the markets or to Canslim then what you should take away from this is…..dont push your ideas on the market. I dont know who is reading this but most traders tend to make predictions, the market we were just in after the latest Flash Crash probably got many people excited again that the bull market was here again. The rise was fast, we never made a lower low and we were brushing against all time highs again vs staying in a lower consolidation. However if the institutions can sell at higher prices they will, and apparently they did. The market was whipsawed around for several session, this is called chop or a choppy market. There has been worse chop but this did the job. The distribution days have piled on and were now in a correction.
It appears that 8-9 days of distribution is the tipping point these days. Again if you are new to Canslim you need to add up distribution days in order to see if the selling is just small selling or wide spread selling where many institutions are not buying and are in fact selling. The distribution day count changes as the market becomes more liquid, before the great recession it was 3-4 distribution days now its double that. The liquidity that the FED has introduced has given the banks a lot more capital to work with and therefore a lot more shares can be purchased, so a lot more needs to be sold before that pressure can kill a rally.
This correction comes after the flash crash, and typically support becomes resistance and resistance becomes support, so lets see if we get back to that level if the market holds up or sells off. If the market sells off below that flash crash level then we could be in for a good long correction. But keep an eye on the markets, on the leaders, on the sectors that are leading the markets. Look in IBD for the top sectors, are they growth sectors or gold and utilities? If they are defensive, like the latter ones then were probably not in a great place to start buying again. Let the market guide you, dont have an opinion. You can have a theory and let the market prove you right or wrong. If you think were going to bounce around the flash crash level and we do then maybe your theory is correct and you should put some money to work. Put in a small amount because Cansliming isnt based on picking levels to bounce off of, Cansliming is based on strength in the market. If you can see strength then you can put money to work again.